The House of Representatives on Tuesday adopted a rule that will change Washington and lawmaking for the better. When legislation is proposed, the Congressional Budget Office is tasked with estimating its fiscal consequences. In most cases, the CBO assumes there is no effect on economic growth, positive or negative. In the future, the House will instruct the CBO to take macroeconomic effects into account when estimating the cost of legislation.
With this, a long-time dream of supply-siders has been realized. It will surely mark a turning point in the economic history of the U.S. economy.
Predictably, some Democrats denounced the change. In my view, this issue should transcend politics because it is simply a question of basic economics. If you raise or lower taxes, you will change people's behavior. If these dynamics are not properly considered, then legislation can and most likely will suffer from negative and "unforeseen" consequences.
As Scott Hodges of the Tax Foundation today noted:
Dynamic scoring is not a plot to cut taxes without paying for them, rather it is an important tool for raising the tax IQ of members of Congress so that they understand the different effects that various tax increases or tax cuts have on the economy. The ultimate goal is to enact tax policies that improve the lives of all Americans, which won’t happen if we continue to protect Washington’s status quo.
Read the whole thing.
There is reason to be optimistic.