Shortly after becoming chief economist to Bernie Sanders on the Senate Budget Committee, Stephanie Kelton struck up a friendship with a colleague who had previously worked at the Congressional Budget Office. “We would sit and chat,” Kelton told me. “I remember the first conversation, he was telling me about CBO. He said, ‘When I started with them, the first thing they said is that they stop stupid shit from happening.’ That is how they described their purpose.”
Nothing in the duties and responsibilities of CBO would anticipate such lofty authority. Its mission is mostly mathematical. CBO “scores” proposed legislation, mostly for its cost to the government’s bottom line. It also issues broader forecasts about expected government deficits, household incomes, and economic growth. It’s mostly a factory for producing charts and graphs, hardly a domineering aggrandizer of political power.
And yet CBO plays an outsized role in U.S. politics, a circumstance not wholly of its own making. In Washington, which likes to distill complex issues down to simple numbers, the CBO score can define whether legislation lives or dies, even though the score doesn’t characterize a bill’s goals, just the budgetary impact. As Philip Joyce, senior associate dean and professor of public policy at the University of Maryland and author of a history of the Congressional Budget Office, explains, “Someone at CBO said to me, ‘If you ask us how much it costs, we’ll tell you how much it costs; if you ask us if it’s a good idea, we’ll tell you how much it costs.’”
Yet our political dysfunction, and the entrenchment of a neoliberal ideology that prefers markets to government intervention, has conflated fiscal cost with overall worthiness. The 2020 Democratic primary’s signature question—“But how will you pay for that?”—reveals this fallacious, unbalanced foregrounding of deficits. If America turns blue in 2020, the next president will harbor either ambitions well to the left of Barack Obama, or the most progressive agenda since Franklin Roosevelt. But at the heart of the plot to stop that president in their tracks will be the opposition’s skillful employment of CBO numbers, to “prove” that America cannot have nice things.
“There are times that bad budget policy is excellent policy,” says Scott Lilly, who worked for 31 years in Congress, mostly for Congressman Dave Obey (D-WI), a longtime House appropriator. “If you look at World War II, we ended up at a public debt that was 108 percent of GDP in 1946. So we shouldn’t have engaged in WWII, we should have let Hitler take over Europe and sat back? That would have been good policy because we would have been more fiscally sound?”
Even CBO will tell you that they deliver a range of options that should not be taken as gospel, but instead viewed as baseline information to weigh against other costs and benefits. “We have to do a number and we do our best,” says Phillip Swagel, who took over as CBO director in June.
With the CBO, Washington has allowed itself to be governed by an unelected collection of well-meaning economists given a fundamentally impossible task.
Nature abhors a vacuum, however, and humans preternaturally demand some structure, some standard of judgment, some scoreboard. In the absence of a Congressional Social Benefits Office or a Congressional Quality of Life Office, we solely have a Congressional Budget Office, and this can debilitate reasoned policy decision-making. It’s not that CBO governs Washington, it’s that Washington has allowed itself to be governed, by an unelected collection of well-meaning economists given a fundamentally impossible task. Even CBO’s critics praise it for being a relatively honest broker that can provide valuable insight into the fiscal consequences of legislation. But that’s not the sum total of policy, and scorekeeping tends to create a logic of its own. It unconsciously assigns merit to legislation based on thin and at times inaccurate criteria. And even if it stops stupid shit from happening, who decides what qualifies as stupid?
DESPITE BEING A FIXTURE in modern legislative life, the Congressional Budget Office is a relatively new institution. All of the New Deal and Great Society programs passed into law without a CBO score, from Social Security to Medicare and Medicaid. Like so many dominant elements of our current political framework, CBO dates back to the disruptions of the 1970s.
