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U.S. House votes to adopt contentious changes to cost estimates

January 8, 2015

By David Lawder

WASHINGTON (Reuters) – More macroeconomic projections will be included in cost estimates for major fiscal legislation in the U.S. House of Representatives under a rule change approved on Tuesday, a move critics said could mask the true impact of tax cuts.

The move toward “dynamic scoring,” as the approach to gauging the budgetary effect of tax and spending changes is known, was part of a rules package passed on a 234-172 party-line vote as the Republican-controlled Congress began its work.

The change, which applies only to House bills for now, requires that more macroeconomic effects be taken into account when analyzing “major legislation” and its estimated cost estimates, work done by the Congressional Budget Office and the Joint Committee on Taxation.

Republicans say the CBO’s and JCT’s current estimating methods fail to reflect government revenues generated when tax cuts or other legislative changes boost economic growth.

Democrats blasted the change as “voodoo economics” that would make it easier for Republicans to cut tax rates without increasing federal deficits in their tax reform plans this year.

The change would apply to House bills that involve spending or taxation equal to 0.25 percent of U.S. gross domestic product, or those deemed important by the chairmen of the JCT and House Budget committees.

Estimates for Senate bills will not change until the Senate can adopt a companion rule, which would most likely come later this year when the chamber passes a budget resolution, Republican congressional aides said.

The CBO and JCT currently provide some macroeconomic analysis as supplements to major bills, such as immigration reform or President Barack Obama’s healthcare law. The change adopted on Tuesday will include those growth effects and associated revenue in official cost estimates.

White House Budget Director Shaun Donovan said in a blog posting that adoption of dynamic scoring would “risk injecting bias” into a decades-old, non-partisan budget process.

“As a result, it could allow Congress to adopt legislation that increases federal deficits, while masking its costs,” Donovan said.

House Budget Committee Chairman Tom Price disagreed, saying the goal was for “realistic” cost estimates.

“We’ve heard that it’s stacking the deck, or that it’s cooking the books in favor of tax cuts. That’s nonsense,” Price said. “What we’re trying to do is simply say that if a piece of legislation is going to have a large effect on the economy, that we include that effect in the official estimate.”