Dynamic Scoring of CBO gets rid of Congressional Referees

This is ripe.
Why the Republican Congress’s First Act Was to Declare War on Math

The first substantive act of the new, all-Republican Congress was a telling one: House and Senate leaders, now in partisan accord and able to impose an undiluted partisan imprint upon the institution, struck a blow in their decades-long struggle on behalf of low taxes for the rich and against the bookkeeping standards that have stood in their way. In a rapid vote yesterday, the House directed the Congressional Budget Office to use “dynamic scoring” — a Washington term of art to describe imposing conservative ideology upon the once-neutral task of measuring the budgetary impact of legislation.

The Congressional Budget Office [“CBO”] is a 40-year-old institution that has acquired enormous clout within Washington by virtue of its reputation for ideological neutrality. It furnishes Congress and the public with budgetary estimates that, if necessarily imperfect (as all predictions must be), are arrived at fairly. It is also a perfect modern expression of an old Progressive Era–ideal: that policymakers should be informed by the work of impartial experts. That the conservative majority has set out to corrupt this institution as one of its first major acts is, therefore, perfectly fitting.

What is Dynamic Scoring? In simple terms, we can think of it like this: Under the old method of Static Scoring, if the government spent $1 on an apple seed, the CBO would calculate the cost of that seed to be whatever estimate it concluded to be the direct economic benefit of that spending (for random example, let’s say that in today’s terms, a $1 apple seed is worth $1.25 to the GDP). Under Dynamic Scoring, if the government spent that same $1 on an apple seed, the CBO would now be tasked with estimating the future macroeconomic effects of this spending. So instead of $1 creating $0.25, CBO would need to make significant assumptions about that seed, and perhaps conclude that the production of apples from this seed would lead more people than today to consume apples, that this increased demand would create more apple farmer jobs, and that the resulting job growth would lead to increased tax revenues. Such dynamic effects could make that $1 spent seem worth significantly more.

Two thoughts on this:

  1. The CBO is supposed to Congress’ scorekeepers. While there are notable problems with static scoring, since it takes microeconomic assumptions into account (under static scoring, even that $1 apple seed would assume, for instance, that there’s $0.25 benefit, based upon market realities), it cannot predict future policy or events, and is agnostic about underlying policy decisions that do have real world effects. Adopting a dynamic system is inherently built upon biases. It forces assumptions that are incredibly difficult to predict and bases such assumptions upon variables that have not yet happened and may not actually occur.

    Continuing with our apple seed hypothetical, under static scoring, the $1.25 return on the $1 may be incorrect. It may only be $1.20. Or it may be $1.50 or cost us $0.50. But this is an issue of accuracy, not precision. Your variable was incorrect, but the methodology underlying it is sound and we can focus on improving that variable in future scoring.

    But using Dynamic Scoring makes precision incredibly difficult as well because the variables you are forced to predict compound. Multiplying three or six or 15 variables that can lead to outcomes that are not just inaccurate, but also imprecise. Thus, you can have in incredibly wide range of outcomes in Dynamic Scoring, that does not exist to the same extent with Static Scoring.

    We have to ask ourselves what the purpose of the CBO is in the first place. Economic predictions are incredibly difficult to make and thus, it is fairly likely that regardless of which scoring system you choose, you are going to have an accuracy issue. There’s no way around this. So even though accuracy should always be a goal, reality makes such a goal impossible to obtain. So then what? From most accounts, CBO exists to create a standardized and nonpartisan best and consistent prediction of the impact any change in policy will have on revenues and expenditures. Dynamic Scoring destroys hope that predictions for legislative impacts will lack precision, which is the entire point. Static Scoring evaluated a moment in time (i.e. currently, an apple seed creates $1.25 of value on GDP, even though it’s possible that an apple seed purchased today but used 10 years from now may only create a $1.20 return). Dynamic Scoring attempts to predict the future (i.e. an apple seed creates $1.25 of values on GDP today and since this is a net benefit, more apple farmers will plant apple seeds, which will lead to higher availability of apples, which will reduce the average sale price of apples reducing the effect on GDP to $1.05 in ten years).

  2. While I think Dynamic Scoring is unhealthy because of the precision problems it creates, I’m not per se opposed to it. Dynamic Scoring does get at the heart of a significant shortcoming of the existing way of scoring legislation: policy has real world effects (even if those effects are near impossible to consistently predict, considering the almost infinitesimal number of variables that may effect a given outcome).

    The real problem is how Congress has chosen to impliment Dynamic Scoring. The implications ensure that the only referees in the Congressional game will no longer be nonpartisan. As passed, Dynamic Scoring will only apply to Republican policies (cutting taxes), while Democratic policies (infrastructure, appropriations, social programs) will largely be exempt. That seems fair…

    Under the rules passed, Dynamic Scoring applies to legislation:

    • that impacts greater than 0.25% of GDP (or $43 billion)
    • excludes appropriations bills that are largely need-based projects that subsidize local projects that usually have multiplier effects on GDP

    As Representative Delaney (MD-6) writes,

    If dynamic scoring is truly about reflecting the on-the-ground impact of government action, it must be applied to both sides of the ledger: spending and revenue. Unfortunately, the Republicans’ new rule effectively amounts to dynamically scoring only tax cuts. It does this by excluding appropriations bills and stating that only “major” pieces of legislation — defined as affecting the economy annually by 0.25 percent of gross domestic product, or $43 billion per year — will be dynamically scored. While that sounds reasonable, only comprehensive tax reform bills would meet that threshold. Other bills that increase investments in infrastructure, education and research generally do not rise to that level.

    So tax cuts will be seen in a shiny new light, while smart investments will remain unattractive[, when scored]. One-half of the policy agenda will use one set of facts, while the other half will use a different set. This is intellectually dishonest, and it’s wrong.

Dynamic Scoring, as applied, is disingenuous and undermines open and efficient government. It’s no wonder it was the GOPs first order of business once taking control of both houses of Congress.

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