For the previous half-century, the executive branch handled federal budget planning. Since 1921, presidents were required to send an annual budget proposal to Congress, and appropriations committees worked off their baseline to divvy up the money. Practically all budgetary expertise resided in the White House Bureau of the Budget, renamed the Office of Management and Budget (OMB) in 1970, and lawmakers seeking to understand how their ideas might translate in practice had to go through them. It was a chaotic process, but it worked decently until a power-mad Richard Nixon won re-election in a cakewalk in 1972.
Flush from his victory, Nixon decided to withhold congressionally appropriated funds for social and environmental programs he didn’t like. Despite prefiguring actions that triggered Donald Trump’s impeachment, at the time it was perfectly legal, or at least not illegal. Thomas Jefferson first used this procedure, known as impoundment, by refusing to pay $50,000 for 15 Navy gunboats in 1803.
Historically, impoundment was reserved for when policymakers agreed that programs were no longer necessary (the gunboat funding, for example, was appropriated under the expectation of war along the Mississippi River, and then peace broke out). But Nixon impounded funds for municipal sewers and water treatment plants, appropriated through a law he vetoed but Congress overrode.
While cities sued for their share of the funding (and eventually got it when the Supreme Court ruled in Train v. City of New York), Congress took action to take back the purse strings. The result would become the Congressional Budget and Impoundment Control Act of 1974. Nixon might have vetoed it as well, but with Watergate at its peak, his administration feared angering Congress further.
The Budget Act forced future presidents to seek congressional approval to impound funds. But Congress also recognized that presidential budget dominance stemmed from legislative deficiency. So the law created budget committees in the House and Senate, and required Congress to formally pass an annual budget resolution. Instead of having the total federal budget be the sum of whatever the appropriations committees approved, the new budget progress would agree on the bottom line first, and then argue about who got to appropriate what. To reclaim some power from OMB and the executive branch, the act created the Congressional Budget Office to provide technical expertise and objectively estimate costs.
The details were scant. “The law simply said there’s going to be this agency,” Joyce explains. It was left to CBO’s first director to set prerogatives. The House preferred Sam Hughes, an OMB official; the Senate wanted Alice Rivlin of the Brookings Institution. Neither side would budge; House Budget Committee Chair Al Ullman bluntly refused to nominate a woman. Then in October 1974, Wilbur Mills, the powerful chair of the House Ways and Means Committee, was caught in the Tidal Basin with a stripper named Fanne Foxe. Mills eventually resigned and Ullman took his chairmanship, and new Budget Committee Chair Brock Adams wasn’t as nakedly chauvinist. So Rivlin got the job.
Tom Williams /CQ Roll Call via AP Images
Stephanie Kelton worked for the Senate Budget Committee in 2015. ‘The goal is to get a permission slip out of CBO and it’s just a game,’ she says. ‘Whatever I have to do, play with the numbers, make calls, lean on them.’
Rivlin, who died last year at the age of 88, would become one of Washington’s greatest deficit hawks, blaming shortfalls for restraining economic growth. She was the architect of Clinton-era surpluses when she ran OMB from 1994 to 1996. The Rivlin-Domenici deficit reduction plan, a stepsister to the later Bowles-Simpson scheme, called for substantial health care cuts and changing Medicare to a voucher program. In other words, Rivlin wasn’t just a neutral scorekeeper; she had a perspective, and as the tone-setter for CBO’s work for its first 45 years, it’s hard to argue that her viewpoint didn’t seep into the bones of the agency.
At CBO, where she served from 1975 to 1983, Rivlin primarily sought to expand the agency’s purpose and profile, anticipating economic issues as well as reacting to individual pieces of legislation. Its long-range policy forecasts were an early harbinger of the minefields such predictions walk into. “I remember one report I objected to strenuously,” says Lilly, who is now with the Center for American Progress. “Around the time that the D.C. Metro was funded, they did a report saying that the energy required to build the Metro more than offset the energy savings. That was true in one sense but it ignored the reality that one of the major benefits of Metro was a radical change in land use, which ultimately was where the energy savings was coming from.”
