Budget

Live By the CBO's Rules, Die By the CBO's Rules

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The Washington Post's Suzy Khimm has a helpful piece explaining why the Congressional Budget Office matters so much in legislative spending battles. The bottom line? The CBO has proven willing to deliver unhelpful news to both parties, regardless of who's running the agency. Because the CBO doesn't make policy recommendations, and because it has managed to stick to a consistent set of rules and stay above the partisan fray, frequently serving as a check on the rosy estimates offered by White House budgeters, it's become one of the most respected institutions in Washington politics. 

That's more or less as it should be: A Congress with consistent, independent budget estimates is better than one without; imagine how easy it would be to overspend if there were no legislative price tags. And the more consistent, conservative (in the risk-averse sense), and rule driven the budget-scoring process, the better.

But the rules, while important, can still create problems. Congress critters frequently like to exploit that respect by gaming the scoring rules and portraying the agency's estimates and projections as certainties. That's what happened with the health care bill. As former CBO director Douglas Holtz-Eakin told me, "Congress used CBO to get the score it wanted. I get that. I ran the CBO. They used me too." And, as Holtz-Eakin writes in Reuters this morning, those rules have helped make it easy to pass legislation that turns the federal government into a 10-figure lender, because they require the CBO to assume they'll earn back big bucks:

Budget law requires the Congressional Budget Office (CBO) to assume that loans made directly by the government earn huge profits, with virtually no risk that such estimates could be wrong.  As a former CBO Director, it is easy for me to point out that most of the governments financial transactions are fraught with risk – the support of Fannie Mae and Freddie Mac being the prime examples that came back to haunt the taxpayer.  So it is a paper fantasy that the federal government will surely recoup more money than it lends out.  If a bank were to use the same accounting, the Securities and Exchange Commission would charge them with overstating their earnings and throw the book at them.  Congress gets to call these phantom profits "savings."

It's not that the budget analysts at CBO are unaware of this either:

CBO understands the pitfalls ,and has told Congress that in the two largest federal lending programs – federal direct student lending and housing loans made by the Federal Housing Authority (FHA) – the estimates ignore real-world risks and put taxpayers on the hook for huge inevitable future shortfalls. Worse yet, Congress spends the fictional "savings" the day legislation is passed, while leaving unsuspecting taxpayers to pick up the tab down the road.

But CBO's clear caveats haven't stopped Congress from turning the federal government into a high-dollar lender:

Consider student loans.  Armed with a CBO projection of $68 billion in taxpayer "savings" from establishing the Department of Education as a student loan monopoly, Congress and the President drastically increased the government's role in delivering student aid. Secretary of Education Arne Duncan has a tough enough job as head of U.S. education efforts.  Why ask him to also be a banker? Nobody could perform both roles well.

It gets worse.  Congress and the President turned around and spent the so-called "savings" that have no guarantee of materializing.

Read "The Gatekeeper," my January 2010 feature on the CBO's history and development, here

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  1. The CBO’s divorcing itself from real world likelihoods doesn’t make it partisan but certainly keeps its projections from being practically useful.

  2. Wasn’t there some obscure troll on the site that riled against the CBO as the cause of all the country’s problems, or some shit? A spoof of Tony, perhaps?

  3. C’mon Reason, get on the ball here:
    NNew NASA Data Blow Gaping Hole In Global Warming Alarmism http://news.yahoo.com/nasa-dat…..34971.html

    I fully expect a hat-tip.

    1. New data? Who cares? There is a consensus about this, which is way better than data.

      1. The radiant energy data was collected by the Clouds and Earth’s Radiant Energy System (CERES) instruments aboard NASA’s Terra satellite.

        The irony of course being that the Terra satellite was put into orbit to measure climate change.

      2. GIVE US GRANT MONEY

    2. Why is Yahoo news using a photo of Ben Bernake for this article?

    3. I love anything that blows holes in Global Climate Change alarmism, but the article’s language bothers me:

      NASA satellite data from the years 2000 through 2011 show the Earth’s atmosphere is allowing far more heat to be released into space than alarmist computer models have predicted, reports a new study in the peer-reviewed science journal Remote Sensing

      The use of the word “alarmist” to describe the community that subscribes to the Climate change theories isn’t a good word.

      It would be like a scientific article referring to people who subscribe to competing theories as “imperialists” or “capitalist roaders”.

      Just because you believe in global warming doesn’t make you an “alarmist”. Any more than my skepticism of it makes me a creation scientist.

      1. Yeah the author of the article (not the scientific paper) works for Heartland Institute

        James M. Taylor is senior fellow for environment policy at The Heartland Institute and managing editor of Environment & Climate News.

        This article is a bit better at describing what the study found:

        http://pielkeclimatesci.wordpr…..s-in-earth‘s-radiant-energy-balance-by-spencer-and-braswell-2011/

      2. “Alarmist” describes computer models, not the human believers in AGW. Then again, perhaps you are conceding that there really is no dofference between the two?

    4. Too late, dude posted by Pip in the Morning LInks (sic).

    5. Too late, dude posted by Pip in the Morning LInks (sic).

      1. Fuck off, squirrels.

        1. You can say that again.

      2. I’m hoping that this comment thread will get their attention more than the 500 comment free-for-all in the morning links post.

  4. it has managed to stick to a consistent set of rules and stay above the partisan fray

    For now. The Fed and the Treasury department use to have the same distinction….but that died a long long time ago.

    The CBO’s nonpartisan street cred has a shelf life.

    And the fact that it is a department of congress (is that even constitutional?) makes the damage it could do even more scary. Separation of powers is a good thing…erasing the lines is always bad.

