"Dynamic scoring": Why and how to include macroeconomic effects in budget estimates for legislative proposals

By: Douglas W. Elmendorf
Brookings Papers on Economic Activity
September, 2015


Including macroeconomic effects in budget estimates for certain legislative proposals would improve the accuracy of those estimates and would provide important information about the economic effects of those proposals. Moreover, if certain key conditions were satisfied, those estimates would meet the general goals of the estimating process that estimates be understandable and resistant to misinterpretation, based on a consistent and credible methodology, produced quickly enough to serve the legislative process, and prepared using the resources available to Congressional Budget Office (CBO) and Joint Committee on Taxation (JCT).

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In Douglas Elmendorf’s words

"Based on my experience as the director of CBO from January 2009 through March 2015, I think that including macroeconomic effects in estimates for certain legislative proposals would provide policymakers and the public with important additional information about those proposals," he writes. "I also think that some of the key concerns that have been expressed about estimates of macroeconomic effects of proposals apply with roughly equal force to estimates of non-macroeconomic effects, and that other concerns can be addressed through appropriate procedures by CBO and JCT. That is, estimates of the macroeconomic effects of legislative proposals may fall short of an idealized conceptual version of estimates of non-macroeconomic effects but is quite comparable to the messy version of those estimates that is unavoidably used in practice."