The Center's work on 'Process' Issues


FAQs on Budget “Reconciliation”

January 22, 2015 at 2:59 pm

Republican leaders plan to use a legislative process called “reconciliation,” which allows for special and speedy congressional consideration of certain tax and spending bills, to advance their fiscal policy agenda in 2015.  In the Senate, members can’t filibuster reconciliation bills, and the scope of amendments they can offer to them is limited, giving this process real advantages for enacting controversial budget and tax measures.  Our new report addresses some frequently asked questions about reconciliation:

  • How Often Have Policymakers Used Reconciliation?
  • What Kinds of Changes Can a Reconciliation Bill Include?
  • How Does Congress Start the Reconciliation Process?
  • What Role Do Committees Play?
  • What Special Role Do the Budget Committees Play?
  • How Many Reconciliation Bills May Congress Consider Each Year?
  • Can the Full House or Senate Amend a Reconciliation Bill?
  • What Happens After Each Chamber Adopts a Reconciliation Bill?
  • What Procedural Advantages Does Reconciliation Have in the Senate?
  • What Procedural Advantages Does Reconciliation Have in the House?
  • Can Reconciliation Be Used to Increase Deficits?
  • What Is the Byrd Rule?
  • What Provisions are “Extraneous” Under the Byrd Rule?
  • How Is the Byrd Rule Enforced?

Click here for the report.

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New House Rule Could Ease Passage of Deficit-Increasing Tax Cuts

January 5, 2015 at 11:02 am

Our new paper analyzes a House Republican plan to amend House rules this week to require the Congressional Budget Office (CBO) and Joint Committee on Taxation (JCT) to use “dynamic scoring” for official cost estimates of tax reform and other major legislation.   Under dynamic scoring, the official cost estimates would incorporate estimates of how legislation would affect the size of the U. S. economy and, in turn, federal revenues and spending.

Incoming Ways and Means Committee Chairman Paul Ryan has said this change is designed simply to generate more information on the impact of proposed policies.  In reality, however, the House would be asking CBO and JCT for less information, not more, and the new rule could facilitate congressional passage of tax cuts that are revenue-neutral only on paper.

As our paper explains:

CBO and JCT already provide macroeconomic analyses of some proposed bills as a supplement to the official cost estimates they produce.  These analyses typically present a range of estimates of the legislation’s impact on the economy.

The new House rule, in contrast, asks for an official cost estimate that only reflects a single estimate of the bill’s supposed impact on the economy and the resulting revenue impact.  By incorporating additional revenue in the official cost estimate (as a result of an estimate of economic growth), this would enable lawmakers to write bills with deeper tax-rate cuts, or smaller offsetting curbs on tax breaks, than they otherwise could do.

The economic impact of even a well-designed tax reform plan is likely to be modest relative to the size of the U.S. economy.  But the estimates of revenue gains from the plan’s estimated dynamic effects could be large in the context of current fiscal debates.  Those estimates could also be highly dubious, depending on the models and assumptions used.

For example, JCT estimated that the tax reform plan that former Ways and Means Chairman Dave Camp produced last year could generate between $50 billion and $700 billion of additional revenue over the decade through faster economic growth (see chart), with the $700 billion estimate reflecting a series of very rosy assumptions — including the assumption that a future Congress will stabilize the debt as a share of gross domestic product (GDP) by approving large spending cuts that aren’t part of the Camp bill.  If highly optimistic economic and fiscal assumptions like these are included in official cost estimates but then fail to materialize, the result will be higher deficits and debt.  And as CBO, JCT, and other analysts have warned, tax cuts that ultimately expand deficits can slow economic growth, rather than increase it, because the higher deficits can create a drag on saving and investment.

Click here for the full paper.

