At CBO, A Choice for Republicans



Early next year, the term for the current director of the Congressional Budget Office (CBO), Douglas Elmendorf, will be over. Elmendorf has led the CBO since January, 2009, presiding over some of its most high-profile work: scores of the Affordable Care Act and the stimulus, budget reports and fiscal projections in a time of record deficits and mounting debt. 

When Elmendorf's term ends, Republicans, who now control both houses of Congress, will, for the first time in years, have the opportunity to appoint someone to fill the slot. It's an opportunity to exert enormous influence over the legislative process, because in Washington policy debates, CBO's estimates are treated as canonical. Yes, there is often criticism of its conclusions, but by and large, what the office says goes. The CBO's numbers form the foundation of many policy debates.

Over the last several weeks, a number of prominent conservative economists have urged congressional Republicans to make what might initially sound like an unusual choice: Reappoint Elmendorf, who was selected by Democrats.

Wait a minute—Republicans should pick the guy that Democrats wanted? It's not as strange an idea as it might seem. Indeed, there's a strong argument that Elmendorf would make an excellent choice to continue leading the agency, even and perhaps especially under a Republican Congress. 

For one thing, it's possible that there would be some strategic advantage to reappointing Elmendorf. As Keith Hennessey, a senior economic adviser in the Bush White House, argues, reappointing Elmendorf would offer a Republican Congress some insulation from criticism; Democrats could hardly complain that their GOP opponents had rigged the legislative scoring process if the office remained under the leadership of someone initially appointed by Democrats.

Republicans wouldn't be choosing someone who is a vocal partisan. As Hennessey notes, while it would not be accurate to describe Elmendorf as a conservative, during his tenure, the CBO has on several occasions come to conclusions that don't necessarily match up with liberal economic orthodoxy or policy preferences.

More important, however, is that Elmendorf has the proper academic background and character for the job. He has a Ph.D in economics, which should be required for the top job at the premier economic analysis shop for Congress. He is rigorous and non-partisan, willing to incorporate quality economic evidence no matter where its conclusions might lead. He is fair and decent, a hard-working honest broker who takes time to worth congressional staff from both sides of the aisle and is, by all accounts, well liked by Hill offices occupied by both parties. He is cautious and careful, producing the single point estimates that Congress demands and defending their merits even while highlighting the uncertainties and limitations of economic modeling and policy projection. He embodies, in other words, all of the essential qualities of the Congressional Budget Office in the decades since it was first brought into existence.

The primary case for Elmendorf, then, is that he is an excellent conservator of the Congressional Budget Office as an institution, maintaining its integrity and its authority even in a trying time.

This is not, however, to say that no argument for change at CBO has any merit. 

The weak argument against Elmendorf is that he is a liberal economist who has abetted liberal policies, a servant of the Democratic party who has effectively given a pass to some of the most controversial policy changes of the last six years—Obamacare especially. I've taken issue with the way scores for the health law and the stimulus were used and abused by partisans in Congress, but I think it's a mistake to simply pin the blame on the head of the CBO, which operates under a variety of scoring conventions that shape its projections (as with Obamacare), and which is often required by law to produce estimates that are not really possible to pin down (as with the stimulus).

Some conservatives and Republicans have also argued that a change in leadership would pave the way for a change in CBO's scoring conventions. In particular, there's been a lot of enthusiasm for what is known as "dynamic scoring," which would account for increased economic activity and thus increased tax revenue as a result of tax cuts, hopefully making tax cuts less of a budgetary drain, perhaps even finding that tax cuts can pay for themselves. But this is a hope without much evidence; Republicans toyed with dynamic scoring during the Bush years, and both the Treasury Department and the Congressional Budget Office of the era found that dynamic effects would be small to non-existent.

The better and more interesting argument for change is that new leadership would be better able to open up the CBO—to "modernize" its methods, as National Affairs editor Yuval Levin has suggested, by making its various processes and conventions more transparent. Levin argues that the CBO is a "black box" opaque to those on the outside. "The agencies are both staffed by hard-working and highly professional economists who try to ensure their assumptions and methods keep up with the latest academic research, but their models are opaque and proprietary — which also makes them seem arbitrary and unpredictable."

The goal, Levin argues, should be to fix this by transforming the CBO into a sort of open source modeling shop; its spreadsheets, assumptions, and supporting evidence public for all to see. CBO would still produce estimates, but its primary role, along with the Joint Committee on Taxation, would be to maintain up-to-date models—models that outsiders could tweak and adjust on their own.

The end result of a change like this would be to create a competitive environment for legislative estimates; outside analysts could take CBO's models and adjust the assumptions and inputs, then show how the results would be different under different types of circumstances. It would underscore the effects of those assumptions, and highlight the range of possible outcomes for any given policy change.

There would be a trade-off, too, which is that the CBO would lose much of its authority, and thus would lose its central role in policy debates. A major part of the CBO's mission, and its role since its founding in 1974, has been to provide points of common agreement in policy debates; legislators may not always like CBO's estimates, but because the office is respected as an economic authority and not reliably partisan, those estimates invariably become shared baseline assumptions—common ground from which both sides can argue.

This, in turn, has wrested power away from activist Hill offices, which used to produce unrealistic and overly rosy scores of legislation (the CBO's score for Ted Kennedy's 1970s-era health care bill helped kill the legislation's chances), as well as from the administration's self-interested economic projections (the White House almost always has a political incentive to promote an optimistic view of the economy). It is a power center, yes, but one that holds other potentional power centers in check, and has none of their incentives toward activism.

In a competitive scoring environment, that common ground, and the power-checking authority it provides, would mostly disappear. And as a consequence, so would CBO's core function in policy debates. Its role would still be important, but it would also be more limited; it would be a curator of methods rather than a keeper of shared conclusions. The fundamental character of the institution that Elmendorf has preserved so well would change.

There would be real advantages to this transformation; the opacity of the CBO is frustrating and outdated in an era of government transparency, and legislators and policymakers (not to mention journalists) would all have more access to more information. Competitive pressure might lead to better scoring, or at least a more widespread understanding of its abilities and limitations, over time.

For these reasons, even though I would be supportive of Elmendorf staying on, I also would not necessarily oppose picking a new CBO director and beginning to experiment with more transparent processes. Republicans won the election, and with it the right to choose their own director. 

But if Republicans choose to go this route, and to overhaul the office, they should do so cautiously. The CBO has remained a respected, credible, influential institution in Washington for decades, under both parties, for a reason, and if Republicans want to alter its character they should be fully aware of what they are doing. They would be altering the institution's core function, and with it both the main reason why it was created and why it has worked so well. The CBO, at least as we understand it, would not be the CBO anymore.