Congress

Legislative Reality vs. Political Reality

How Democrats game the Congressional Budget Office

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"The budget," said Will Rodgers, "is like a mythical bean bag. Congress votes mythical beans into it, then reaches in and tries to pull real ones out." And the Congressional Budget Office (CBO), the non-partisan office tasked with generating official price tags for legislation, is the agency responsible for helping Congress count those mythical beans. But as the health care debate has progressed throughout the year, Congressional Democrats have become far more adept at getting the CBO to count the beans just the way they want.

Over the summer, some of the biggest setbacks faced by Congressional Democrats in their effort to overhaul the nation's health-care system came from the CBO. According to the CBO, bills put forth by the House and the Senate Finance Committee would cost $1 trillion and $1.6 trillion, respectively. The CBO also projected that the House bill would increase the federal deficit by $239 billion. 

But after the August recess, scores for the various reform proposals improved markedly. Not only were they cheaper, requiring less total spending, they were judged by the CBO to result in net reductions to the deficit. What happened?

In large part, the answer is that Democrats became more skilled at manipulating the CBO's scoring process. Indeed, they have become so skilled at getting what they want out of the CBO that the office has taken to including strongly worded warnings that the various bills' real costs may not actually match their estimates.

In the House, Democrats shifted an expensive, unpaid-for "fix" to doctor's Medicare reimbursement rates over to a separate bill. And in the Senate, they backloaded the spending so that its full effects would not be felt in the 10-year window that CBO scores. In the latest Senate bill, 99 percent of the spending would occur in the last six years of the budget window. 

Nor do the scores count the cost of state level Medicaid expansions—$25 billion in the Senate's bill—or of the private sector mandates it imposes, which, according to Michael Cannon, a health policy analyst at the Cato Institute, could add an additional $1.5 trillion to the total.

The bigger issue is that in budgeting, there are multiple realities available: The various scores put forth by the CBO are based on what might be called "legislative reality"—a fictional world in which there are no changes to current law except the bill under consideration, and new legislation is executed to the letter. That means CBO scores are not permitted to reflect political reality—the understanding that what a law says Congress will do in the future is not necessarily what Congress will actually do.

Knowing this, Democrats have concocted legislation that ignores the relevant facts of political reality and instead skews legislative reality, which is based not on honest expectations but on the promises made in legislation, in their favor.

For example, the most recent Senate reform bill counts $192 billion in savings from Medicare payment reductions and $118 billion in savings from reducing payment rates in Medicare Advantage programs. It attempts to guarantee these results by setting up a Medicare advisory board which would be required to recommend cuts should the savings not be achieved.

Yet it is highly unlikely that such changes will come to pass. In the past, despite passing laws that institute formulas requiring payment reductions, Congress has been loath to make such cuts, and has overturned those cuts at nearly every opportunity. As former CBO chief Douglas Holtz-Eakin recently told me, "They surrendered their budget authority to a formula, but they took it right back." To Congress, when it comes to cutting payments to powerful constituencies, there's little difference between a formula and a commission.

Analysts at the CBO are not blind to this, but they must score bills as if what is written is what will happen. However, they are not prohibited from issuing strong warnings about what might happen if the legislative reality they assumed for scoring purposes somehow does not come to pass—which is just what they've done.

For example, the CBO's September 16th scoring of the Senate Finance Committee health care bill ends with the caveat that its projections about cost and deficit reduction "assume that the proposals are enacted and remain unchanged throughout the next two decades, which is often not the case for major legislation. For example, the … mechanism governing Medicare's payments to physicians has frequently been modified … to avoid reductions in those payments."

Indeed, such caveats are a staple of the CBO's health care scores. A revised score of the Finance Committee's bill released on October 7th noted that "the projected savings for the proposal reflect the cumulative impact of a number of specifications that would constrain payment rates for providers of Medicare services. The long-term budgetary impact could be quite different if those provisions were ultimately changed or not fully implemented."

In an October 29th report on the House reform bill, CBO chief Doug Elmendorf wrote that "the bill would put into effect (or leave in effect) a number of procedures that might be difficult to maintain over a long period of time," including "the 21 percent reduction in the payment rates for physicians currently scheduled for 2010." And the CBO's November 18th score of the Senate's bill states that the projections cautions that the estimates of long-term deficit reduction are "subject to substantial uncertainty."

The language involved may sound reserved, but in the staid world of bureaucratic Washington, this is akin to hanging flashing neon signs all along Pennsylvania Avenue warning that deviations from legislative reality are highly likely. Indeed, Elemendorf, who has frequently noted that our nation's fiscal policy is "unsustainable," has become so concerned with this problem in overall budget projections that he recently gave a presentation noting that "the difference between current law (which underlies CBO's baseline projections) and current policy as perceived by many people… is very large."

