Why the End of Doug Elmendorf's CBO Matters

A big change, and a big conservative coup.

Douglas Elmendorf, director of the Congressional Budget Office (CBO), right, looks on as Osvaldo Gratacos, inspector general of the U.S. Export-Import (Ex-Im) Bank, speaks during a House Financial Services Committee hearing on the Ex-Im Bank reauthorization in Washington, D.C., U.S., on Wednesday, June 25, 2014

Photographer: Andrew Harrer/Bloomberg

On Monday, Bloomberg Politics learned that the incoming Republican leadership of Congress would not grant Doug Elmendorf another term running the Congressional Budget Office. On its face, the decision just made sense–elections have consequences, etc. "I'm sort of baffled that people think it's bizarre/alarming for the GOP majority to appoint a new CBO chief," suggested New York Times economics writer Josh Barro.

Before the CW hardens, it's worth looking at how the Elmendorf era ended. The respected CBO director, a veteran of Bill Clinton's Treasury Department, was appointed in 2009 to fill the unexpired term of Peter Orzsag, who'd been bumped up to run the Office of Management and Budget. Elmendorf was reappointed in 2011, and there was a push–spurred by Orszag–to keep him on in 2015. A week after the GOP's election victories, with little attention focused on the CBO, Orzsag wrote in his Bloomberg View column that "the new leadership might appoint someone who is more an advocate than an analyst."

What did that mean? It meant that the movement in the GOP was toward "dynamic scoring," toward budget math that would score tax cuts as stimulative instead of just hatchet blows to future coffers. Outgoing House Budget Chairman Paul Ryan wanted this. Incoming House Budget Chairman Tom Price wanted it so much that he got the Republican House to (narrowly) pass the "Pro-Growth Budgeting Act," which would have required the CBO to create dynamic scores alongside its static scores. (If Congress were academia, you might call them cisscores.)

The wonks went to the barricades. Keith Hennessey, a veteran of George W. Bush's administration, argued that the Republicans would be better off with Elmendorf. "I don’t want the ref to be biased right or left," he said. "I don’t even think a right-leaning ref would be that valuable to winning these debates, given the higher press hurdle that would be set by a biased press corps. I also think fiscal and economic conservatives benefit from an institutionally strong CBO." 

Greg Mankiw, the chairman of the economics department at Harvard, agreed with that. "I understand that GOP leaders may be tempted to put their own stamp on the Congressional Budget Office," he wrote in mid-November. "But sometimes the benefits of continuity transcend ideology and political affiliation." Charles Murray, no liberal, signed on to the bloggish Save Elmendorf campaign.

They were no match for movement conservatives. Largely Washington-based groups pilloried the GOP for even thinking of retaining Elmendorf. American Committment's Phil Kerpen was particularly public about that.

A few days later, Grover Norquist's Americans for Tax Reform issued a rap sheet on Elmendorf, warning conservatives that the "credible" CBO director "got Grubered" by bad data and, worse, pushed "failed Keynesian economic analysis." It was a very astute re-framing of the argument. The problem wasn't that conservatives wanted dynamic scoring; the problem was that the current scores were junk. And it's no accident that conservative columnist Peter Roff was clued into the decision before the rest of the press.

Conservatives made their case to the key Republicans who would determine whom to recommend at CBO. Sources suggest that they were pushing on an open door. There was not much interest, in a party that had just clobbered the Democrats, to leave a Democrat in a job that could determine the math of tax reform and Obamacare repeal.

Before it's here, it's on the Bloomberg Terminal.