Minimum Wage

This Week's Minimum Wage Debate is a Reminder About Why We Need the CBO


The Congressional Budget Office's report on the effects of raising the minimum wage was exactly the sort of balanced, careful report that the CBO is known for. It offered talking points to folks on both sides of the debate, estimating that hiking the wage floor to $10.10 an hour would raise about 900,000 people above the poverty line, but would also cost about 500,000 jobs. Both estimates, it said, were subject to substantial uncertainty, and could be significantly higher or lower.

But it resulted in something that's been relatively rare over the past few years: Democratic criticism of the CBO. The White House, in particular, did not like hearing that the minimum wage hike that President Obama supports would result in lost jobs. The day the report was released, Jason Furman, the administration's top economist, told reporters that the CBO findings do "not reflect the consensus view of economists who have said that the minimum wage would have little to no impact on employment." House Minority Leader Nancy Pelosi (D-Calif.) released a statement saying that the CBO report's "conclusions contradict the consensus among hundreds of America's top economists."

Asked about the White House pushback the following day, CBO director Douglas Elmendorf  declined to respond directly. But he stood by his agency's assessment. "I want to be clear that our analysis on the effects of raising the minimum wage is completely consistent with the latest thinking in the economic profession," he said at a Christian Science Monitor breakfast. "What we have done is to do a very careful reading of the literature and put weight on a wide range of results."

This might sound like gentle disagreement, but in the soft-spoken world of government economic estimates, it's roughly the equivalent to a shooting war. And while not a regular event, it's not the first time this White House and the CBO have rubbed elbows. During the 2009 debate over the president's health care law, the CBO issued a skeptical assessment of many of the law's proposed cost-savings measures, concluding that there wasn't enough evidence that they would work. Then-White House Office of Management and Budget Director Peter Orszag (a former CBO director himself) shot back, saying that the CBO had "overstepped" in its analysis. Again, it sounds pretty low key, but in some ways it's the government budget wonk equivalent of a slugfest.

This sort of intra-agency economic debate is a good thing, and it's one of the prime reasons the CBO is so valuable: The budget office provides a check on administration econo-spin, which has a tendency to be rosier in general, since the president's political fates are tied so closely to the economy, and more specifically friendly to the administration's favored proposals. (In the past, it also provided reality checks for overly optimistic estimates that came from Hill offices too.) As an independent economic authority, CBO doesn't have the same incentive structure as the White House economic team; if anything, its biggest incentive is to maintain its own authority and independence. The result is essentially a form of internal government competition, in which the CBO helps keep the administration in line—or, at the very least, reminds people that other reputable perspectives exist.

This doesn't mean that every CBO estimate should be treated as holy writ. Like every organization that does economic projection, the CBO gets things wrong too. (I've disagreed with some of their conclusions in the past, and I'm sure I'll do so again.) But its checking function is one of the biggest reasons why we're better off with an independent authority like the CBO than without.