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Answers to Questions for the Record Following a Hearing on The 2015 Long-Term Budget Outlook Conducted by the Senate Committee on the Budget 1 (July 28, 2015)

handle is hein.congrec/cbo2386 and id is 1 raw text is: JULY 28, 2015 Answers to Questions for the Record Following a Hearing on The 2015 Long-Term Budget Outlook Conducted by the Senate Committee on the Budget On June 17, 2015, the Senate Committee on the Budget convened a hearing at which Keith Hall, Director of the Congressional Budget Office, testified about CBO's report The 2015 Long-Term Budget Outlook (www. cbo.gov/publication/50250). After the hearing, Chairman Enzi and other Members of the Committee submitted questions for the record. This document provides CBO's answers. Chairman Enzi Question. There is a growing body of academic research that argues for a connection between changes in regulation and economic growth. For example, work by John Dawson and John Seater found that the growth of regulation from 1949 through 2005 resulted in an annual 2 percent drop in economic growth. Also, a 2005 World Bank study found that a 10 percent growth in regulations is associated with a half percentage point reduction in per capita personal income. If increased regulation does slow the pace of economic growth and economic growth is a key factor in the growth of federal revenues, would a reduction in economic regulatory burden lead to a growth of revenues above the current law baseline? If so, what is a reasonable rule of thumb that can be used when thinking about the relationship between changes in regulation and changes in federal revenues in the 10-year baseline? Would a less restrictive regulatory environment result in an improvement in the long-term budget outlook? Answer. Economic growth is one of the key factors that determine federal revenues, but the relationship between regulation and economic growth in the long term is not so straightforward. Some regulations would facilitate economic growth; others would diminish it. The economic effects of regulation depend greatly on the specifics of the regulations involved.' For that reason, CBO does not have or expect to develop a general rule of thumb about the relationship between changes in regulation and changes in federal revenues. Most researchers who have studied the effects of regulation on economic growth have had difficulty distinguishing between the effects of regulations and the effects of other factors that have changed in the United States over long periods and that differ among countries. Either they have focused on associations between the number of pages of regulations issued (ignoring the content of those pages) and the changes in output in the United States over time, or they 1. See David Parker and Colin Kirkpatrick, The Economic Impact ofRegulatory Policy: A Literature Review of Quantitative Evidence, Expert Paper No. 3 (Organisation for Economic Co-operation and Development, August 2012), http://tinyurl.com/o3sqvkt (PDF, 974 KB).

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