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Rudolph Penner: The Attacks On The Congressional Budget Office Are Wrong

Jun 28, 2017 | Health Care

Dr. Rudolph Penner was the director of the Congressional Budget Office from 1983 to 1987, and he is an Institute Fellow at the Urban Institute and a member of the Committee for a Responsible Federal Budget. He wrote a post that appeared on the Tax Policy Center blog, TaxVox. It is reposted below.

The Congressional Budget Office is under unprecedented political attack. These criticisms are overblown, and likely will prove to be counterproductive—even to those making them.

CBO’s primary role is to estimate the costs and other fiscal effects of policy proposals for Congress. As director of the office from 1983-87, I can testify that these projections win no popularity contests. Advocates of a proposal tend to believe that CBO has vastly overstated its costs or understated its savings, while its opponents think the opposite.

Given the political sensitivity and importance of CBO’s work it is remarkable that Congress has willingly accepted almost all its estimates over more than four decades. In one of my busiest years, we did over 700 estimates and only a very few got me shouted at. Even then, the criticism was usually in private. It was a rare occasion when disputes were publicly aired in the press.

We are now witnessing such an occasion. OMB Director Mick Mulvaney has blasted CBO estimates of the effects of the American Health Care Act (AHCA), the House Republican substitute for the Affordable Care Act (ACA). More troubling, the former congressman has demanded CBO be abolished. Senator John Cornyn (R-TX), the chamber’s second-ranking Republican leader, has called CBO estimates “fake news.”

Like all forecasters, CBO makes mistakes. It is frequently asked to make forecasts that are much more challenging than predicting the weather or the outcome of sports events. In assessing the impact of the AHCA, it must predict the effects of policies that are unlike anything that has ever been tried before. For example, the measure would give states the option to alter insurance regulations governing pre-existing conditions. CBO must estimate what states would do in the future if this legislation is enacted when it is probable that many state officials do not know themselves.

But a forecast does not have to be perfectly accurate to be useful. If a weather forecaster predicts three inches of rain and only two inches fall, it can be said that it was a terrible forecast in that it was off by one third. Nevertheless, it was useful to know that a lot of rain was coming.

Similarly, when CBO predicts that more than 20 million fewer people will have health insurance coverage in 10 years under AHCA than under current law, its qualitative message of large coverage changes is very valuable.

Making a forecast of health coverage changes is extremely difficult because it involves predicting the 10-year effects of both the ACA and the AHCA in a very uncertain health care environment. It would be a miracle if CBO’s coverage forecast is precisely accurate, but it would also be a miracle if the difference in coverage between current law and the proposed legislation was not in the millions. That projection is worth knowing, both for policymakers and the public.

If it were not for CBO, the policy debate would be dominated by an administration’s estimates of the effects of its own initiatives and by estimates from the proponents and opponents of legislative proposals. That would not be desirable for the Congress, which should be able to rely on objective and dispassionate analysis. It is also important that CBO works for both the majority and the minority in Congress. At times when Congress and the executive branch are ruled by the same party, CBO is an important tool for members of the minority party to understand the consequences of legislation before it is passed. That contrasts with parliamentary democracies where minority parties are often completely shut out of policy deliberations.

One of the best aspects of the current budget process is that it requires 10-year CBO estimates of the cost of policy initiatives. That is still true even though the rest of the budget process is broken, perhaps beyond repair. The 10-year estimate warns Congress if it is adopting a program that costs little the first few years, but has exploding costs in the longer run.  Given our nation’s medium and long term fiscal concerns, this is an important feature.

As a former director I am biased in favor of the office. I was grateful to inherit an extraordinary staff from founding director Alice Rivlin. The staff works extremely hard under tremendous pressure– often working through the night. They are superb analysts who are ingenious at digging up data that illuminates the most obscure aspects of proposals. The office may deserve criticism from time to time, but the nation should be grateful that CBO is there.

"My Views" are works published by members of the Committee for a Responsible Federal Budget, but they do not necessarily reflect the views of all members of the Committee.