Eight Free-Market Organizations to Congress: The Pro-Growth Budgeting Act is Long Overdue

January 23, 2012 Dear Representative Price, On behalf of the millions of members of our respective organizations, we write in strong support of your recently-introduced Pro-Growth Budgeting Act, H.R. 3582. Since 1975 the Congressional Budget Office (CBO) has served as the official scorekeeper for Congress, providing estimates of the impact of legislative proposals on overall tax revenues and government spending. CBOs work has contributed significantly to the important policy debates happening in the halls of Congress, but even today it suffers from a major flaw: the full economic impacts of any given proposal are ignored. When Congress fails to honestly account for how the economy will react to new policies (for example, how American businesses will respond to higher tax rates), this leaves out a vitallyimportant part of the picture for any estimate of the true costs or benefits of federal legislation. The result is, unfortunately, one that is regularly biased in favor of big-government policies: tax hikes look like they have less impact because the score ignores the resulting disincentives to work, save, and invest imposed on the economy; deficit-financed stimulus spending tends to score with all positives for the economy because they ignore the full costs of a rising national debt down the road and the inefficiency of redistributing capital through government. Your bill takes important steps forward in correcting this problem by requiring the CBO to perform a full macroeconomic impact analysis for major legislative proposals, known alternatively as dynamic scoring. This means that for any bill with an estimated annual impact of .25 percent or GDP or more (approximately $38 billion), there will finally be an official recognition that the federal governments tax and spending policies actually do affect the economy in important ways. Fundamental CBO scoring reform has long been a priority for each of our organizations, and more far-reaching fixes are needed. Nevertheless, this bill is an important foothold that can be leveraged in the larger effort of finally presenting an accurate and complete impact analysis of all proposals being debated in Congress, the kind of honest analysis the American people

deserve. As this effort proceeds, we hope that some consideration is given to lowering the GDP threshold over time, allowing important proposals such as estate tax reform to receive the same critical attention as larger, more comprehensive proposals. It is equally important to pay careful attention to the assumptions of the economic model used to produce the analysis at CBO: an effort to shed more light on the effects of federal legislation should not be used as a vehicle to institutionalize the flawed Keynesian approach to fiscal policy. Here especially transparency from the CBO is key, which is why the bills provisions requiring the CBO to publish along with its analysis a statement identifying the critical assumptions and the source of data underlying that estimate are so important. We urge you to ensure that the transparency of the economic models used by CBO remains a central component of this important legislation. The Pro-Growth Budgeting Act is an effort that is long overdue, and we commend you for your leadership in bringing the matter before Congress. We are proud to support H.R. 3582, we urge your colleagues to support this important legislation, and we look forward to working with you in the future. Sincerely,

Phil Kerpen Vice President for Policy Americans for Prosperity Grover Norquist President Americans for Tax Reform Dick Patten President American Family Business Institute Michael A. Needham Chief Executive Officer Heritage Action for America

Seton Motley President Less Government Colin A. Hanna President Let Freedom Ring Duane Parde President National Taxpayers Union Jim Martin Chairman Sixty Plus Association