Concerns with the CBO
By Arnold Kling
The inquiries of the Congressional Budget Office, which haven’t been made public, concern the CBO’s analyses of some of Washington’s most complex and controversial measures, including bills on financial regulation, health care, small-business lending and efforts to aid the housing market, said people familiar with the matter.
The article refers to Republican staffers, and from what I can gather the inquiries do not have formal standing.
Meanwhile, apparently at least one left-wing think tank is up in arms over the CBO study that showed that Federal workers are overpaid. Andrew Biggs gives his perspective on that brouhaha.
In its overall budget forecasting, the CBO offers a useful check on politicians of both parties. I admit to being a big fan of the CBO for that reason. See the latest budget outlook.
I have two concerns about the CBO. One is that they are regarded as an all-purpose think tank by Congress, and this leads them into issues that are controversial and outside of their core competence. The most prominent example is forecasting the economic impact of fiscal policy, for which they use models that are not well regarded.
The study of Federal pay is another example of engaging in needless think-tankery.* In the end, I think CBO has more to lose than to gain by taking on such projects. At a time when the budget outlook is such a crucial issue, I wish that the CBO were focused laser-like on budget forecasting, without political distractions.
The other concern I have is that CBO has become, like the rating agencies during the mortgage securitization boom, a target for gaming. In my view, the Democrats gamed the CBO process in producing a health care bill that had “scorable savings” that almost surely were not real savings. Other watchdogs, such as the chief actuary for Medicare, called them out on this, but CBO was not able to do so. I suspect that the Republican resentment toward CBO stems from that experience.
It would be harder for legislators to game the CBO scoring system if CBO were less transparent. If legislators understood nothing about the details of the process and simply had to make rough guesses about CBO analyses, then they could not fine-tune bills to take advantage of scoring quirks.
This is a difficult issue with which to deal. On the one hand, legislators should obtain estimates of the fiscal impact of legislation before it is enacted. They should certainly make changes when the impact is not what is desired. What they should not be doing is playing games to make legislation appear to be better than it really is.
I do not see a simple solution for this problem. Perhaps a limit on the number of iterations of a bill that can be scored would (a) conserve CBO staff resources and (b) make gaming more difficult. However, it is hard to see how to devise and implement such a limit.
(*Part of my problem is that I reject statistical methods of determining government pay comparability in favor of the simple market test of looking at quit rates and application rates for government jobs.)