There's No Accounting for Politics

Remember supply-siders? Those who insist tax cuts boost government revenues are back -- and ready for a nasty rumble on the Hill

By Howard Gleckman

Imagine if the Sacramento Kings decided to improve their chances of defeating the Los Angeles Lakers in the NBA playoffs by changing the rules. So the Kings announced that henceforth, a basket by Kobe Bryant shall be worth only one point, instead of the usual two. And if the referees don't go along with the new rules, well, the Kings would fire them.

That isn't far from what's happening in Congress, where an ugly battle is brewing over how to keep score of tax cuts and spending in coming years. "Why should I care?" you ask. After all, what could be more boring than a gaggle of politicians wrangling over budget accounting?


  And you'd be right. Except that the resolution of this squabble will determine the fate of both future tax cuts and White House efforts to reform the tax code. If current scoring conventions continue, President George Bush might as well kiss the idea of new tax reductions goodbye. As Washington returns to an era of budget deficits, there will be no money to pay for them.

That's why GOP loyalists have begun a quiet but intense battle to do two things. The first: Change the way tax cuts are scored for budget purposes. Henceforth, they want rate reductions and some other tax cuts to be counted as raising revenue for the Treasury, instead of losing money.

Under today's scorekeeping, most tax cuts are assumed to reduce federal revenues. But, reprising the argument that supply-side economists made in the early 1980s, some conservatives argue that rate cuts produce so much extra economic activity that they actually generate money for the Treasury. This creates a sort of perpetual-motion machine -- the more the government cuts taxes, the more revenue it takes in, and the more it can keep cutting taxes.

There's something to be said for the idea that certain tax cuts -- though by no means all -- do indeed boost the economy. This should at least reduce the amount of money the government loses when it cuts taxes. There's just one problem -- no one has any idea how to measure all of this. Even Glenn Hubbard, chairman of the White House's Council of Economic Advisers and a conservative, doubts that these effects can be measured very well.


  Never mind. House Republicans see conventional scoring as a massive roadblock between them and future tax cuts. So they want to make sure that the next person in charge of crunching the numbers -- the director of the Congressional Budget Office -- is willing to keep the books the Republican way.

The current holder of that office, Dan Crippen, is hardly a lefty. Crippen's GOP bona fides include work in the Reagan White House, a stint with former Senate Republican leader Howard Baker, and a few years in a lobbying shop run by party heavyweight Ken Duberstein. Crippen's term expires at the end of the year, and he doesn't want to be reappointed. Good thing -- because right now, House Republican leaders, including party whip Tom DeLay (R-Tex.), are accusing him of disloyalty. Crippen's sin: He insists on using traditional methods to score the budget impact of tax cuts.

Pols turning on their CBO director is nothing new. For years, Democratic and Republican-controlled Congresses have come to loathe their selectees. This goes back to the days when then-Representative Jack Brooks (D-Tex.) used to say things about Alice Rivlin, the CBOs highly respected -- and very Democratic -- first director, that still can't be repeated on cable TV.


  The current battle goes far beyond the usual grumbling. House Republicans want to replace Crippen with a director who will abandon those traditional scoring methods. One candidate: David Malpass, a former Hill staffer who's now at Wall Street brokerage Bear Stearns. They insist that Malpass, or whoever gets the job, must agree to use supply-side scoring on tax cuts.

Congressional budgeters, especially at the career staff level, fear that this will tear apart the nonpartisan CBO. Crippen, for one, argues that such dynamic scoring is impossible. And Senate Democrats, who will have veto power over the House choice, vow to resist any attempt to change the way CBO keeps score. If the House and Senate remain divided after the November elections, this promises to be a very nasty battle.

Just remember, accounting matters. If you don't think so, just ask all those Enron investors.

Gleckman is a senior correspondent in BusinessWeek's Washington bureau. Follow his views every Tuesday in Washington Watch, only on BusinessWeek Online

Edited by Douglas Harbrecht

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