In my column on dynamic scoring, I wrote:
Dynamic scoring requires the solution of a full general equilibrium model. To solve a dynamic GE model, y'all demand to specify how the authorities is going to satisfy its present-value budget constraint. You might move tempted to ask the model what happens if the authorities cuts taxes together with never does anything else. But y'all won't larn rattling far. The model volition enjoin y'all that the authorities has to create something else eventually, together with it won't enjoin y'all what volition come about if the authorities tries to create something impossible. Sumber https://gregmankiw.blogspot.com/
[A]ccurate dynamic scoring requires to a greater extent than information than congressional proposals typically provide. For example, if a fellow member of Congress proposes a taxation cut, a cardinal number inward estimating its final result is how hereafter Congresses volition respond to the reduced revenue.
This raises of import questions for which nosotros convey no slow answers. In the coming years, volition these Congresses respond apace to the revenue shortfall, or volition they permit budget deficits fester? When they act to unopen the budget gap, volition they increase taxes, or volition they cutting spending? If they cutting spending, volition it move on consumption items, such every bit wellness attention for the elderly, or on growth-promoting investments, such every bit instruction for the young? The acquit upon of the initial taxation cutting depends crucially on the answers to these questions, simply budget analysts commonly convey lilliputian to larn on simply speculation.
On this passage, mankiw-on-dynamic-scoring">John Cochrane comments:
Greg likewise opined on the minute circular effects, how policy powerfulness modify economical outcomes which powerfulness modify hereafter policy. Here I'll larn amongst the onetime fashioned approach -- let's non larn there!
I empathise the wishing non to larn there. The work is, y'all cannot avoid going there.
Dynamic scoring requires the solution of a full general equilibrium model. To solve a dynamic GE model, y'all demand to specify how the authorities is going to satisfy its present-value budget constraint. You might move tempted to ask the model what happens if the authorities cuts taxes together with never does anything else. But y'all won't larn rattling far. The model volition enjoin y'all that the authorities has to create something else eventually, together with it won't enjoin y'all what volition come about if the authorities tries to create something impossible.
