The Fiscal Effects of Faster Growth
The Budgetary Impact of The Path to Prosperity Under Alternative Growth Scenarios
The Path to Prosperity budget resolution, which passed yesterday out of the House Budget Committee, relies upon Congressional Budget Office (CBO) scoring conventions, which essentially assume that the policies in the budget have no impact on the size of the overall economy (i.e., GDP remains fixed relative to the base case). A cautious, conservative approach to scoring is common and appropriate when legislating, but it is also common and appropriate to take a separate look what the impact on the economy of certain policies might be and how pro-growth policies might affect the federal budget. The following analysis makes the case that the policies advanced in The Path to Prosperity budget resolution could result in faster economic growth and better fiscal outcomes than a static score might suggest.
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