THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Sunday, November 27, 1994 TAG: 9411230041
SECTION: COMMENTARY PAGE: J4 EDITION: FINAL
TYPE: Editorial
LENGTH: Medium: 54 lines
The Republican Party, at least until it embraced the supply-side gospel in the '80s, was traditionally committed to fiscal responsibility, balanced budgets and conservatism where it counts - in the bookkeeping.
Now that the party is about to be in charge of Congress, it should rediscover a dedication to the green-eyeshade mentality. It is going to have the responsibility for the budget and the deficit.
No less an authority than Ronald Reagan has written words Sen. Robert Dole and Rep. Newt Gingrich would do well to remember. ``Presidents don't create deficits, Congress does. Presidents can't appropriate a dollar of taxpayers' money, only congressmen can.''
Under Reagan, of course, congressmen of both parties were only too happy to go along with administration budget assumptions that came to be known as ``the rosy scenario.'' How much revenue would come in was overstated and how much programs would cost was understated. The result was an increase in the national debt of more than $3 trillion during the Reagan-Bush years.
It is disquieting that Republicans seem to be inclined to try a similar trick again. Leading lights in the party are suggesting that proposed budget reforms be assessed on the basis of so-called dynamic scoring instead of the more usual static scoring.
Static scoring assumes a capital-gains tax cut of a certain size will lose $56 billion in forgone tax revenues if all things remain equal. But those who favor dynamic scoring say all things don't remain equal. Changes in tax law or other governmental regulations cause people to change their behavior.
Under dynamic scoring, it is possible to argue the loss in revenue due to a cut in the capital-gains-tax rate will be at least partly offset by an increase in economic activity or by a greater enthusiasm for investing in stocks as opposed to tax-exempt bonds.
There's no question that static scoring fails to take into account the effects a change in government policy may have on the marketplace, but there's a good reason for that. As one economist says, static scoring is simply arithmetic.
But dynamic scoring requires the gift of prophecy since it asks budgeters to divine what will happen in the future when millions of people react to a change in policy. In short, it is not mathematical science and not even an art. It can verge on blue smoke and mirrors. And it is tempting to use it to understate costs and overstate revenues. That is, the rosy scenario rides again.
The Republicans are in step with the times insofar as they advocate leaner government and balanced budgets. Rather than undercut their credibility with accounting sleight of hand, they should play the game conservatively. by CNB