The Republican-selected incoming director of the Congressional Budget Office shares views with conservatives on a number of issues, but his greatest chance to leave his mark will be on taxes.
The biggest difference between Keith Hall and outgoing Democratic appointee Douglas Elmendorf, said budget expert Stan Collender, will show up in how Hall treats dynamic scoring for tax changes.
“Dynamic scoring is the big deal, and Republicans want to cut taxes,” said Collender, who works for the communications firm Qorvis. “This new guy may help them do that. If that’s the case, it will be a black mark on the CBO.”
Dynamic scoring, unlike conventional static analysis, takes into account feedback from overall economic growth generated by new laws, meaning that changes that boost economic growth appear less costly to the government.
The Congressional Budget Office has long performed dynamic analysis in estimating budgets and scoring major legislation. For example, in 2013 it provided an estimate of the Senate immigration reform bill’s impact on the economy and revenue.
Tax legislation is scored by the Joint Tax Committee, not the Congressional Budget Office. But the budget office would have a role in incorporating tax changes into its long-run budget estimates and baselines. There, Hall’s decisions could have the biggest impact of any of the moves he could make as director, as Republican lawmakers seek comprehensive tax reform that lowers tax rates while cutting loopholes.
But that’s just one of a range of looming issues, from health care to the minimum wage, in which Hall’s background as a right-of-center economist and Republican staffer will make a difference.
The outgoing U.S. International Trade Commission chief economist is “a very free-market guy. He’s a solid free-market economist,” said Veronique de Rugy, an economist who worked with Hall at the libertarian think tank Mercatus Center before he left for the International Trade Commission.
De Rugy, who writes for a range of right-of-center publications on fiscal affairs, said the topic of the Congressional Budget Office didn’t come up in her deliberations with Hall. But she said she “wouldn’t be surprised if he shared a lot of our concern on the way CBO bills are scored and the bias in favor of big government and against free-market policies.”
One specific example de Rugy cited was that of the minimum wage. Many conservatives are skeptical of raising the federal minimum wage on the grounds that it could raise the cost of employing workers and lead to higher unemployment.
The Congressional Budget Office’s most recent estimate, based on a number of academic studies on the minimum wage, found that a 40 percent increase in the federal minimum wage to $10.10 would lead to about 500,000 fewer jobs. That result was criticized by President Obama’s economic team for allegedly overestimating the negative consequences of the minimum wage.
Hall, who worked as a White House adviser for George W. Bush and has served as commissioner for the Bureau of Labor Statistics, views minimum wage increases as bad for job growth, as shown by his work for Mercatus. His own judgments might not necessarily translate into different estimates, but they indicate an openness to GOP ideas that some economists don’t share.
Another of Hall’s recent writings for Mercatus focuses on the way in which federal disability insurance discourages work and causes people to drop out of the labor force.
Social Security disability insurance is set to be a major topic of focus for Republicans as its trust fund is set to be exhausted in 2016 if no action is taken.The way that the Social Security and Medicare trust funds are accounted for is sometimes a matter of controversy. Congress requires the CBO to project that the programs will be able to pay out benefits in full even after their trust funds expires. Social Security’s trustees warn that expiration of the trust fund would lead to an immediate cut of roughly 20 percent in the benefits received by 11 million people, a development that both sides of the aisle say that are committed to avoiding.
On that and a number of other topics, Hall could move the Congressional Budget Office in a direction favored by Republicans. In particular, House Budget Committee Chairman Tom Price in recent years has called for a number of legislative changes to the budget process, including changing the accounting used to estimate federal spending on credit programs such as the mortgage guarantees sold by Fannie Mae and Freddie Mac and requiring longer-term budget estimates for major legislation to prevent legislation from “gaming” the system by back-loading costs in later years.
Outside conservative analysts also have called for greater transparency, especially when it comes to scoring the effects of Obamacare, which the office said in 2010 would reduce deficits.
Correction: This article has been corrected to explain the law on the Congressional Budget Office’s Social Security payouts.
