CBO

At CBO, A Choice for Republicans

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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.

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  1. Maybe if Elmendorf gets to keep the job he’ll be able to afford a suit that fits.

    1. He is the director of the CBO, he is supposed to dress this way.

  2. discussion of the director of the Congressional Budget Office…

    is this the wonkiest wonk that has ever wonked?

  3. Fuck that shit. Appoint a libertarian. Not a partisan, mind you, an anti-statist. “What? No, fuck you, cut spending.”

    1. I’d like to see something like this:

      This revision to the PPACA will cost the Federal government X billion dollars, individual states an average of Y million dollars, and individual taxpayers Z thousand dollars over the next 10 years. At the same time, insurance companies should expect expect increased revenues of A billion dollars and increased lobbying expenditures of B million dollars while non-insurance companies should expect to pay C thousand dollars in additional health care costs over the next 10 years.

      It’d have to be a Public Choice economist.

  4. ” reappointing Elmendorf would offer a Republican Congress some insulation from criticism;”

    Horseshit.

    ” …is, by all accounts, well liked by Hill offices occupied by both parties.”

    This may be the most damning endorsement I’ve ever heard.

    ” There would be a trade-off, too, which is that the CBO would lose much of its authority,”

    The “trade-off” from a government agency being more transparent is that it might lose authority? The horror.

    Thomas Sowell for director of the CBO.

      1. Third.

        It’s funny, but Sowell used to be a Marxist. What cured him was working for the Dept. of Labor, and finding out that NO ONE there wanted to find out if raising the minimum wage would also raise unemployment.

        1. They aren’t there to solve national problems, BP.

    1. Yeah? ” …is, by all accounts, well liked by Hill offices occupied by both parties” probably means he produces a report with enough numbers both sides can use them to support their PoV…

  5. 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)

    Copying Gruber’s model was Elmendorf’s choice. There were congressional shenanigans, but that one was entirely on him.

    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.

    Shikha was on a “dynamic scoring” kick awhile ago, so I figured it was pointless.

  6. Could do a lot better, but could do a lot worse.

  7. 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.

    Really? Elmendorf let the Democrats feed him obviously bogus numbers so that the CBO could declare Obamacare to be deficit neutral. If Elmendorf cared so much about the institution, he would have called bullshit on those numbers and never made that finding. That he didn’t, was an act of moral and political cowardice.

    Good God, Sudderman is as bad as his wife in his worship of top men and his utter belief that they all mean well and are good people.

    1. I’d axe him for Obamacare alone. The CBO is useless if “political reality” takes the place of real-world accounting.

      1. Exactly. Those numbers were obviously faked and no one with integrity should have accepted them.

  8. Elmendorf is a good choice (or as good as we are going to get). Sure, he doesn’t exist in the antiquated neoclassical bubble that most libertarians seem to, but he has done as good a job as you can given the limitations of his office and political realities.

    1. Adherence to reality = antiquated

      1. You seem like you are in a bad mood. The general rejection of the neoclassical synthesis is a big problem for libertarians. It makes us look unserious when you talk to people who actually understand economics.

        1. I don’t know what the ‘neoclassical synthesis’ is and I don’t care. The people who actually understand economics do take us seriously that’s called the Austrian school.

          1. The Austrian school? You’re joking, right? You reject mathmatical modeling in economics? You reject scientific rigor applied to theory? Are there even any austrians left? Goodness.

            The neoclassical synthesis is the majority position among economists now since it seems to have the most predictive power. Roughly speaking, its neoclassical-based microeconomics (which is NOT austrian economics, by the way) and neokeynesian-based macroeconomics.

            1. Sorry, that was too harsh. There are austrian economists at some outlying programs, like George Mason and Auburn. And I realize that a lot of the ideas are incorporated in some form into what most people think of as “real” economics.

              What frustrates me about it is that, as a libertarian, I think we do a good job applying a rigorous logical framework to the world around us. Austrian economics is all about a priori reasoning and has failed to have much predictive power in the real world. And, on top of that, Austrians generally reject out of hand the modeling that has given so much of micro and macro economics and, by association, finance a huge amount of predictive power.

              Just because a theory fits our peculiar world-view, it shouldn’t allow us to replace reality with that theory. That’s why I cringe when I hear libertarians talk about being an “Austrian” after reading Hayek or Mises because it allows people who know what they are talking about on the subject to dismiss them, and by association, libertarians as dilettantes.

  9. Republicans should find an issue on which to compromise by forcing the CBO to (i) score government programs according to GAAP and (ii) develop their own models from an actual reading of the legislation.

    1. If government operated on GAAP accounting, their criminality would become obvious.

    2. Absolutely? a switch to accrual based accounting would yield some honesty in government accounting.

      Especially if the switch included revisions of previous budgets. 😀

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  11. Dude that makes a lot of sense . Wow.

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