New Congressional Budget Office Director Keith Hall on Wednesday outlined how his office plans to implement new rules requiring that the economic effects of selected legislation be considered when making budget estimates — a key change that Republicans have fought for for decades.
Historically, the CBO has evaluated legislation on what’s known as a static basis. So, for instance, if a piece of legislation cuts taxes, the CBO only calculated the amount of money in lost revenue — rather than for accounting for the fact that if tax cuts spur economic growth, some of that lost revenue would be recouped. Conversely, tax hikes could shrink the economy, and offset at least some revenue gains.
When Republicans took over Congress, they passed a rule requiring the CBO to perform so-called dynamic analysis on some legislation, which could have major ramifications on issues such as taxes and entitlement reform.
In a Wednesday presentation at the conservative Heritage Foundation, Hall explained how his office would abide by the change.
CBO will now employ dynamic analysis for any legislation that has a .25 percent effect on gross domestic product in at least one year over a 10-year period, or if one of the committee chairs requests the analysis. In addition to the standard 10-year analysis, CBO will deliver a qualitative analysis for the next 20 years.
Hall said the presentation of the information would “evolve” over time. The CBO would still include a standard static analysis, but then would additionally include estimates based on a macroeconomic analysis — with caveats identifying reasons for uncertainty.
