By David Lawder
WASHINGTON (Reuters) - When Republicans take full control of Congress on Jan. 6, they will face decisions on major changes at the Congressional Budget Office, including possibly naming a new head and changing the rules used to assess the cost of legislation.
Conservative groups have been calling for the replacement of CBO Director Doug Elmendorf, who was appointed by Democrats in 2009 and whose term expires next month. They argue that a Republican-leaning economist would more readily adopt a cost analysis known as "dynamic scoring" that incorporates expectations of higher economic growth associated with legislation.
Analyses by the CBO, a non-partisan office, show how much a bill would increase or decrease the federal budget deficit over a 10-year period.
The budget math used under dynamic scoring has long been a goal for Republican lawmakers, including the incoming chairman of the House Budget Committee, Representative Tom Price, and the current chairman, Paul Ryan, who next month will take over the tax-writing House Ways and Means Committee.
Under current congressional analysis rules, if a bill cuts tax rates, government revenues fall. Dynamic scoring assumes that lower tax rates would boost growth and income, helping to offset at least some of the lost revenues.
Some economists say this approach could make it easier to sell tax reforms or balance the budget while avoiding painful cuts in military spending.
"What we're simply striving for is accuracy in score keeping," Ryan told Reuters in a recent interview. "We know for a fact that it is not accurate or prudent to ignore the effects of economic growth on policies we make in Congress."
While Democrats will be able to make recommendations about who heads CBO in the coming year, Republicans will control the Senate and House of Representatives in 2015 and would have leeway to replace Elmendorf.
Democratic lawmakers strongly oppose dynamic scoring. Representative Chris Van Hollen, the senior Democrat on the House Budget Committee, said on Monday: “Any effort by Republicans to interfere with the professional integrity of the CBO by selecting someone to push their failed ‘trickle down’ economic theory of tax cuts for the wealthy through dynamic scoring would undermine the credibility of CBO and the entire budget process."
With a Republican-controlled Congress, Ryan and new Senate Finance Committee Chairman Orrin Hatch will be able to impose similar changes on calculating economic impact on staff at the Joint Committee on Taxation, which analyzes tax bills.
Some scoring changes at the CBO may require revisions to the 1974 law that created the agency, Price said. He intends to pursue such a revamp but said Republicans were still discussing their plans in this area and whether to keep Elmendorf after his term expires in January.
"I've always said that Doug Elmendorf has done an extremely good job at CBO," Price said. "My complaint, my concern about CBO is not about the individual at the lead of CBO, my concern is the rules under which they operate."
Several conservative political groups are calling for Elmendorf to be replaced. Americans for Tax Reform, which is run by anti-tax activist Grover Norquist, said the CBO under Elmendorf's watch "pushes failed Keynesian economic analysis."
It also criticized CBO for failing to reject analyses of President Barack Obama's healthcare reform law produced by controversial White House consultant Jonathan Gruber, who has come under fire for videotaped remarks saying the law was written to hide new taxes and that voter "stupidity" aided its passage.
But several prominent conservative economists have backed Elmendorf, arguing that Republicans would gain more credibility by keeping the former Clinton administration economist.
They note that CBO's work under Elmendorf has been evenhanded, and on some occasions where it has supplied dynamic scoring analysis for informational purposes, Democrats have been hurt. For example, CBO estimated that Obama's minimum-wage hike plan would eliminate around 500,000 jobs in the near term.
"If you're going to go with dynamic scoring, Elmendorf is a great guy to implement that," said Michael Strain, deputy director of economic policy studies at the conservative American Enterprise Institute. "It would be harder to accuse Republicans of putting their thumb on the scale" if he stays.
(Reporting by David Lawder; Additional reporting by Richard Cowan; Editing by Leslie Adler and Eric Beech)