This Week’s Minimum Wage Debate is a Reminder About Why We Need the CBO

The Congressional Budget
Office’s report on the effects of raising the minimum wage was
exactly the sort of balanced, careful report that the CBO is known
for. It offered talking points to folks on both sides of the
debate, estimating that hiking the wage floor to $10.10 an hour
would raise about 900,000 people above the poverty line, but would
also cost about 500,000 jobs. Both estimates, it said, were subject
to substantial uncertainty, and could be significantly higher or
lower.

But it resulted in something that’s been relatively rare over
the past few years: Democratic criticism of the CBO. The White
House, in particular, did not like hearing that the minimum wage
hike that President Obama supports would result in lost jobs. The
day the report was released, Jason Furman, the administration’s top
economist,
told reporters that the CBO findings do “not reflect the
consensus view of economists who have said that the minimum wage
would have little to no impact on employment.” House Minority
Leader Nancy Pelosi (D-Calif.) released a statement
saying that the CBO report’s “conclusions contradict the
consensus among hundreds of America’s top economists.”

Asked about the White House pushback the following day, CBO
director Douglas Elmendorf  declined to respond directly. But
he stood by his agency’s assessment. “I want to be clear that our
analysis on the effects of raising the minimum wage is completely
consistent with the latest thinking in the economic profession,” he

said at a Christian Science Monitor breakfast. “What
we have done is to do a very careful reading of the literature and
put weight on a wide range of results.”

This might sound like gentle disagreement, but in the
soft-spoken world of government economic estimates, it’s roughly
the equivalent to a shooting war. And while not a regular event,
it’s not the first time this White House and the CBO have rubbed
elbows. During the 2009 debate over the president’s health care
law, the CBO issued a skeptical assessment of many of the law’s
proposed cost-savings measures, concluding that there wasn’t enough
evidence that they would work. Then-White House Office of
Management and Budget Director Peter Orszag (a former CBO director
himself) shot back, saying that the
CBO had “overstepped” in its analysis. Again, it sounds pretty low
key, but in some ways it’s the government budget wonk equivalent of
a slugfest.

This sort of intra-agency economic debate is a good thing, and
it’s one of the prime reasons the CBO is so valuable: The budget
office provides a check on administration econo-spin, which has a
tendency to be rosier in general, since the president’s political
fates are tied so closely to the economy, and more specifically
friendly to the administration’s favored proposals. (In the past,
it also provided reality checks for overly optimistic estimates
that came from Hill offices too.) As an independent economic
authority, CBO doesn’t have the same incentive structure as the
White House economic team; if anything, its biggest incentive is to
maintain its own authority and independence. The result is
essentially a form of internal government competition, in which the
CBO helps keep the administration in line—or, at the very least,
reminds people that other reputable perspectives exist.

This doesn’t mean that every CBO estimate should be treated as
holy writ. (I’ve disagreed with some of their conclusions in the
past, and I’m sure I’ll do so again.) But its checking function is
one of the biggest reasons why we’re better off with an independent
authority like the CBO than without.