The policy reports eventually got scaled back, but CBO established credibility through its unvarnished assessments. At the time, OMB was known to look favorably upon things presidents preferred, and assume high costs for things they opposed. CBO questioned the numbers in President Ford’s first budget in 1975, and Republicans assumed it was because Rivlin, a Democrat, ran the agency. But CBO analyzed President Carter’s energy policy in similarly negative fashion.
CBO’s forecasts owed much to advances in computer simulations. If a senator devised legislation to spend $1 billion on roads and bridges, CBO would run it through models that estimated how many jobs such spending might create, or how much economic activity and tax revenue it might generate over a set time frame known as the “budget window” (initially only five years, but since the late 1990s typically ten). If a congressman wanted to raise eligibility standards for Medicare, models might look at how many uninsured that would create and what the government would need to pay in uncompensated care at emergency rooms, relative to savings from fewer numbers on the Medicare rolls.
A free-college proposal would have to estimate the ten-year cost of covering tuition at public colleges and universities. A change to bank regulations might approximate the increased likelihood of financial crisis and government bailouts. An omnibus appropriations bill might have hundreds of tiny changes requiring scoring. And factors like long-term inflation, interest rates, demographic shifts, expected economic and employment growth all have to get factored in. Multiple models, simulations, and analysis go into every score.
On top of that, there are the pressures of dealing with politicians who demand favorable scores for their bills and are accustomed to getting what they want. This is where the “stop stupid shit” mentality kicks in. “There’s a natural skepticism, which is deserved, people coming to CBO and saying, ‘I’ve got this great idea and it doesn’t cost any money and will not lead to bad things happening,’” says Joyce, who spent five years working at CBO.
Typically, CBO and other federal agencies with expertise provide technical assistance to members seeking a score. “A member says here’s what we have in mind,” says Swagel, the CBO director. “We can’t do the projection until there’s legislative language. We say, ‘Here’s how we see this happening,’ and give a preliminary view. And then we’ll go back and forth.”
This inevitably intersects CBO’s desire for unbiased forecasting with raw politics. In his book The Economist’s Hour, Binyamin Appelbaum explains how Rivlin got caught up in the supply-side economics debate in the 1970s, by refusing to show in her scores that tax cuts pay for themselves. Conservatives pestered her with questions, called for hearings on CBO’s models, and read into the record a memo from Rivlin arguing that supply-siders were an “extreme right-wing claque who should not be given an audience.” Conservative Democrat Russell Long, a senator from Louisiana, remarked that his allies had to “find somebody who knows more how to put the answer in the computer so that it comes out the right way.”
It can look like a type of lobbying from the outside, and some members with clout are fiercer than others. “The goal is to get a permission slip out of CBO and it’s just a game,” says Kelton. “Whatever I have to do, play with the numbers, make calls, lean on them.”
To its credit, CBO has often resisted acquiescing to ideological requests, thanks in part to Rivlin and her immediate successors. “When Robert Reischauer left,” says Joyce, referring to a Rivlin aide who served as CBO’s third director, “there were a series of op-eds in The Wall Street Journal, calling out staff people by name and saying the new director needed to get rid of all these Keynesians and bring in right-thinking Americans. There was a push to get Republicans to remake CBO in its image, and it didn’t happen.” More recently, Republican CBO directors have defied desires for robust “dynamic scoring,” an attempt to show large economic boosts from tax cuts. In 2017, director Keith Hall, a Republican, responded to attempts to repeal the Affordable Care Act by predicting it would cause 27 million Americans to lose health insurance, which even CBO critics like Kelton praised.
But extrapolating from these incidents to conclude that CBO builds in no assumptions and makes no choices in its economic modeling would be wrong. Because if it did not, CBO simply could not perform its job.
