CBO

The CBO Was Created to Provide a Check on Executive Power

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Senate.gov

An unsigned editorial in The Wall Street Journal today calls for Republicans to better control the institutions of Congress—namely the Congressional Budget Office (CBO) as well as the Joint Committee on Taxation (JCT)—ideally by abolishing them entirely. But it does not portray the history and purpose entirely accurately, and, as a result, is mistaken what would likely happen if the office were to be shut down.

The CBO, according to the editorial, "was created by Democratic majorities to counter GOP Presidents and support the Democratic agenda of expanding government." This misunderstands the conflict that gave rise to the office. The legislation that created the CBO didn't come from a partisan dispute, but a long-brewing power struggle between the executive and legislative branches.

As Philip Joyce writes in his book on the CBO's role and history, in the late 1960s and early 1970s, Congress became "frustrated with what it perceived as its domination by the executive branch in the budget-making process." For decades, the legislative branch had been understood to be subordinate to the administration when it came to budgeting. But starting with President Lyndon Johnson—a Democrat, notably—Congress became increasing frustrated with its lesser status in the budgeting process, and with the way the administration exerted its greater power. As Joyce notes, President Johnson promised in his 1967 budget report that military operations in Vietnam could be funded along with new Great Society programs like Medicare and Medicaid. The following year, however, he called for new taxes the following year to fund them. Congress wasn't happy.

This was the essential problem that Congress was trying to solve: a powerful executive branch with incentives to offer conveniently misleading, overly rosy projections about the costs and budgetary impacts of major federal expenses like war and entitlements. Congressional frustration boiled over during the Nixon administration in a dispute over impoundment (which as Joyce explains was less about spending limits and more about which branch had the authority to enforce spending limits), and the Congressional Budget Office was born.

Basically, the CBO was created as a budgetary power center that could check the influence of the administration's Office of Management and Budget (OMB). This was practically explicit in the Senate's recommendation that legislation be passed creating what was then referred to as the Congressional Office of the Budget, because Congress needed "a highly competent staff to guide it in fiscal policy and budgetary considerations, similar in expertise of the President's Office of Management and Budget."

The Journal editorial argues that because CBO's staffers aren't elected, there's no democratic accountability. "The wisest course," the editorial says, "is to abolish CBO and Joint Tax and allow open debate about the tax and spending implications of policy changes. Let the politicians with the authority to make these decisions be accountable for the results." The editorial acknowledges that this may not be possible, and more reasonably urges Republicans to pick a new CBO director if this is too much, but this drastic step seems to be the ideal. 

If the CBO were to be abolished, however, the most likely outcome would be that power and authority would return to the executive, where OMB (which is also staffed and managed by unelected individuals), would once again be the most influential government player in the budgetary ballgame. To the extent that individual congressional offices or committees might take the job of estimating legislation and budgetary effects themselves, they too would be unchecked by any powerful neutral arbiter, which can also lead to misleading, overly optimistic projections. One of CBO's first acts after its creation was to help tank a universal health care plan put forward by Ted Kennedy—by estimating that the plan would cost three times more than Kennedy's office had indicated. In general, members of Congress, regardless of party, are not known for the precise or accurate explanations or estimates of budget details. 

This is not to say that leaving things exactly as they are is the only reasonable choice. I believe there is a good case for reform at the CBO, though the risks of wholesale overhaul should be clearly understood. (It's worth reading Avik Roy's measured, well-argued case for reforming the office, also in today's Journal.) But if you're looking to shut down government offices and agencies, one that tells us how much stuff costs and how deeply we're in debt should be pretty far down the priority list. Simply getting rid of the CBO would further empower an executive branch that already has too much power, and, in the process, make wise, informed budgeting and policymaking even more difficult than it already is. 

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  1. Regardless of whether it was created to strengthen one branch as against the other,

    it has become a tool of the single, unitary government, easily used to obfuscate and justify the continuing breakdown of the separation of powers in service to growing the government.

    Abolish it. It does more harm than good.

    1. If the past decades have taught us nothing, it is that the intended separation of powers has failed.

      Congress has ceded its legislative authority to executive rule-making.

      It has abolished the requirement that spending bills begin in the House.

      The institutions that contend with each other are no longer the legislative and executive branches. They are the two political parties.

      The CBO exists, not to protect the prerogatives of Congress, but to give plausible cover to the abuse of our Constitutional system by the parties.

