It was January 2009, and Democrats were triumphant. Their party had won major victories in both the House and the Senate, and Barack Obama, arguably the most economically left-wing president in decades, had just won the White House on a promise to finally achieve what had eluded liberals for so long: universal health care.
As the new era unfolded in Washington, plans for overhauling one-sixth of the economy began to take shape. Health care reforms, Democrats vowed, would extend insurance to every American and be fully paid for without requiring middle-class tax hikes, all while cutting costs significantly enough to save the country from financial catastrophe. To sell these claims the party trotted out one of the most respected number-crunchers in town, Office of Management and Budget Director Peter Orszag, a former Brookings Institution health care expert obsessed with cost cutting. With 60 votes in the Senate, nothing seemed to stand in the Democrats’ way.
Nothing, that is, except the Congressional Budget Office (CBO), a nonpartisan federal agency that until this year was run by none other than Peter Orszag. As drafts of various health care bills began to emerge on Capitol Hill, the CBO, responsible for devising Congress’ official legislative cost estimates (known as “scores”), released a series of reports that demolished key Democratic claims. According to the CBO, both the “tri-committee” bill proposed in the House and the bill proposed in the Senate Finance Committee would cost in excess of $1 trillion over 10 years, might leave tens of millions uninsured, and would not curb rising health care costs. Indeed, both would add substantially to the budget deficit in the long term. As the year progressed, the CBO proved a more effective check against key elements of the Democrats’ domestic agenda than anything concocted by Republican strategists or libertarian wonks. In an October article, The Washington Post concluded that the CBO had “essentially condemned two legislative proposals by slapping them with trillion-dollar price tags.”
Created as an afterthought and initially intended as a low-profile congressional calculation service, the CBO has quietly risen to a place of unique prominence and power in Washington policy debates. Widely cited and almost universally respected, it is treated as judge and referee, resolving disputes about what policies will cost and how they will work.
But the agency’s authority is belied by the highly speculative nature of its work, which requires an endless succession of unverifiable assumptions. These assumptions are frequently treated as definitive, as if on faith. In practice, this means the CBO is not merely an impartial legislative scorekeeper but a keeper of the nation’s budgetary myths, a clan of spreadsheet-wielding priests whose declarations become Washington’s holy writ.
Birth of a Budget Office
The CBO’s history goes back to the 1974 Congressional Budget and Impoundment Control Act, one of many mid-’70s attempts to wrest back power from an executive branch that had expanded to new levels under President Richard Nixon. The act, which passed over Nixon’s veto, was part of an ongoing effort to get Congress more involved in the budgeting process, which many legislators felt was too dominated by the White House. It launched the House and Senate Budget Committees, changed the way the annual budget was prepared, and created the Congressional Budget Office.
Few in Congress knew what the new agency would look like. As CBO Special Assistant David Mundel recalled in a 1988 case study prepared for Harvard’s Kennedy School of Government, “I don’t think anybody had the faintest idea what this place would be—if it would be two people, if it would be a group that advised the budget committees only, if it would ever come to exist.”
Before birthing their new bureaucracy, the House and Senate had to reconcile sharply different ideas about how the agency would be run. The House, according to then–Special Assistant and later CBO Director Robert Reischauer in the Harvard study, wanted a quiet, low-profile organization, “basically a manhole in which Congress would have a bill or something and it would lift up the manhole cover and put the bill down it, and you would hear grinding noises, and twenty minutes later a piece of paper would be handed up with the cost estimate.” It was to be “noncontroversial, the way the sewer system is.”
The Senate, by contrast, envisioned a more prominent office, one that would provide not only calculations but extensive analysis—a full-service congressional think tank. After a protracted power struggle, the Senate conception won out. Senate Budget Committee Chairman Ed Muskie (D-Maine) helped pick the economist Alice Rivlin as the first CBO chief, with a mandate to remain objective and nonpartisan, providing detailed analysis but avoiding policy recommendations.
Rivlin had been (and remains) a senior fellow at the center-left Brookings Institution, where she has worked, on and off, in various capacities since 1957. Now 78, Rivlin is a petite woman with short, dark hair, and the wry, knowing confidence of a longtime Washington hand. She holds a visiting professorship at Georgetown University’s Public Policy Institute, serves on the board of the New York Stock Exchange, and was a 1983 recipient of the MacArthur Foundation’s “genius” grant. Rivlin was not merely the first head of the CBO; she was one of the agency’s architects as well, quickly expanding its mission beyond what even the Senate had in mind.
Early on, Rivlin pushed for, and received, independence in hiring. Staffing on Capitol Hill back then was rife with nepotism—Rivlin has described it as a “schmoozy, good ol’ boy Hill culture”—and those making hiring decisions were expected to play along when powerful legislators sent their former staffers out with recommendations. Muskie largely shielded Rivlin from such expectations.
Thanks both to Muskie’s protection and the agency’s vague conception, Rivlin had a great deal of leeway to staff and organize the CBO as she saw fit. Disregarding the Senate’s estimate that 158 staffers would be sufficient, Rivlin and her initial team hired 259 instead, every one of whom she made a point to interview herself.
Rivlin’s goal was for the CBO to be respected by the budgeting community. Analysts kept their judgments conservative by relying on pre-existing economic models. Even when pressed by legislators, Rivlin says, she “religiously” avoided policy endorsements. The result was an agency that quickly attained a high degree of respect and authority on Capitol Hill.
From the beginning, CBO figures provided meaningful reality checks for big-ticket items on both parties’ legislative wish lists. In 1975, for example, the agency estimated that a health care bill proposed by Ted Kennedy would cost $185 billion over five years—three times higher than the number put forth by Kennedy’s staff. In the 1980s, Rivlin turned the CBO into a staunch opponent of Ronald Reagan’s supply-side economics, insisting that tax cuts could not bring in enough revenue to pay for themselves.