Abstract By design, official budget estimates for legislative proposals generally exclude the proposals’ likely effects on levels of labor, capital, productivity, and other economic outcomes, as well as any feedback effects from changes in those outcomes to the federal budget. Policymakers would benefit from knowing the expected sizes of those economic effects, and advances in research and in the estimating agencies’ tools and experience have made providing estimates of those effects more feasible. If Congress requested that those effects be included more often in budget estimates—so-called “dynamic scoring” of legislation—the advantages and disadvantages of doing so would vary across policy areas. For some areas, the budgetary impacts of the currently excluded effects have been estimated to be significantly different from the impacts of the included effects. But producing dynamic estimates would be substantially more time-consuming than producing conventional estimates, and in some areas, the research base needed to inform modeling of the relevant economic effects is insufficient for credible estimation. Read the full PDF here.
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Table of Contents
- Dynamic Scoring A Progress Report on Why When and How 3
- September 10 2024 3
- Brookings Papers on Economic Activity 3
- I. Why 6
- I.A. Budget Estimates 7
- I.B. Behavioral Responses 8
- I.C. Feasibility of Producing Dynamic Cost Estimates Given Time and Resource Constraints 9
- I.D. Uncertainty of Dynamic Budget Estimates 12
- I.E. Magnitude of Policy Effects on Labor Capital Productivity and Other Economic Measures 16
- I.F. Credibility of Estimates 18
- Excluding 19
- II. When 21
- II.A. How Do Alternatives for Specifying the Deployment of Dynamic Scoring Compare 21
- II.B. What Issues Arise with Appropriation Bills 23
- II.C. What Factors Affect the Value of Investments in Dynamic Scoring Capacity 24
- II.D. How Might the Foregoing Considerations Evolve over Time 26
- Journal of Economic 26
- Perspectives 26
- JEP 26
- III. How 26
- III.A. Estimating direct effects of a proposal on labor capital and productivity 26
- III.B. Estimating changes in output and other economic factors 27
- III.C. Estimating changes in the budget 30
- III.D. Reporting the estimates 30
- IV. An Illustrative Example Potential Changes in Immigration Policy 31
- IV.A. Conventional Scoring 31
- National 32
- Academies 32
- IV.B. Population-Change Scoring 33
- IV.C. Dynamic Scoring 35
- V. Illustrative Examples Potential Changes in Federal Investment and Federal 36
- Permitting of Investment 36
- V.A. CBOs 2021 Report on Physical Infrastructure Spending 37
- How state and local governments respond to additional federal funding 37
- How quickly funding leads to outlays 37
- How quickly outlays increase productivity 37
- How much outlays increase productivity 38
- How outlays are financed 38
- V.B. Application to Potential Changes in Federal Spending for Research and Development 38
- V.C. Application to Potential Changes in Federal Permitting for Physical Infrastructure 40
- VI. Conclusion 41
- Acknowledgements 41
- References 42
- Econometrica 42
- National Tax Journal 42
- Review of Economic Studies 42
- American Economic Review Insights 42
- The Hill 42
- American Economic Review 42
- Population Research 42
- Policy Review 42
- Journal of Economic Perspectives 44
- Brookings Papers on Economic 45
- Activity 45
- The Review of Economic Studies 45
- Tax Policy and the 46
- Economy 46
- Brookings 46
- Papers on Economic Activity 46
- Innovation and Public Policy 47
- Journal of Economic Perspectives 47
- Economic Modelling 47
- Journal of Macroeconomics 47
- American Economic Review 47
- The Economic and Fiscal 47
- Consequences of Immigration 47
- The Review of Economics and Statistics 47
- Quarterly Journal of Economics 47
- Journal of Political Economy 48