NO FREE LUNCH

Meet the elite squad of economists, analysts, and actuaries who bring authority to Washington’s crazy debates

Obsession
"America First"
Obsession
"America First"

The Congressional Budget Office is tangible evidence that knowledge is indeed power.

The CBO, as it is known, has been credited with the death of more legislation than any puissant politician, making waves not with votes but by forcing lawmakers to commit to choices and publicly sharing estimates of their consequences.

In 1994, the agency’s judgement helped put the kibosh on a health-care law proposed by president Bill Clinton. Fifteen years later, the death of a public health-insurance option was laid at the CBO’s feet. Earlier this year, the CBO’s projection that 24 million Americans would lose insurance coverage helped kill the first version of a Republican plan to overhaul the health-care system.

Today the agency is expected to weigh on a revised version of the plan, which the House of Representatives passed in haste earlier this month without giving the CBO time to assess its impacts. The CBO will also be tasked with analyzing the budget proposal the White House released on May 22, which has already faced criticism for implausible forecasts and double-counting.

The CBO’s role in American political life is far more important than you might expect from a group of little more than 200 economists, analysts, and actuaries. Even in the age of “fake news,” when no authority is unquestioned, the CBO remains a unique bastion of authority.

“It has a remarkable culture, going back to Alice Rivlin, who originally stood it up,” says Donald Marron, a long-time Washington policy analyst who served as the CBO’s acting director from 2005 until 2007 before joining George W. Bush’s Council of Economic Advisors. “CBO does simply not have the incentive to shape its numbers to satisfy any political objective; whereas the folks at [the White House budget office] and in the administration have to balance their desire to be objective with the pressures they feel from their bosses who want to accomplish political goals.”

The CBO was created in 1974 as a by-product of the rivalry between an emboldened Congress and a diminished president Richard Nixon. Worried that Congress’s power of the purse was not being sufficiently respected by the executive branch, lawmakers created the modern budget process. This set the practice of adopting an annual budget resolution to guide the appropriations by which the Congress actually allocates funds to government programs.

As something of a side note, the CBO was formed so that lawmakers would no longer have to rely on analyses from the Treasury department or the White House to understand their own spending proposals. Now led by Keith Hall, an experienced government economist appointed by the Republican-led Congress last year, the agency estimates how changes to government policy will affect outlays and revenues, as well as the broader economy.

The CBO’s chief weapon, then, is sticker shock, and the only reason it can wield that authority is that it fiercely protects its independence. Rivlin, the first director, encapsulated its ideology in a 1976 memo instructing employees that “CBO must be, and must be perceived to be, an objective, non-partisan, professional organization in the service of Congress…if we appear to take sides, [then] the trustworthiness of the information we provide will be in doubt.”

The CBO’s biggest role takes place in its annual assessments of the president’s tax and spending proposals, which it performs in concert with the Joint Committee on Taxation, a group that furnishes economic models of tax changes to the economy. But in recent decades, contentious debates about health care have thrust the agency into a starring role. Most notable is its work adjudicating the tension lawmakers face when providing universal coverage: finding a balance between forcing people and their employers to provide their own insurance, or having the public buy it on their behalf.

In 1994, Democrats were unable to resolve this dilemma in a politically palatable way, leading to the downfall of their proposal.

“Each individual group would think they’d discovered a new route to China…and they’d go down to [then-CBO director] Bob Reischauer, and he’d say, ‘No, boys, you can’t go that way. It’s all ice up there,'” one Democratic lawmaker told the New York Times (paywall) of the impasse.

In 2009, as Democrats returned to the task of broadening health-care reform, they designed their bill to meet the CBO’s model. This time around, they had the political will to accept big tax increases to produce a bill that the CBO said expanded coverage and would be deficit-neutral. But sticker shock did make certain ideas, like a public option for health insurance (i.e., a government-run insurance agency), untenable for many Democrats.

Now, Republicans are facing the same dynamic. They’d like to cut health-care subsidies and then roll back the tax increases that pay for them, but there’s no way to do that without reducing coverage. Just as the Democrats emphasized the positive effects of the coverage expansion and downplayed its costs when they enacted the Affordable Care Act, a.k.a. Obamacare, now Republicans are eager to play up the savings CBO found while ignoring the Americans, many of them poor, who would lose coverage under the American Health Care Act (AHCA). It’s still all ice up there.

Producing realistic estimates can put officials at the CBO in a tricky spot since, as Marron notes, both lawmakers and the reality can produce phenomena that aren’t easily estimable. It’s not simply constructing a model of the economy and filling in the right numbers.

The former CBO official recalls a meeting to consider whether the possibility of a law being declared unconstitutional should be included in a forecast, or trying to estimate the likely occurrence and magnitude of terrorist attacks in US cities to score terrorism reinsurance legislation. Some of the trickiest cases are when the CBO is asked to forecast what would happen if officials are given the flexibility to implement a policy or not; for example, coming up with a forecast of whether or not 50 different state governments will expand a federal program or maintain it as before when given the choice.

Despite these complications, the CBO has a fairly good record. Its attempts to forecast the effects of Obamacare have largely been validated, despite major changes in the law since its inception, including a Supreme Court decision that gave state governors the choice of whether or not to implement an expansion of Medicaid, and legislation that cut payments to insurers participating in the revamped individual markets. One 2015 analysis found the CBO’s estimates were better than four other contemporaneous efforts to weigh the bill.

The tiny office has been working for weeks now to assess the latest version of the AHCA. The “score” it gives the act, expected today, will become a set of guard rails for the Senate as it tries to come up with its own version of the legislation; the CBO’s assessment will likely shape the arguments made by both proponents and critics of the new health-care plan.

And if that isn’t enough, the CBO’s next task will be to take on a presidential budget that, even by the standards of documents used mostly to signal priorities, relies on magical thinking and rosy assumptions about the future. Mick Mulvaney, the White House budget director, even criticized the agency in his first briefing, telling reporters that the CBO’s model “assumes a pessimism about America, its economy, and its culture that we refuse to accept.”

The men and women of the CBO are used to that kind of rhetoric. Working there, Marron says, means “being accustomed to the fact that you’ll often be yelled at.”

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