      1. Seems to me that something private, totally outside of government funding and control, is the answer. Of course, for that to really work, the private organization would need access to real data. . .not the fudge spewed out of Washington. And, of course, the concern about a private watchdog is that it will take sides in this silly, pointless partisan crap.

    2. Also known as “regulatory capture”.

  2. My understanding is that the CBO is considered nonpartisan and objective by tradition only, and Republicans have their claws out for it (probably they want it to make the Ryan budget’s magic numbers somehow add up).

    1. Don’t lock eyes with ’em, don’t do it. Puts ’em on edge. They might go into berzerker mode; come at you like a whirling dervish, all fists and elbows. You might be screaming “No, no, no” and all they hear is “Who wants cake?” Let me tell you something: They all do. They all want cake.

    2. Happy $18 trillion national debt day, Krugscum!

      Go ahead and regale us all with some more wonderful tales about how the problem is that we’re not spending enough money, and how much better off we would all be if the debt were three or four trillion dollars higher than it is now.

      1. Maybe your guys shouldn’t have run the debt up so much if you insist on bitching about it.

        1. I must have missed the Libertarian controlled congress. What years did they hold power?

          I also apparently missed the Gary Johnson administration.

          That which is not blue isn’t necessarily red.

          1. THERE IS ONLY TEAM
            THERE IS NO ‘NOT-TEAM’

  3. The CBO Was Created to Provide a Check on Executive Power

    And now it doesn’t so shut up and bend over!

  4. Economics is not a science. Therefore, you can make an “analysis” say anything you want. The CBO exists to write bullshit projections so that the ignorant masses can be conned for the 20 milliseconds needed to ram through legislation that the owners of the government want.

    1. Re: MarkinLA,

      Economics is not a science.

      Yes, it is.

      Therefore, you can make an “analysis” say anything you want.

      Leaving aside the non sequitur, you can also make an analysis to say anything you want even within the physical sciences – see “Climaty Changey/Hokey Stickay”.

      What the CBO does is calculate the cost of a bill according to the parameters set by the bill itself. That is not difficult to do. Indeed the CBO makes assumptions regarding future costs, revenues and inflation and such, but at least it provides a baseline from which to judge.

      1. Yeah, and they are always dead on.

        What is a non sequitur about economics not being a science and doing an “analysis”? Economics has all the validity of stock pickers and sports book touts. They also do an analysis. You just mix in a little truth, make some shit up, and come to the conclusion you feel in your gut like those guys do.

        Who said climate science was real science. It is pseudo-science like economics.

      2. You can’t run repeatable experiments in economics like all social “sciences”. It is not real science. It is made up bullshit in order to elevate third rate mathematicians who couldn’t do real math into positions of prominence. None of their theories stand the test of time.

        They are repeatedly wrong in their projections yet never admit their failures using some lame excuse like “we just didn’t do enough of what I wanted” in order to avoid facing reality.

        When the free market failed in the housing market or during the S&L crisis, they blame the “government” or some other entity like Freddie Mac and Fannie Mae. Or they make the lame claim that if only there had been more deregulation none of bubble activity would have occurred. Somehow the magic fairy of free markets would have corrected things. They can never admit their beliefs are the faulty ones.

        1. There are a few basic and broad macro economic principles that are more less scientifically indisputable. For example, voluntary trade between nations is economically preferable to no voluntary trade between nations.

          At the micro level, I agree with you that it’s mostly guesswork, voodoo, and unprovable and unfalsifiable claims as opposed to real science.

          1. Don’t you mean at the *macro* level?

          2. About as useful as:

            If I punch you in the nose, you won’t like it.

          3. For example, voluntary trade between nations is economically preferable to no voluntary trade between nations.

            Maybe yes, maybe no. Did Japan benefit from our trade prior to WWII? We used their dependency to force them out of China and it led to them attacking us?

            There are no absolute truths when it comes to irrational behavior like human behavior.

        2. The nifty thing about free markets is that there are profits and losses. So when someone does something wrong, they lose. In a free market, when someone loses, that’s it. End of story. Hopefully they and others learn from the mistake and don’t repeat it. So it is self-correcting.
          Then along comes someone with friends in government, and they lose in the market. Instead of that being the end of the story, the government steps in and bails out the people who have the right friends, and passes legislation that further entrenches whatever practice resulted in the losses.
          As a result, there is no self-correction. Rather you end up perpetuating whatever caused the problem in the first place. The result is much worse and prolonged than if the markets were just left alone to self-correct.
          That’s not to say markets are perfect. Far from it. The magic of markets is that when people fuck up, they feel it. If they don’t have government to shield them from their own mistakes that is.

