Dynamic Scoring: An Introduction to the Issues

The controversy over dynamic scoring in the United States is not new. 1 But the possibility that dynamic scoring might be adopted has moved closer to reality recently, with initial attempts by the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) shedding light on what the process would entail. Thus, it is an appropriate time to review the issues. Working together, CBO and JCT provide two types of revenue and expenditure projections for Congress: (1) forecasts of expenditures and revenues based on assumptions about what " current " policy is, and (2) forecasts of the changes in expenditures and revenues that would result from proposed legislation. The first type of forecast is known as a baseline. The second type is called scoring. The two types of forecasts are interdependent. Projected effects of legislation depend on the starting point, so the baseline affects scoring. Updates of the baseline reflect the estimated impact of legislation, so scoring affects the baseline. On the revenue side, where dynamic scoring has received the greatest attention, the baseline forecasts are provided to Congress by CBO, while scoring is done by the JCT. 3 In a sense, the debate over dynamic scoring may be traced to an inconsistency in the way that legislative changes are handled by the two agencies. Macroeconomic feedback effects are ultimately incorporated in CBO's baseline, but are not attributed by JCT to any source when the proposals are scored. This inconsistency is most easily understood in terms of relative informational requirements. One can update a baseline to account for macroeconomic changes without attributing these changes to particular legislation. Indeed, the models used to construct baselines are not specified at the level of detail that would be necessary to do so.