KELTON DESCRIBES CBO’S posture as short-run Keynesian and long-run classical. Under this modeling, spending will create a short-term economic boost, while over time it will crowd out private investment. The long-term economic benefits of public investments are subsequently minimized. When Kelton worked for the Budget Committee, she met with CBO’s top macroeconomist about a $1 trillion infrastructure bill Sanders had proposed. “I said, ‘Walk me through the crowding out thing,’” she recalls. “Her argument was, if the deficit increases then interest rates go up, and people know that future tax rates will be higher so they draw out of the labor force.”
You’d have to ignore more than a decade of fairly large deficits with no correspondent interest rate rise to still believe this. Kelton, for her part, has a different conception of fiscal policy, known as Modern Monetary Theory. She believes that leaving money in the economy through more government spending or tax cuts would reduce interest rates as the deficit increases, in effect “crowding in” more private investment.
At the meeting, Kelton asked about this. “I said, ‘How do you allow for crowding-in effects from investment?’ She looked at me like I had three horns. That’s what they do, they let their assumptions drive the analysis.”
This resistance to theories that are out of step with conventional wisdom reflects the studiously middle-ground nature of CBO. Its analysts are recruited from mainstream economics departments, and the models reflect those choices. Opposition to supply-side economics is a choice, as is opposition to nonstandard thinking about fiscal-policy effects. “For better or worse, it largely reflects the mainstream in the economic profession,” says Dean Baker, economist with the Center for Economic and Policy Research.
Several economists and CBO officials explained to me that the agency strives to be consistent as much as it strives to be accurate. “If you have a bunch of bills in Congress about health care, CBO cares that it’s not disadvantaging some bills relative to others because it’s using different assumptions,” says Joyce. “So a particular bill doesn’t become law because it’s analyzed one way and not another way.” Those assumptions evolve when new information reveals them to be incorrect, but by that time they’ve already been employed many times over.
For example, CBO does not predict recessions. While the standard CBO forecasts assume full employment, in its ten-year projections it assumes a somewhat higher average unemployment rate, on the assumption that there will be a recession somewhere in that time period. That works for consistency but not necessarily for accuracy.
Other assumptions are more controversial. CBO scores so-called “automatic stabilizers,” benefits that kick in when the economy is in a downturn, like unemployment benefits or food stamps, as if they will be fully utilized. This tends to exaggerate the costs of such policies. CBO also assumes a benchmark that only 6 percent of funds appropriated for road construction will spend out in the first year. “If you put money into highways as a way to get people back to work, say you put an extra $10 billion in, their estimate is only $600 million in the first year,” says Lilly. “We would try to force a more rapid buildup in the program, and they wouldn’t agree.”
CBO does not factor in the benefits of carbon emissions reductions when estimating environmental policy. “There’s a social cost of carbon that the government uses,” says Josh Bivens, director of research at the Economic Policy Institute. “That should go in and be reflected.” Bivens adds that CBO’s estimated job loss in the Affordable Care Act was based on assumptions that people with more secure insurance coverage would voluntarily give up work. “If people are voluntarily moving out of the labor force, it’s hard to say it’s a big crisis,” he notes.
A more consequential assumption CBO makes is that Social Security and Medicare will eat up general-fund revenues once they deplete their respective trust funds. This is actually prohibited by U.S. law, though new laws could always alter that. But Congress, perniciously, added a rider in 1985 that effectively forces CBO to make this assumption. It rapidly kicks up projections for the debt-to-GDP ratio, by adding previously prohibited Social Security and Medicare spending to the federal bottom line. The subsequent scary-sounding debt projections give politicians a tool to resist a progressive agenda.
Other problems are more structural. In general, “the models always converge to a long-term equilibrium,” says James Galbraith, economist and professor at the University of Texas at Austin. “It makes competing pieces of legislation comparable, and standardizes economic forecasts. Then people reify the forecasts as if something was real. It’s not.”