New York Times Warns Against “Dynamic Scoring”

December 8, 2014 at 12:06 pm

A New York Times editorial this weekend raised several red flags about so-called “dynamic scoring” — that is, including estimates of the macroeconomic effects of policy changes in official cost estimates for tax and spending legislation.  We strongly agree.  Our recent paper making the case against dynamic scoring, and a short summary we released today, explain that:

  • Current budget estimates aren’t “static.” The Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) incorporate in their cost estimates many changes in individuals’ and companies’ behavior in response to proposed changes in tax rates and other policies.
  • Dynamic estimates are highly uncertain. Different models and assumptions produce widely varying estimates of how policy changes would affect the overall economy.  Some models’ results depend on assumptions about how future Congresses will reduce deficits.  And the models all have significant gaps.
  • Dynamic estimates are prone to manipulation. Because of this uncertainty, congressional leaders will likely cherry-pick the model and assumptions that give the most favorable estimates.  That’s exactly what House Ways and Means Chairman Dave Camp did in touting the highest estimates of economic and revenue growth for his tax reform proposal — estimates more than ten times greater than JCT’s lowest ones.  (See figure.)
  • CBO did not use dynamic scoring for the 2013 Senate immigration bill. Some members of Congress claim, incorrectly, that CBO used dynamic scoring to estimate the bill’s budgetary effects.  CBO’s official cost estimate took account of the bill’s direct effect on the U.S. population and labor force.  But it did not include estimates of the bill’s more speculative and uncertain effects on the economy, such as its effects on investment and productivity.

You can follow me on Twitter at @PaulNVandeWater and my co-author Chye-Ching Huang at @dashching.

“Dynamic” Estimates Are Highly Uncertain, Subject to Manipulation

November 17, 2014 at 5:10 pm

An American Action Forum event today to promote “dynamic scoring” for tax and spending legislation unintentionally illustrates what Chye-Ching Huang and I explain in a newly updated paper:  estimates of the macroeconomic effects of policy changes — which is what dynamic scoring would include — are highly uncertain and subject to manipulation, so they shouldn’t be part of official cost estimates.

In reasonably balanced remarks, Senator Orrin Hatch (R-UT) said that “we should not expect dynamic scoring to produce outsized miracles from either the supply side or the demand side.”

But Tax Foundation President Scott Hodge, in giving his organization’s estimates of the effects of several tax proposals, promised just such miracles.  According to Hodge, cutting the corporate income tax rate or allowing full expensing of investments (that is, allowing firms to deduct the investments’ full cost from their taxable income up front, rather than depreciating it over the investments’ lifetime) would more than pay for itself by boosting economic growth and, in turn, tax revenues.

That’s highly implausible.  But it shows how advocates can manipulate assumptions or cherry-pick dynamic-scoring estimates to buttress their agenda.  Ways and Means Committee Chairman Dave Camp (R-MI) did the same thing when he cited only the most optimistic of many “dynamic” estimates in touting the benefits of his tax reform proposal, as our paper and the graph below show.

A Dangerous Way to “Fix” American Government

October 21, 2014 at 4:21 pm

“A dangerous proposal is circulating in states across the country that could widen political divisions and jeopardize cherished rights and freedoms,” CBPP President Robert Greenstein explains today in the Washington Post’s PostEverything blog.  He continues:

The push is coming primarily from well-organized, arch-conservative groups seeking to capitalize on the decline in public trust in government to limit the federal government’s role and spending powers.  And the method they prefer is a constitutional convention — the first since the 1787 conclave that produced the U.S. Constitution.

Under the Constitution, if two-thirds of state legislatures call for a convention to amend it, one must be convened.  Some of those pushing for a convention say that 24 of the needed 34 legislatures have approved such resolutions.  Advocates of a convention have targeted more than a dozen other states and are developing lobbying campaigns to push for such resolutions there.

The implications are enormous.  At stake, potentially, are the freedoms we take for granted under the Bill of Rights; the powers of the president, Congress and the courts; and the policies the government can or cannot pursue.  Conventioneers could alter absolutely anything about the way the United States is governed.  Some say they want to terminate all federal taxes and to require super-majorities in the House and the Senate to put any new taxes in their place.  Others want to bar the government from carrying out a number of its functions, for example by constraining its ability to regulate interstate commerce.  Whatever changes a convention approved would be enshrined in the Constitution if three-fourths of the states ratified them.

Yet the processes for impaneling the convention, selecting the delegates, setting the convention’s voting rules, and determining what issues the convention would consider and how much of the Constitution it would seek to rewrite are a mystery.  That means that under a convention, anything goes.  There are no rules, guideposts or procedures in any of these areas. . . .

Click here for the full post.