‘Scoring’ Legislation for Growth

by Edward P. Lazear

Wall Street Journal
January 6, 2015

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.

The old approach, that ignored effects on economic growth, has been defended as being “neutral,” a way to prevent political pressure from affecting nonpartisan CBO calculations.

The White House has already released a blog post that opposes the change, based on the supposed neutrality of the old approach and arguing that the new rule will introduce bias. But the House, not White House, has it right. Ignoring the macroeconomic impacts of legislation is far from neutral.

Every piece of legislation has economic consequences. Most are small, but some are significant. When the CBO ignores them, it disregards the detrimental effects on economic growth of bad legislation as well as the positive effects on growth of good legislation.

More