In other words, CBO quite often gets things incredibly wrong. That’s not a knock on CBO, it’s an honest description of the impossibility of their mission. At the heart of macroeconomic forecasting are millions of daily decisions made by fallible and unpredictable humans. All the computing power in the world cannot fully account for these sundry variables that affect economic performance.
“The notion that we make budget decisions today on the basis of forecasts that are inherently unstable is not a logical way of doing things,” says J.W. Mason, an economics professor at John Jay College and a fellow at the Roosevelt Institute. “You’re driving down a road you don’t know and trying to drive based on where the car will be in two miles, you can’t do that. We can solve immediate pressing problems, and when debt seems like a problem, cut spending and raise taxes.”
Mason noticed recently that CBO reduced its long-term interest rate forecast from 3.7 percent to 2.9 percent. That means that the interest payments on the national debt will wind up a whopping $2.2 trillion lower than previously thought. The newly calculated debt-to-GDP ratio also fell by about one-third, relative to the previous prediction. Mason also assembled CBO’s forecast for interest rates every year since 2011, showing it to be consistently higher than reality. That’s the danger of a long-term equilibrium assumption.
“The reality is that everybody’s forecasts have been systematically off for the last decade,” Mason says. “Everybody predicted a return to normality. Macro variables are not very predictable.” Galbraith, whose 2014 book was entitled The End of Normal, calls it a form of Confucianism. “The world has these harmonies and we will revert to them,” he says. “No other science operates on that principle.”
It’s to CBO’s credit that they made a big downward adjustment. But the previous expectation that the government can’t “afford” certain policies goes back to the assumption of mounting debt, and how interest on that debt will take up larger and larger shares of fiscal space. If that was calculated inaccurately, we wrote off potentially useful legislation for years, for no good reason. And if current deficits aren’t pushing interest rates higher, it calls into question much of the hysteria around debt burdens being thrown on the backs of children and grandchildren.
Another example is the Trump tax cuts. As the law was being rushed through Congress at the end of 2017, CBO’s initial forecast was that it would cost $1.438 trillion over the next ten years. By April 2018, just a few months later, that estimate had ballooned to $1.889 trillion, a 31 percent increase. This came mostly from changed assumptions about revenue losses from the corporate tax changes, and that was even before the business lobby went to work to extract further gifts from regulatory interpretations.
To comply with budget reconciliation instructions, Republicans were required to hold the ten-year cost of the Tax Cuts and Jobs Act under $1.5 trillion. By April 2018, it was clear to CBO that this would not happen. But there’s no way to rerun the process and invalidate the law because CBO changed its interpretation. Republicans could have passed the bill anyway, but only with reconciliation (a procedure that requires a simple majority) could they avoid a Senate filibuster and pass solely with GOP votes. The inherent difficulty of forecasting enabled a giant tax cut for the wealthy.
You don’t have to dig deep to find these CBO adjustments and errors: They’re all on the agency’s website. CBO continually updates, reviews, and assesses its predictions. It offers a budget outlook and then reruns it midyear. It annually checks federal revenues, outlays, and deficits to see how reality matched its theory; the fiscal year 2019 review revealed that it overestimated revenues by 0.8 percent. Other papers looking at deficit projections and revenue projections going back to the 1980s show what are often large errors, due mostly to recessions that overestimated revenues by as much as 25 percent. CBO also missed the surpluses during the late Clinton years, then forecast enough surpluses to retire the national debt until George W. Bush slashed taxes and flipped the budget back into the red; it missed the financial crisis, and over-optimistically predicted an immediate bounce-back from it. “The recovery was always two years away for four straight years,” says Bivens.
It’s healthy for an agency to engage in continual self-assessment to refine its accuracy. It’s also good to adjust assumptions based on new information and data. “When we evaluate the financial status of Social Security, we look at the view of what happens over 75 years,” says CBO director Phillip Swagel. “Fertility is down, younger people are having fewer babies. You might think that’s a good thing societally but that’s negative for Social Security. We don’t use dials to smooth that out. It’s change, when the facts change our opinion changes.”