          1. You also forget about the ability of free markets to run wild. There is nothing inherently wrong with subprime mortgages or junk bonds.

            It is nothing more than solving a simple equation.

            If you know the default rates of the various borrowers and the credit scores then you should be able to solve for an interest rate that gives the same overall return as does one for prime borrowers. If you can get people to borrow at significantly higher rates then you make more money.

            The problem with both subprime and junk bonds is that there was no significant brake on the industry.

            As long as Micheal Milken was the only game in town he could refuse to do business with poor management, growthless industries, or bad business plans. Once the other brokerages got wind of all the money he was making they entered the game. More competition meant lowered standards for the borrowers until deals were getting made that everybody knew were going straight to bankruptcy court. The employees of those firms had to generate the fees to earn their keep and nobody was going to leave the game knowing that if anybody left everybody else would be in a better position.

            1. In the subprime game you had the bizarre situation where because of the flood of new borrowers and the rise in prices foreclosures were actually making money instead of losing it which queered the models even more. In addition, you could roll those loans over in a few weeks to the Wall Street banks. Why stick to standards when the longest you were going to hold that loan was a month? Instead of making 8% on your money you rolled it over so fast that you were making 40% because of all the fees and that didn’t include the commissions for ex-pizza delivery boys at 200K a year.

              The self-correction you talk about is the same one Jefferson warned about – inflations and deflations used by the powerful to steal the life savings of average people.

              1. I should have said and that DID include the commissions for ex-pizza delivery boys at 200K a year.

                I think. Anyway you made the 40% and the 200K you needed for the pizza boy.

        3. You can’t run repeatable experiments in economics like all social “sciences”. It is not real science.

          So I suppose investigating what happens deep within the earth, or in galaxies far far away, is not science either.

          Or building bridges. Unlike Calvin’s father, engineers can’t build a bridge, test it to destruction, and rebuild it. Well, of course engineering ain’t science anyway. Amirite?

          1. Engineering is applied science and we do have the laws of physics and material sciences to determine the load something can take. I think Lehigh University has one of the most significant labs for testing steels and the stresses they can handle.

            As for theoretical physics, we do create experiments and as for the cosmos there are verification of physics based on observations.

            Do you really think economics has real experiments that are testing theories just because some economist says we need more “stimulus” what ever that means?

            I will let you in on a little secret – things in the economy usually get better at some point in time no matter what you do, just wait long enough. So you can always pretend your theory is correct.

            1. What experiments have been done on deep earth materials, other than teeny tint diamond anvils?

              What experiments have been done on other starts, other than observations?

              I submit that’s exactly what economists do.

    2. This. The same is true in the corporate world — I can ask a simple finance question of three different groups and get five different answers. Yes math is math, but assumptions are everything.

      1. “There is a story that has been going around about a physicist, a chemist, and an economist who were stranded on a desert island with no implements and a can of food. The physicist and the chemist each devised an ingenious mechanism for getting the can open; the economist merely said, “Assume we have a can opener”!”

  5. The Journal editorial argues that because CBO’s staffers aren’t elected, there’s no democratic accountability.

    There isn’t when people are elected, so what difference, at this point, does it make?

    1. I prefer mathematical accountability over consensus accountability anyway.

      1. Science doesn’t have democratic accountability. Except for climate change science.

      2. That’s the great thing about math.

        There’s no avoiding it, in the long run.

        Trying to avoid it just makes the pain worse.

        Unfortunately, we’ve been trying to avoid math in our government and monetary policy for at least a generation. When, not if, the pain comes, it will be epic.

  6. “It’s worth reading Avik Roy’s measured, well-argued case for reforming the office, also in today’s Journal.”

    I always thought Roy’s writing on Obamacare for Forbes was the best stuff out there on the topic…

    … except for Peter’s! WHICH IS EVEN MORE AWESOME

  7. a more realistic number for Congress to look at when considering cost is CBO Projection + CBO Track Record.

  8. Jack Sammy is not going to like that dude.

    http://www.Anon-Rocks.tk

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