A Partisan CBO Would Be DOA
More reports, please.
New Republican leaders in Congress will shortly decide whether to reappoint Douglas Elmendorf as director of the Congressional Budget Office. Does this matter? you may ask. More is at stake than you'd think.
Elmendorf's professional credentials aren't the issue in the controversy over his job. (They're impeccable.) At stake is the character of the CBO itself. Should it remain a nonpartisan budget auditor or serve the aims of whichever party controls Congress?
Working alongside a bitterly polarized legislature, the CBO supplies independent analysis of new laws and their fiscal consequences. Discussion in Congress, such as it is, can start from the CBO's impartial calculations. A CBO that's partisan -- or seen to be -- would narrow the scope of useful debate on Capitol Hill from little to none.
Some Republicans disagree that the CBO has worked this way. They say it's ideologically tainted, pushing a statist line while pretending to be neutral. Is there justice in this claim? The main point of contention concerns "dynamic scoring," which involves estimating the macroeconomic effects of changes in policy. The CBO usually does static scoring, which assumes macroeconomic behavior stays the same.
Imagine a cut in taxes. Under static scoring, it's simple: Lower tax rates reduce revenues. Under dynamic scoring, you'd consider the effects of lower taxes on economic growth. If output went up, that would expand the tax base, so revenues wouldn't fall as much, and might even rise.
In principle, this more complicated calculation is a reasonable thing to suggest. In practice, though, it's much harder to do than static scoring -- and all but impossible to do in a way that commands wide agreement. Meeting the demand for dynamic scoring would unavoidably move the CBO into partisan politics.
Static scoring, for all its faults, provides a clear starting point for discussion, too useful to be lightly discarded. If the new Republican leadership insists not just on more dynamic scoring, but also on installing a CBO leader whose estimates of dynamic feedbacks would be to its liking, the office would no longer be a plausibly independent adjudicator.
During his tenure, Elmendorf has overseen findings that have annoyed Democrats (raising the minimum wage would mean fewer jobs) and Republicans (the Affordable Care Act would lower health-care costs). He's shown himself to be scrupulously impartial. It also helps that he's a top-class economist.
This doesn't mean the CBO's work can't be improved. One helpful innovation would be to publish ranges rather than point estimates for its fiscal conclusions. Even simple-seeming fiscal calculations can involve wide margins of error. False precision is a form of dishonesty. The CBO should also be more open about its models and data, and make it easier for outsiders to check its findings and run their own numbers.
Whatever conventions the CBO adopts -- for instance, measuring outlays and revenues over 10 years -- they'll be gamed. If the CBO adopts a six-year basis for estimating "revenue neutrality," Congress will draft bills that shift costs into year seven. This is standard practice. It undermines the CBO's credibility and calls its whole purpose into question. However, don't blame Elmendorf and his officials; it's entirely the fault of Congress.
Members of Congress can empower the CBO to do a better job, or it can render its efforts pointless. With or without Elmendorf, that's their choice.
To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at email@example.com.