Initially, CBO projected significant job loss from a progressively higher minimum wage; as new studies have come in and cities and states have moved toward $15 an hour with minimal effects, CBO has altered that stance. “That was a response, the research had been done, people shoved it in their face,” says Dean Baker. “I was going after them on interest rate projections. I said you’ve been consistently too high. And they called me, said they looked at it, and changed it.”
Swagel stressed the transparency of CBO’s actions, that they explain how they develop their numbers and emphasize the inherent uncertainty. The “score” for legislation is more like a middle point in a range of scenarios, as CBO has acknowledged for years. “It’s something I think about, how can we convey both what matters in terms of our estimate, and the uncertainty, and what are the drivers of that,” he says. But in the end, often all that the media reports, and all that lawmakers pay attention to, is that one number, that one score.
WITHIN CONGRESS, CBO is revered. An unending stream of press releases weaponizes CBO, touting a good score or condemning a bad one. “It’s really like the word of God,” says Kelton. “If you propose anything, the first question is, ‘What would CBO say?’”
Barack Obama’s advisers legendarily kept options for the stimulus package limited to $800 billion, smaller than the economic hole it needed to fill, because they didn’t want to seek a high number, which would consequently produce a high CBO score. Similarly, the cost of the Affordable Care Act was kept under an artificial threshold of $800 billion, fearing the CBO headline. Both cases yielded consequences: smaller spending to reduce unemployment, fewer subsidies to purchase individual insurance coverage, and more economic pain, all to avoid a headline number.
In recent legislation the House passed allowing Medicare to negotiate the price of prescription drugs, for example, it was known that House Speaker Nancy Pelosi took all her cues from CBO. She relentlessly touted the initial favorable score as the reason to pass the bill, almost to the exclusion of the stated goal, saving money for drug patients. Costs to the budget count in the CBO score; benefits to the public do not. Sources close to the process told me that CBO held down the number of drugs Medicare could negotiate per year, due to questions about feasibility. More drugs negotiated would save more for patients, but would cost more administratively. So Pelosi kept drug negotiations to a minimum. The source accused CBO of imposing their own political calculus on legislative content, when they are supposed to be a mere referee.
CBO
Phillip Swagel became CBO director in June 2019. ‘CBO is not deciding what Congress should do, Congress is deciding.’
House leadership resisted an amendment authored by Representative Pramila Jayapal (D-WA) that would grant rebates for excessive drug prices to Americans with employer-sponsored coverage, adding to a provision in the bill giving rebates to Medicare. The reason was perverse: If rebates were extended to a larger group, drug companies would be likely to forgo excessive prices. That would lower the money going to Medicare, and therefore worsen the CBO score.
The savings were earmarked for Medicare improvements. House leadership, then, wanted to keep drug costs higher outside of Medicare, in a bill called the Lower Drug Costs Now Act, to improve Medicare essentially on the backs of other drug patients. Eventually this deviancy couldn’t hold, and leadership allowed the Jayapal amendment into the final bill.
Part of the CBO obsession stems from the credibility the agency built up through the Rivlin years as a nonpartisan actor willing to challenge perceived “extreme” economic beliefs. Nothing gives the Washington media/consultant class a bigger thrill than being able to display their righteous centrism, and far too many on Capitol Hill want some of those plaudits too. Add to that a well-funded complex of deficit fearmongers that amplifies budgetary questions so they become standard subjects for political debate, regardless of their relatively low salience among the public.
Particularly within a Democratic establishment desperate to be seen as responsible—Republicans only wield austerity politics when out of office, content to expand the deficit when in power—the CBO score has taken on totemic significance. Even the most left-leaning Democrats bend over backwards to make sure their plans are fully paid for, while criticizing conservatives for putting wars and tax cuts on the national credit card. Economists have come around to the idea that the deficit is just not much of a problem, especially given that high debt levels have not led to soaring interest rates in the last decade. But the political class hasn’t caught up.