In his presentation, Elemendorf was referring to tax rates. But it's essentially the same difference that Democrats have taken to exploiting in crafting health care legislation. There's an old proverb that says "a poor man's budget is full of schemes." But every time they release a new health care bill, Democrats prove that you need not be poor for that to be true.

Peter Suderman is an associate editor at Reason magazine.

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  1. Whether it’s Pelosi or Reid in front of the microphone, Schumer’s smarmy visage always appears in the frame.

    1. It’s like spirit photography. He was there when the photographer took the picture, but rather slowly appeared when it was developed.

      Digital camera update: Schumer is the ghost in the CCD.

  2. Maybe tiresome market fundamentalists like Suderman can just opt out of any health care program. I hope he smokes.

    1. Oh, please let me opt out.

      I have all but given up on tax revenues being spent on other people’s health care. But if you let me get whatever insurance from whatever company I want and take it to whatever doctor in whatever practice I want, I would consider myself lucky.

      Unfortunately, the Pelosi/Reid plans allow nothing of the sort.

      Perhaps, Morris, you could use some sway here? While you’re at it, I’d like to opt out of Medicare and get my 3% back too.

    2. Morris, if the opt-out includes being released from paying taxes for the damn thing, I’d opt-out in a heartbeat.

    3. Why don’t you opt out of existence? I hear disappearing up your own ass is quite lovely this time of year.

      1. Also, it is an effective method for voting. Right before elections you pull your head out of your ass, remember how much you have been told you hate Bush, and cast your vote for hope and change. Stick your head back up your arse while all of the “historic” legislation passes and re-emerge just in time to vote for more hope and change.

    4. Since we can’t opt out, we’ll just game the system since this is the most poorly designed bill in my lifetime. No pre-existing disqualification simply means that those of us with a sufficiently low income where we will pay significantly less in penalties than the cost of the mandated minimum coverage will simply pay our fine each year and when a medical event comes that we need to cover, we’ll simply apply for health insurance that we cannot be rejected from. After the fix is taken care of, we’ll cancel our health insurance and repeat the cycle again. Because if you can’t beat ’em, fuck em over.

      1. This would work for, say, cancer. Not so much for heart attacks.

        The people who wrote this either don’t understand insurance, or don’t fucking care how badly they screw things up.

        1. Who says it can’t be both, prolefeed?

  3. Maybe we should all just move to India. More people probably speak English there anyway.

    Then again, there is always Seasteading. If only we could get that figured out soon.

  4. [CBO] are not prohibited from issuing strong warnings about what might happen if the legislative reality they assumed for scoring purposes somehow does not come to pass?which is just what they’ve done.

    Good for CBO, I suppose. But until “the average taxpayer” truly appreciates congressional shenanigans, nothing will come of these “strong warnings”. E.g., can CBO take out ads on American Idol? 8-(

  5. great site hope you visit washingtonamerica.com

  6. My only point is that if you take the Bible straight, as I’m sure many of Reasons readers do, you will see a lot of the Old Testament stuff as absolutely insane. Even some cursory knowledge of Hebrew and doing some mathematics and logic will tell you that you really won’t get the full deal by just doing regular skill english reading for those books. In other words, there’s more to the books of the Bible than most will ever grasp. I’m not concerned that Mr. Crumb will go to hell or anything crazy like that! It’s just that he, like many types of religionists, seems to take it literally, take it straight…the Bible’s books were not written by straight laced divinity students in 3 piece suits who white wash religious beliefs as if God made them with clothes on…the Bible’s books were written by people with very different mindsets…in order to really get the Books of the Bible, you have to cultivate such a mindset, it’s literally a labyrinth, that’s no joke

  7. My only point is that if you take the Bible straight, as I’m sure many of Reasons readers do, you will see a lot of the Old Testament stuff as absolutely insane. Even some cursory knowledge of Hebrew and doing some mathematics and logic will tell you that you really won’t get the full deal by just doing regular skill english reading for those books. In other words, there’s more to the books of the Bible than most will ever grasp. I’m not concerned that Mr. Crumb will go to hell or anything crazy like that! It’s just that he, like many types of religionists, seems to take it literally, take it straight…the Bible’s books were not written by straight laced divinity students in 3 piece suits who white wash religious beliefs as if God made them with clothes on…the Bible’s books were written by people with very different mindsets

  8. which limited the actions of Congress and by extension had to be incorporated, the Second Amendment stated that RKBA was not to be infringed, and lacked detail as to by whom, and therefore applied to all government. By its very language it was already applicable to the states!

  9. So, there is no way she knows about any of the research you site or has any idea how the world outside her own bubble actually works. So cut her some slack.

  10. I am really enjoying reading your well written articles. thanks.

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