  5. The CBO must score upon a static basis and not a dynamic one.

    This alone, without more, says it all.

    C-Clusterfuck

    B-Budgeting

    O-Operation

    Useless.

  6. “FED IS DEAD: THE ERSTWHILE BEGINNINGS OF A NEW TOOTHPASTE DICTATORSHIP”

    THE CBO. CAN THE CBO ROCK THIS LAND?

    THE OLD KARATE KID IS ABOUT LIFE. THE NEW KARATE KID IS ABOUT DEATH.

    WON’T THE WORLD BE SAFE FOR MY SPERM TO MEET HER EGGS IN PARADISE.

    I HAVE SEEN THE BEGINNINGS OF THE COCKASIAN UPRISING.

    I HAVE SEEN THE ENDINGS OF THE AFRO-AMERICAN POP-CULTURE HOSTAGE CRISIS.

    THIS ISN’T THE SAME AS BEFORE. BUT, BY GOD, IT ROCKS!

    WANT A SIMPLE ANSWER? BUY LEAD!

    WANT A COMPLICATED ANSWER? FED IS DEAD!

    CAN THIS BE THE END?

    NO!

    WAIT!

    NO!

    OH GOD, POUR YOUR POWDERED CUM IN MY MOUTH YOU BASTARD!

    …ERASING…DELETING…BACKSPACING.

    SPACE!

    THAT’S IT.

    THAT’S THE END TO THE COCKASIAN UPRISING.

    GO INTO SPACE…ON A TRACTOR!

    CRY FOR THE COCKASIAN PRINCESS…FOR SHE KNOW’S NOT WHAT SHE IS.

    1. Hypnotic. I’m impressed. There is truth in your words, I can feel it. I just can’t understand it.

      1. See, this is what happens when the homeless get access to discarded laptops…

        1. That is the true Singularity.

    2. Put me in touch with your weed man.

  7. imagine how easy it would be to overspend if there were no legislative price tags. And the more consistent, conservative (in the risk-averse sense), and rule driven the budget-scoring process, the better.

    The CBO was created as a nonpartisan agency by the Congressional Budget and Impoundment Control Act of 1974.

    The national debt in 1974 was about 450 billion.

    Today it is 14,500 billion.

    Yeah that CBO has sure been a god send.

  8. Imagine a world where every discussion had accurate, impartial estimates of costs and outcomes. Would there even be a debate about anything? It is a certainly a step in the right direction to have such a thing, though, in practice, it is hard to tell whether something like the CBO is actually accomplishing that ideal.

  9. Sorry for the threadjack, but remember when it was reported on Hit & Run that Rick Perry supported a state’s right to determine whether it will recognize gay marriage? And remember just this week that it was posted on Hit & Run that a presidential candidate’s stance on constitutional amendments is so “irrelvant” that nobody should even ask them about it? Hmmm: http://tpmdc.talkingpointsmemo…..al-ban.php

    1. Gov. Goodhair doesn’t disappoint. Running to the votes as fast as he can, principles be damned. Just proves the SoCons are still too damn strong in the Republican party, to my vast disappointment.

  10. “ROTO-ROUTER, SHAKE YO BOOTY: THE END OF THE CAPITO-COMMUNO-POWER HANDJOB”

    STOP! TURN THE BOATS AROUND. SOME SLAVE GOT FREE!

    STOP! THERE ARE STILL SOME SURVIVOR OF THE TITANIC THAT NEED RESCUING!

    …LIVING IN AN AIR-POCKET, EATING THEIR OWN EXCREMENT, THEIR AIR-SUPPLY IS ABOUT TO RUN OUT!

    HURRY!

    SAVE THEM!

    THIS IS THE STATE OF THE CURRENT DEBT CRISIS.

    SURVIVING IN BUBBLES, EATING SHIT, FOR 99 YEARS.

    GOD, WHAT A TRAVESTY.

    CUM.

    CUM.

    CUM.

    CUM.

    CUM.

    CUM.

    CUM.

    THIS IS THE STATUS OF THE TRULY ORIGINAL.

    COME WITH THE FIERY ANGST OF THE GRUNGE HIPSTERS AS THEY FELLATED THEIR CORPORATE MASTURS TO SELL RECORDS.

    RACISTS BIGSHOT NBA NEGROES.

    WHY CAN’T A COCKASIAN MAKE IT IN THE NBA?

    I HATE CONSPIRACIES, BUT I THINK THE JEWS HAD SOMETHING TO DO WITH IT.

    INTELLECTUAL PROPERTY FOR A FUCKING CHEESEBURGER.

    FUCKING A CHEESEBURGER AINT’T HEALTH WITH ALL THE GREASE IN SHIT IT GIVES YOU.

    BUT DON’T WORRY ABOUT ME.

    I GOT PLENTY.

    1. Genius. This is like spoken word stuff, but if it weren’t total shit.

  11. Test posting

  12. Budget law requires the Congressional Budget Office (CBO) to assume that loans made directly by the government earn huge profits, with virtually no risk that such estimates could be wrong.

    Remember this link yesterday from

    source of $12.7 trillion debt |7.27.11 @ 6:32PM|#

    http://www.whitehouse.gov/info…..n=shorturl

    Click on the link and look at the 700 billion for “Debt issued for government financing (eg student loans)”

    I wonder why Obama did not want to take credit for these policies and chose to put it in gray?

  13. Rather than the balanced budget amendment, they should just get an amendment requiring that Congress appoint an official budget Censor who can unilaterally reject any budget for not following GAAP (but who can be charged with fraud if he lets a non-GAAP budget slide).

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