Perhaps a greater issue is that, while CBO acknowledges its estimates as a middle ground among an assortment of possibilities, the score is statutorily important. “CBO is phasing these numbers into the congressional budget process, which does not operate on ranges, but on numbers,” says Joyce. “When a member raises a point of order because a bill violates some provision of the Budget Act, they need a number.”
Federal law and House rules dictate that any new spending must be offset by corresponding revenue increases or spending cuts; this is known as the “paygo” (pay as you go) rule. Nancy Pelosi has made this a standing rule of the House each time she became Speaker, and Barack Obama signed a statutory paygo law, both to howls from progressives. The rule puts an artificial handcuff on ambitions of activist government, and leashes legislative action to CBO estimates. Any new legislation that costs money, according to CBO, faces a difficult climb to become law, regardless of its other benefits. CBO estimates the cost of new spending and offsets; the estimates of each must line up. If CBO’s wrong about one or the other, we may be spending less or taxing more than statutorily necessary. This isn’t CBO’s fault, of course; Congress has put these clamps on itself. “Ultimately, CBO is not deciding what Congress should do, Congress is deciding,” says Swagel. “CBO is here to support Congress.”
When Congress tries to force itself into budget cuts, CBO is often implicated in the process. For example, legislation that recently passed the Senate Budget Committee, authored by Republican Mike Enzi and Democrat Sheldon Whitehouse, commits CBO to comparing the debt-to-GDP ratio projection in the most recent budget resolution to a new projection incorporating a year’s worth of evidence. If the new projection shows higher debt, the Senate Budget Committee would report a plan for deficit reduction to hit the old debt number, under a special process with limited debate.
“It sets up a presumption which will be portrayed by deficit hawks as saying you will need to reduce the deficit,” says Richard Kogan of the Center on Budget and Policy Priorities. Kogan ran the numbers, which show that the last three budget resolutions would have triggered a staggering $9.5 trillion in deficit reduction. That’s a function of shaky CBO forecasts that get refined over the years. “That’s the fairest way to put it, they are inherently uncertain,” Kogan says. But because CBO is taken as gospel, these forecasts take on unwarranted weight under this proposal, with dramatic consequences.
Members of Congress being who they are, they have also schemed their way around the strictures of CBO. Moving the timing of payments around, making tax changes that bring forward payments that look like a short-term revenue boost, sunsetting tax cuts so they don’t cost anything in certain years, and other gimmicks have predominated in the CBO era, making the worthiness of the enterprise suspect.
For example, when former Speaker Paul Ryan briefly served as chair of the House Budget Committee, his proposal to turn Medicare into a voucher program was initially scored as costing much more than he wanted. So Ryan came up with a solution: He told CBO that he would implement reform proposals that would generate a fixed amount of money. It was a pre-cooked figure without any detail, but CBO had nothing to score, and simply gave Ryan his numbers. “I’m confident Ryan didn’t figure that out on his own,” says Scott Lilly. “CBO probably said, ‘You look bad, we’re really uncomfortable, try it like this.’”
Again, that’s not necessarily a failing of CBO. Despite the nonpartisan pose, they fulfill a role in a legally mandated political process. As an instrument of Congress, CBO is at its mercy. There’s no CBO modeling fix for political dishonesty.
BERNIE SANDERS AND Elizabeth Warren favor bold, expensive, and to their minds necessary ideas that would establish a single-payer Medicare for All system, invest heavily in a Green New Deal, make public colleges free of tuition, and much more. They add to these ambitions with higher taxes on corporations and the rich, including a novel federal tax on wealth. Even Joe Biden, Pete Buttigieg, and other candidates with more moderate agendas envision a significant amount of spending.
