- JahirUddin
Dynamic scoring arrived on the Republican wave of 1994. In January 1995, as one of its first acts, the new GOP majority in Congress invited Alan Greenspan, among others, to a rare joint hearing of the budget committees. The representatives wanted to talk about macroeconomic models of budget changes. Greenspan, then the chairman of the Federal Reserve and thus in charge of the world’s best-known macroeconomic modeler, was skeptical.
Then as now, the CBO every year produces a 10-year projection of economic growth. This is the “baseline,” the fixed point from which everything else is calculated. Under “static analysis,” modelers in Washington make assumptions about human behavior. But as they project out into the future, they can’t change the CBO’s baseline gross domestic product. Under “dynamic analysis,” they can. Next year’s projected growth changes the baseline for the year after, and so on. If static analysis is arithmetic, dynamic analysis is calculus.
“Full dynamic analysis of individual budget initiatives should be our goal,” Greenspan told Congress in 1995. “Unfortunately, the analytical tools required to achieve it are deficient.” He himself would prefer to reduce or even eliminate taxes on capital gains, he said, and he suspected it would lead to little or no loss in revenue over the long term. But he couldn’t prove it. “More to the point,” Greenspan added, “if we fail to achieve adequate reductions in outlays, budget scoring will not substitute for hard political choices.” An e-mail from his office on Nov. 16 read simply: “Though he wishes it were otherwise, Dr. Greenspan has not changed his views.”
Reviewed by Hasi99 on November 17, 2016 Rating: 5

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