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Hatch Contends Dynamic Scoring no Magic Elixir

The GOP’s brawl against Obama’s executive actions persists with new postulations made by a Republican leader on Sunday pushing for a government shutdown to prevent Obama from addressing immigration policy with executive order. Despite this individual’s propping open the idea, numerous other Republicans objected to a government shutdown.

Oklahoma GOP Representative Tom Cole raised concerns opposing the conservative group’s vocalizations, stating that it was an improper means to achieve GOP goals. John Thune, a member of the Senate Republican Conference said on Fox News Sunday, “Republicans are looking at different options about how best to respond to the President’s unilateral action, which many people believe is unconstitutional, unlawful action on this particular issue.”

Tired of waiting, the President wants to take measures to ensure families will not be threatened with deportation that splits their families up. Expected to take executive action before the end of the year, the challenge facing Republicans now is how they will try to stop Obama in a budget fight over the next several weeks. Numerous conservatives have objected to the President’s lenient immigration policies and believe he has overstepped his grounds.

Now, with power of Senate control added to the already Republican-controlled House, the GOP hopes to make a complete overhaul of the U.S. tax code.

In an event held today by AAF, Senator Orrin Hatch of Utah, who is expected to become Finance Committee Chairman in January, stated, “Dynamic scoring is not a magic elixir that solves all of our problems when it comes to tax policy. Even if we agree to use dynamic scoring on major tax reform proposals, there are a number of questions that we must consider.”

We must decide on what economic models to use, what parameter values to empl6101181368_b3583cbfdb_ooy concerning sensitivities of labor and capital suppliers, and the assumptions that should be made regarding whether or not a given proposal aligns with the government’s long-run budget constraints, continued Hatch. Looking at both the microeconomic and macroeconomic impacts of any proposed legislation is vital to our budget reform.

“If we limit ourselves to only static analysis, we take attention away from things that really matter.”

Numerous Republicans are advocating for the use of dynamic scoring in place of static analysis in the budget. They hope that by chopping tax rates and using dynamic scoring, the potential economic growth accounted for would make up for the tax cuts.

Essentially, scoring consists of two parts: the revenues and expenses incurred without a specific legislation being enacted and the revenues and spending produced by the given legislation. Static scoring fails to take into account any affect on economic variables such as gross domestic product (GDP), national income or employment. It does not account for general economic effects. On the other hand, dynamic scoring accounts for economic growth or decline due to the legislation put in place.

For example, if the economy grew or declined by $800 million due to a specific legislation, dynamic analysis would account for the change while static analysis would not.

However, Hatch carefully chose not to take a distinct side, making it clear that tax reform has been and will continue to be a long and difficult process. No one scoring process will necessarily solve everything in a flash. Rather, it is advantageous to pay attention to both elements of scoring.

Hatch went on to point out that while the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) do and have employed dynamic macroeconomic analysis, dynamic analysis must play a role in judging tax reform legislation. “The question is what role that analysis should play. And, as we continue to work toward tax reform, that question becomes all the more relevant.”

Hatch also addressed a report made by the House Ways and Means Committee chairman, Representative Dave Camp (R-Mich.), stating that Camp’s tax reform draft could be a catalyst for $50 to $700 billion in revenue growth. While tax rates could be lowered using this growth, it would only be possible to lower them by roughly 1 percent. Thus, Hatch asserted that dynamic scoring could not be the lone solution to tax reform.

Regardless of the cost of legislation, dynamic scores will vary greatly if a specific legislation causes significant economic growth while another legislation deters economic growth, even if they are “identical from a budgetary point of view,” Douglas Holtz-Eakin, President of the American Action Forum (AAF), vocalized.

Holtz-Eakin also outlined the goal of scoring legislation in the hearing: “ranking legislation properly” to ensure that Congress can properly budget.

The realities of how legislation may affect our country must be laid out. By utilizing both static and dynamic analyses to weigh all potential effects, whether growth, decline, risk or advantage, of any legislation is important so that Congress is able to reform its budget process.

As Hatch contended, dynamic analysis can be an important tool in getting our country out of this “god-awful mess.”

One thought on “Hatch Contends Dynamic Scoring no Magic Elixir

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