More mainstream liberal economists have come around to letting some of those policies exist without offsets elsewhere in the budget. Paul Krugman has called for deficit financing for much of the Green New Deal’s investments; “Debt is just not a serious problem for the United States currently,” he told Vox’s Ezra Klein.
Particularly within a Democratic establishment desperate to be seen as responsible, the CBO score has taken on totemic significance.
Looking at the Trump era in a vacuum, you could argue that Republicans have come around to that view as well. While Trump has tightened eligibility rules on spending for the poor like food stamps, he’s spent like mad in other areas, ringing up annual deficits of $1 trillion in a low-unemployment environment. The budget-busting tax cuts are a primary cause, but Trump has also pursued more Keynesian-style spending: an expensive farm bailout to make up for his trade wars; spending deals that raised the overall discretionary spending caps in a bargain to get more military funds; and paid family leave for federal employees, a policy that got tucked into a defense authorization bill.
However, anyone believing that this has permanently healed the Republican allergy to deficits didn’t pay attention the last time a Democrat took the White House. The minute that happens again, conservatives will surely shriek about the deficit and debt as if it were an invasion on American soil, blaming profligate liberal “tax and spend” policies before a single bill has been passed. Charges of hypocrisy are so well-worn by now, and context so lacking among the media, that Republicans might even get away with this, if past experience is any guide.
In the process, Republicans will position CBO as an ally. They will trade on CBO’s credibility and use their projections to paint a picture of out-of-control government. The fact that CBO forecasts often fail to capture reality, build in questionable assumptions, discount benefits, and offer only a possible range of outcomes won’t come up in the conversation. The phrase “CBO says” will be employed a lot.
We’ve already seen how these forces coalesce to frustrate hopes of progressive interventions in the economy. The full-spectrum demand on Elizabeth Warren to release details of her Medicare for All financing, and her struggles to fend off critics who distrusted her arithmetic, is a good example. CBO will generate a massive number for putting health care on the federal books, and even if it comes in lower than current national health expenditures, that number will get thrown around as proof that moving to single-payer is impossible.
What should be done in the face of this? Some have wondered whether reducing the budget window would improve CBO’s accuracy by limiting the variables. Federal law only requires a five-year estimate of the budget and legislative proposals. Others have suggested a broader communications strategy to make sure CBO’s budgetary bottom line isn’t the playing field for the debate. The next Democratic president “needs to line up the economists and engage CBO,” says Dean Baker. “I would trust they would be prepared to say, ‘Here’s what CBO says and here’s why it’s wrong.’”
There is actually good information buried in CBO forecasts, about other aspects of policy like job creation or the impact on the uninsured, as well as elucidation of the limitations of the numbers. Those caveats all melt away as reporting focuses on the headline. “The blame for how their results get boiled down to thumbs-up, thumbs-down is mostly not on them,” says EPI’s Josh Bivens. “The job is to train the Hill and journalists to not just go to the ten-year budget number.”
But the office is called the Congressional Budget Office, and that consciously or unconsciously directs people toward the numbers. A “Congressional Policy Office” that gives a balanced analysis of legislation that focuses on a host of factors, including effects on jobs, income, poverty rates, and more could remove that bias. One congressional agency that used to offer that broader perspective, the Office of Technology Assessment (OTA), was shut down by Newt Gingrich after the Republican Revolution of 1994. The House proposed funding to restart OTA last year, but Republicans killed it in the final appropriations package. Bringing back OTA would get us closer to balanced analysis of legislative effects.
Ultimately, what needs to be understood is that CBO scores are just data points, not obstacles. They serve as a reasonable baseline to discuss the budget, and that’s about it. If you explain the budgetary cost of a policy that will cover everyone’s health care or eliminate their student debt, policymakers should weigh that against the attendant benefits to society. Republicans like to talk about “cost-benefit analysis,” but Congress has created a structure to simply run the costs without the benefits. That mentality must change if we’re to have a decent conversation about the role of government.
