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Don't Overestimate the Congressional Budget Office

I hope people have read Lori Montgomery's excellent profile of Doug Elmendorf, the new director of the Congressional Budget Office. After all, if I've not convinced you folks of the importance of the CBO, I probably haven't convinced you of anything. But I do want to echo Elmendorf on this point:

"CBO is not going to make or break health-care reform," Elmendorf said in an interview. "Whether health-care reform happens depends on the judgment of members of Congress. We'll provide information that helps them make that judgment. But the decisions are theirs."

For all the concern over the precise nature of CBO's estimates, that's exactly right. As I argued in my introduction to the CBO, the CBO is an responsible economic analysis agency operating inside an irresponsible Congress. Everyone knows its mandate and its limitations. Its estimates are, by definition, conservative, because the CBO can only give you numbers based on old ideas that we've tried and studied, not new ideas that we're preparing to implement. As a senator once said to me, it's like a navigator who tells you where you're going by staring into the rearview mirror.

Members of Congress knows all this. If they think health-care reform is worth it, they'll vote to pass the legislation. If they don't, they won't. The CBO's judgments matter for budgetary reasons. But passage will be a function of the Congress's judgment, not the CBO's estimate.

By Ezra Klein  |  June 11, 2009; 5:00 PM ET
Categories:  Health Reform  
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I take your point, Ezra, but need to disagree slightly. There's been so much ink spilt and so many lines in the sand drawn on making sure that the bill is ultimately budget neutral (hopefully over the ten year window!), that the CBO scoring is going to wind up being hugely important. Legislators from either side are going to have a hard time voting for anything unless CBO says it pencils out, dollar for dollar, so they're going to be in the driver's seat when determining how big the tax increases are going to need to be.

Now, it's true that it's ultimately up to Congress to decide whether the package of taxes is justifiable, given the potential benefits of reform. But since every tax dollar is coming out of somebody's constituent, that's going to make it a lot harder to pass, and Congress doesn't have the wiggle room to say "we think bending the cost curve is worth running a deficit for 12 or 13 years," or whatever. And heaven help us if it's the House PAYGO five year window.

Also, I'm not sure whether CBO ever gets asked to evaluate downside risks (I mostly focus on state-based stuff, and in California this is something the legislative analyst's office does all the time), but if it does, that could be another point where CBO estimates could give cover for lawmakers whose hearts aren't really in reform.

(This is more or less what sank Schwarzenegger's reform push in CA, or at least the excuse given -- there was an analysis that found that given pessimistic assumptions, the reform could wind up a billion dollars in the hole after five years. Of course, given where we're at now in the state, a program that's only down $1 billion over five years would be a bargain, but hindsight's one of those things).

Posted by: Mike_Russo | June 11, 2009 6:08 PM | Report abuse

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