• U.S.

The Dynamic New Buzz Word

2 minute read

‘Dynamic scoring’ sounds like something composers or quarterbacks do. But in fact it’s the hottest buzz word from the realm of Republican legislators, who hope to use the economic technique to justify tax cuts. Already the term has ignited a controversy. Laura D’Andrea Tyson, the President’s chief economist, calls the concept “dangerous.” But Republican John Kasich of Ohio, who is expected to head the House Budget Committee in the new Congress, is just as strongly in favor of the idea.

Scoring is a Washington term for estimating the impact of changes in tax and spending policy on federal revenue. Traditionally, economists and estimators use “static scoring,” in which a cut or increase in taxes is presumed to have a directly proportional effect on revenues. In other words, if taxes are cut 10%, revenues fall 10%. Thus fiscal responsibility demands that tax cuts be paired with matching cuts in spending.

The dynamic-scoring models hold that a 10% tax cut may boost economic activity by lifting the yoke of taxation off workers and businesses, which affects not only their own behavior but the performance of the economy as well. Increased economic activity means that the government’s incoming revenues might actually be enhanced by tax cuts. Thus, using the dynamic- scoring model, tax cuts don’t always require matching spending cuts.

Liberals charge that dynamic scoring is a latter-day version of Reagan-era voodoo economics, a way of slashing taxes without making painful budget cuts. Says Tyson: “We have just gained, after more than a decade, some credibility with financial markets through the hard-won credibility and sanity of our fiscal policy. This is not the moment to change.” But Republicans argue that they have an example of how dynamic scoring could have predicted failure: the luxury tax of 1990, which produced disappointing revenues because it crushed the boat industry.

More Must-Reads from TIME

Contact us at letters@time.com