This is one of the more exciting photographs of the CBO at work.

Photographer: Brendan Hoffman/Bloomberg

Do Republicans Need to Clean House at the CBO?

Megan McArdle is a Bloomberg View columnist. She wrote for the Daily Beast, Newsweek, the Atlantic and the Economist and founded the blog Asymmetrical Information. She is the author of "“The Up Side of Down: Why Failing Well Is the Key to Success.”
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I've been a longtime critic of how the Congressional Budget Office process was gamed to pass Obamacare. So you might think I'd be a full-throated supporter of the idea that Republicans need to clean house at the CBO. Actually, I'm in the opposite camp: The CBO is fine. It's the politicians who are the problem.

Doug Elmendorf is a very fine head of the CBO, and I think it would be splendid if Republicans reappointed him to head the office. (I'm pretty sure they won't, for various reasons, but I think he would do a great job if they did.) There are a lot of credible right-leaning people who could also do a great job. And none of them are going to "fix" what is wrong with the CBO, because the CBO is basically working pretty well. I'm not saying I might not quibble with some of its modeling choices, because this is America, darn it, and it's a citizen's sacred right to quibble. But they're very smart people who know what they're doing, and they are doing as best they can to give fair estimates of what things will cost and what they will do to the economy.

The problem with the CBO is that any such project requires certain procedural conventions. For example, it forecasts over a set period in order to make choices easily comparable and to reduce the uncertainty in its predictions. (The longer your model runs, the more the unforeseen circumstances pile up.) It forecasts based on current law, because otherwise the model would be defined by an analyst's intuition about the future course of elections and legislation. It uses models that generate fairly predictable responses to various inputs. And so forth.

These predictable conventions are an excellent idea. Without them, CBO forecasts would be mercurial reports subject to heavy bias toward the policy preferences of the analysts. I know that Republicans think the CBO was giving Democrats a helping hand in gaming the system, but if anything, the opposite was the case -- Elmendorf went out of his way to emphasize the uncertainties that underlay the headline numbers. If I thought that there had been anything less than honorable about the office's conduct, you can bet I would have said so; I wasn't exactly shy about criticizing Obamacare during its passage. But I came away from every report and interaction impressed with the integrity, humility and hard work of the CBO.

So how, then, did the scores get gamed? As I suggested in my last post, predictable conventions are necessary -- that's why we have accounting standards, not reports from accountants that say "This company looks pretty good to me!" But the problem with predictable conventions is that you can game them. Companies do it with accounting, salespeople do it with commission calculations, and politicians do it with their budget people. We can certainly try to reduce this behavior -- for example, by screaming loud and long when it happens. But the problem is usually not with the standards, nor with the auditors. It's with the folks trying to comply with the letter of the rules while flagrantly violating the spirit.

There are certainly ways we might reform the CBO to make it even better. Conservatives are starting to suggest that CBO models should be available to the public. I also recently heard a suggestion that the CBO should include private costs as well as direct spending in its scores, in order to discourage politicians from relying so heavily on regulatory mandates as clumsy substitutes for direct spending. Both of these seem like good ideas to me, though I have not studied either of them closely enough to be sure that I understand the drawbacks.

But these changes wouldn't have kept Obamacare from being gamed. Neither would a different CBO director -- or, rather, a different CBO director might have, but only if he was an ideologue who tossed out concrete standards in favor of his or her opinions. Moving to that sort of model would be a cure worse than the disease, for two reasons: First, you'd be substituting raw opinion for standards, rendering the scores basically meaningless as a policy tool; second, because Congress appoints the head of the CBO, the same Congress you're trying to stop would be the folks selecting the ideologue to render the opinions.

If we want to stop the gaming, we need to insist that politicians stop it. And, more important, we must insist that our own politicians stop it. Every policy journalist and activist whines when the other side comes up with creative kludges to lower the apparent cost of their programs. But if they clam up when their own guys are in power ... well, the dogs bark, but the caravan moves on.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Megan McArdle at mmcardle3@bloomberg.net

To contact the editor on this story:
Brooke Sample at bsample1@bloomberg.net