At CBO, A Choice for Republicans

Early
next year, the term for the current director of the Congressional
Budget Office (CBO), Douglas Elmendorf, will be over. Elmendorf has
led the CBO since January, 2009, presiding over some of its most
high-profile work: scores of the Affordable Care Act and the
stimulus, budget reports and fiscal projections in a time of record
deficits and mounting debt. 

When Elmendorf’s term ends, Republicans, who now control both
houses of Congress, will, for the first time in years, have the
opportunity to appoint someone to fill the slot. It’s an
opportunity to exert enormous influence over the legislative
process, because in Washington policy debates, CBO’s estimates are
treated as canonical. Yes, there is often criticism of its
conclusions, but by and large, what the office says goes. The CBO’s
numbers form the foundation of many policy debates.

Over the last several weeks, a
number of prominent conservative economists have urged
congressional Republicans to make what might initially sound like
an unusual choice: Reappoint Elmendorf, who was selected by
Democrats.

Wait a minute—Republicans should pick the guy that Democrats
wanted? It’s not as strange an idea as it might seem. Indeed,
there’s a strong argument that Elmendorf would make an excellent
choice to continue leading the agency, even and perhaps especially
under a Republican Congress. 

For one thing, it’s possible that there would be some strategic
advantage to reappointing Elmendorf. As Keith Hennessey, a senior
economic adviser in the Bush White House, argues,
reappointing Elmendorf would offer a Republican Congress some
insulation from criticism; Democrats could hardly complain that
their GOP opponents had rigged the legislative scoring process if
the office remained under the leadership of someone initially
appointed by Democrats.

Republicans wouldn’t be choosing someone who is a vocal
partisan. As Hennessey notes, while it would not be accurate to
describe Elmendorf as a conservative, during his tenure, the CBO
has on several occasions come to conclusions that don’t necessarily
match up with liberal economic orthodoxy or policy preferences.

More important, however, is that Elmendorf has the proper
academic background and character for the job. He has a Ph.D in
economics, which should be required for the top job at the premier
economic analysis shop for Congress. He is rigorous and
non-partisan, willing to incorporate quality economic evidence no
matter where its conclusions might lead. He is fair and decent, a
hard-working honest broker who takes time to worth congressional
staff from both sides of the aisle and is, by all accounts, well
liked by Hill offices occupied by both parties. He is cautious and
careful, producing the single point estimates that Congress demands
and defending their merits even while highlighting the
uncertainties and limitations of economic modeling and policy
projection. He embodies, in other words, all of the essential
qualities of the Congressional Budget Office in the decades since
it was first
brought into existence.

The primary case for Elmendorf, then, is that he is an excellent
conservator of the Congressional Budget Office as an institution,
maintaining its integrity and its authority even in a trying
time.

This is not, however, to say that no argument for change at CBO
has any merit. 

The weak argument against Elmendorf is that he is a liberal
economist who has abetted liberal policies, a servant of the
Democratic party who has effectively given a pass to some of the
most controversial policy changes of the last six years—Obamacare
especially. I’ve taken issue with the way scores for the health law
and the stimulus were used and abused by partisans in Congress, but
I think it’s a mistake to simply pin the blame on the head of the
CBO, which operates under a variety of scoring conventions that
shape its projections (as with Obamacare), and which is often
required by law to produce estimates that are not really possible
to pin down (as with the stimulus).

Some conservatives and Republicans have also argued that a
change in leadership would pave the way for a change in CBO’s
scoring conventions. In particular, there’s been a lot of
enthusiasm for what is known as “dynamic scoring,” which would
account for increased economic activity and thus increased tax
revenue as a result of tax cuts, hopefully making tax cuts less of
a budgetary drain, perhaps even finding that tax cuts can pay for
themselves. But this is a hope without much evidence; Republicans
toyed with dynamic scoring during the Bush years, and both the
Treasury
Department and the
Congressional Budget Office of the era found that dynamic
effects would be small to non-existent.

The better and more interesting argument for change is that new
leadership would be better able to open up the CBO—to “modernize”
its methods, as National Affairs editor Yuval Levin has

suggested, by making its various processes and conventions more
transparent. Levin argues that the CBO is a “black box” opaque to
those on the outside. “The agencies are both staffed by
hard-working and highly professional economists who try to ensure
their assumptions and methods keep up with the latest academic
research, but their models are opaque and proprietary — which also
makes them seem arbitrary and unpredictable.”

The goal, Levin argues, should be to fix this by transforming
the CBO into a sort of open source modeling shop; its spreadsheets,
assumptions, and supporting evidence public for all to see. CBO
would still produce estimates, but its primary role, along with the
Joint Committee on Taxation, would be to maintain up-to-date
models—models that outsiders could tweak and adjust on their
own.

The end result of a change like this would be to create a
competitive environment for legislative estimates; outside analysts
could take CBO’s models and adjust the assumptions and inputs, then
show how the results would be different under different types of
circumstances. It would underscore the effects of those
assumptions, and highlight the range of possible outcomes for any
given policy change.

There would be a trade-off, too, which is that the CBO would
lose much of its authority, and thus would lose its central role in
policy debates. A major part of the CBO’s mission, and its role
since its founding in 1974, has been to provide points of common
agreement in policy debates; legislators may not always like CBO’s
estimates, but because the office is respected as an economic
authority and not reliably partisan, those estimates invariably
become shared baseline assumptions—common ground from which both
sides can argue.

This, in turn, has wrested power away from activist Hill
offices, which used to produce unrealistic and overly rosy scores
of legislation (the CBO’s score for Ted Kennedy’s 1970s-era health
care bill helped kill the legislation’s chances), as well as from
the administration’s self-interested economic projections (the
White House almost always has a political incentive to promote an
optimistic view of the economy). It is a power center, yes, but one
that holds other potentional power centers in check, and has none
of their incentives toward activism.

In a competitive scoring environment, that common ground, and
the power-checking authority it provides, would mostly disappear.
And as a consequence, so would CBO’s core function in policy
debates. Its role would still be important, but it would also be
more limited; it would be a curator of methods rather than a keeper
of shared conclusions. The fundamental character of the institution
that Elmendorf has preserved so well would change.

There would be real advantages to this transformation; the
opacity of the CBO is frustrating and outdated in an era of
government transparency, and legislators and policymakers (not to
mention journalists) would all have more access to more
information. Competitive pressure might lead to better scoring, or
at least a more widespread understanding of its abilities and
limitations, over time.

For these reasons, even though I would be supportive of
Elmendorf staying on, I also would not necessarily oppose picking a
new CBO director and beginning to experiment with more transparent
processes. Republicans won the election, and with it the right to
choose their own director. 

But if Republicans choose to go this route, and to overhaul the
office, they should do so cautiously. The CBO has remained a
respected, credible, influential institution in Washington for
decades, under both parties, for a reason, and if Republicans want
to alter its character they should be fully aware of what they are
doing. They would be altering the institution’s core function, and
with it both the main reason why it was created and why it has
worked so well. The CBO, at least as we understand it, would not be
the CBO anymore.