Knowing the Score


In March 2010, as House Democrats were preparing for their final votes on ObamaCare, the economist Douglas Holtz-Eakin published an op-ed in The New York Times arguing that, despite official Congression- al Budget Office (CBO) scores saying otherwise, the president's health care overhaul probably would increase the nation's budget deficit by hundreds of billions of dollars. Since then, he has become one of the most prominent critics of the claim that the law will reduce the deficit.

Holtz-Eakin—who currently heads the American Action Forum, a center-right policy institute—isn't just any critic: From 2003 to 2005, he ran the CBO. His time there gave him firsthand knowledge of the scoring process and its inherent limitations. Associate Editor Peter Suderman spoke with him in January.

Q: A lot of ObamaCare's defenders seem to be accusing critics like you of trying to have it both ways with regard to the CBO. On one hand, you use its estimates pretty frequently. On the other hand, you're saying that CBO's projections of ObamaCare's fiscal impact are probably wrong.

A: I have nothing but the highest respect and admiration for the quality of the estimates that CBO produces. Period. I have nothing but a deep understanding of the rules by which they must use those estimates, and the way the law was written in order to get the deficit reduction bottom line—by reading out some costs, using budget gimmicks, putting in unrealistic estimates of future Medicare reductions. None of that has anything to do with CBO's competence or professionalism. That's a congressional problem. Congress used CBO to get the answer they wanted. I get that. I ran the CBO. They used me too. 

Q: To clarify, I think part of the criticism is that you can't rely on CBO estimates when it's convenient.

A: I think you should use their numbers in an informed way. I'm trying to inform people about the way in which the particular bottom lines here have been developed.

Q: Similarly, I'm hearing people complain that criticism of the scoring leads to a reduction in the CBO's authority and therefore a more politicized, polarized, and unreliable scoring process.

A: That's nonsense. CBO is strictly advisory in all circumstances. Its role has been to advise the budget committees since 1974 on the budgetary impacts of legislation. It has been convenient for the budget committees to assert that the CBO is a god and to hide behind it. But it's not in fact correct.

Q: Some of the response to criticism of the CBO's scoring seems to stem from the idea that we're better off with a single neutral arbiter. But I've always felt that one of the best things about the CBO is that it serves as a check on the Office of Management and Budget (OMB). Do you think more competitive pressure could help?

A: All monopolies are bad, and CBO was created to break the OMB monopoly. I think it's helpful to have multiple research entities opining on the budgetary cost of things. The more numbers that are out there, the more people discussing the foundation of those numbers, I think the better off the process is.

Q: CBO's scoring process often involves somewhat arbitrary decisions. Can you talk about that?

A: It's not forecasting; it's scoring. The analogy I always use is that in football a touchdown is six points, kicking for the extra [point] is one whereas running it in is two. By having that set of rules for scoring, you can compare games across time, across teams, and across all sorts of situations. So the most important thing about scoring is to apply the same rules to every bill. 

That means that when CBO has to make a call, it should make that call in a similar fashion every time. Sometimes you have to make calls that you don't have much information about. In that sense they're a little arbitrary.