'Dynamic Scoring': Why and How to Include Macroeconomic Effects in Budget Estimates for Legislative Proposals

Abstract

Official estimates of the budgetary effects of proposed federal legislation generally exclude behavioral responses that would have macroeconomic effects. In my view, including such effects — an approach known as “dynamic scoring” — in estimates for certain proposals would improve the accuracy of those estimates and provide important information about the proposals’ economic effects. However, dynamic scoring should be used only for proposals with a large estimated budgetary impact or for which dynamic scoring is requested by the chair or ranking member of a key committee, and only if the estimating agencies have the tools and time to do a careful analysis.

Keywords: federal budget, budget estimates, dynamic scoring, macroeconomic effects

JEL Classification: E61, E62, H20, H30, H60