"The Most Powerful Agency You've Never Heard Of."

National Taxpayers Union Foundation (NTUF) has embarked upon an ambitious new project intended to bring accountability to one of the most influential public policy outfits in Washington: the Congressional Budget Office (CBO).

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The Taxpayers’ Budget Office

The Congressional Budget Office (CBO) wields an immense power over the legislative process, with some calling it the most powerful agency you have never heard of. However, CBO has been criticized for providing a distorted picture of federal fiscal policies and proposals. There are many examples – including scores of farm bills, liabilities in federal student loans, air traffic control modernization, and health care reform. Despite what the implications of CBO “scores” mean for legislation, there has not been an organization dedicated to ensuring it provides complete and useful data - until now.
The Taxpayers’ Budget Office will fill this need by serving as a watchdog for CBO processes, scoring, and transparency. Likewise, TBO will provide essential cost estimates and budgetary analysis for legislative proposals. Our efforts will challenge CBO’s analytic orthodoxy and encourage it to improve.

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CBO Accountability Initiative: The Taxpayers’ Budget Office

National Taxpayers Union Foundation (NTUF) has embarked upon an ambitious new project intended to bring accountability to the most influential public policy outfit in Washington: the Congressional Budget Office (CBO).

Since 1975, CBO has been tasked with providing Congress with detailed analysis on the economic impact of legislation. CBO wields an immense power over the legislative process, with some calling it the most powerful agency you have never heard of. However, CBO has been criticized for providing a distorted picture of federal fiscal policies. There are many examples – including scores of farm bills, liabilities in federal student loans, and air traffic control reform – where CBO has been criticized for providing a distorted picture of federal fiscal policies. Many of CBO’s most crucial and problematic analyses have been in the area of health care policy. The fate of major overhaul packages can hinge on CBO’s cost projections.

Which is why National Taxpayers Union Foundation (NTUF) has embarked upon an ambitious new project intended to bring accountability to the most influential public policy outfit in Washington. Despite the immense implications of CBO “scores” for legislation, there is currently no organization dedicated to ensuring it provides complete and useful data. NTUF will address this glaring knowledge gap by creating a Taxpayers’ Budget Office (TBO) to provide essential and alternative cost estimates for legislative proposals.

Recent Posts:

“Everyone should know that any number will be either too high or too low.”

Don Marron, former CBO Deputy Director

Congress’s Scorekeeper: Small-sized Agency, Outsized Role

CBO was established in the Congressional Budget and Impoundment Control Act of 1974. This Act set in place the modern budget process: it established the standing House and Senate budget committees, required Congress to approve an annual resolution specifying levels of spending and tax revenues, put in place a timeline for developing and passing the budget, and enacted a reconciliation process to help ensure that outlays and revenues adhere to the targets in the budget resolution. Since then, CBO has been tasked with providing Congress with detailed analysis on the economic impact of legislation.

Even as a relatively small entity, the influence wielded by CBO’s projections can determine the fate of legislation. In addition, politics can often stand in the way of CBO’s effective functioning as a “referee” in the legislative scorekeeping process. Unfortunately, public officials often  “legislate to a score” in order to obtain CBO’s seal of approval on legislation whose real-world impact could be far different.
CBO Misses the Mark

“The uncertainty is sufficiently great that repealing the ACA could reduce deficits over the 2016 - 2025 period – or could increase deficits by a substantially larger margin than the agencies have estimated.”

Congressional Budget Office, Budgetary and Economic Effects of Repealing the Affordable Care Act

CBO Misses the Mark on Healthcare

While the extent of CBO’s influence may come as a surprise to some, its role in past health care reform debates demonstrates its importance.
1. Deciding the Fate of Major Health Care Reform

The best illustration of this can be found in CBO’s score of the Clinton Administration’s comprehensive health care reform in the early 1990s known as “HillaryCare”. Contradictory claims that it would add to the deficit landed a mortal blow to the proposal. Because then-President Clinton was dedicated to tackling the budget deficit, CBO’s analysis turned the administration’s reform plan into a massive political liability, and therefore made it impossible to pursue.

Yet, even as CBO’s projections of HillaryCare led to its failure, its score of President Obama’s Affordable Care Act (ACA) was essential for the bill’s passage. Due to CBO’s indication that the ACA would shrink the deficit, then-Senate Majority Leader Harry Reid (D-NV) was empowered to utilize the budget reconciliation process, which reduced the number of votes necessary to advance the bill. If CBO’s score of the ACA had reflected its budgetary predictions of HillaryCare’s impact – a real possibility if the individual mandate had been scored as a tax – the bill would have languished in the Senate due to political and procedural obstacles.

2. Missed Projections

Sadly, there is a long list of health care programs whose actual costs were grossly underestimated, many involving CBO. One example stretches all the way back to 1987, when Congress was drafting legislation for Medicaid’s Disproportionate Share Hospital (DSH) payments program. Utilizing CBO baseline estimates, the House Committee Report on the bill projected that within five years (1992); the price tag for DSH would reach $1 billion. As it turned out, the actual cost in 1992 was $17 billion – a catastrophic overrun.

3. Overstating Costs: The Case of Medicare Part D

In some cases, the cost-estimation process can benefit taxpayers, but still not without controversy. In 2003 Congress was crafting what would become the biggest new entitlement since Medicare was created in 1965, by adding a new benefit (known as Part D) to that program for the purchase of prescription drugs.

That November, CBO officially projected a net cost of $395 billion for the reform package. That summer, Richard S. Foster, Medicare’s chief actuary, estimated that the new plan would cost $530 billion over its first ten years. Foster’s projection could well have halted Part D’s progress, but he was pressured to keep the figures under wraps. His estimate was not reported until the end of January 2004, after the law was enacted.

Although ultimately both CBO’s and Foster’s predictions for taxpayer costs were too high, they illustrate the importance of providing as much informed perspective as possible to the public and elected officials -- free of politics.

How Do We Fix CBO?

“[CBO] has by now become virtually a sovereign branch of the US federal government, comparable in clout in relation to the executive and the Congress to the courts back in the Progressive era and the New Deal.”

Theda Skocpol, Harvard University

Solving CBO Accountability With the Taxpayers' Budget Office

Given both CBO’s influence and gaps in methodology, building an alternative legislative platform for taxpayers and policymakers is an absolute necessity. With a long history of tracking CBO activity, we are uniquely suited to research and expose the impact of its analyses on the legislative process. The Taxpayers' Budget Office project, sponsored by NTUF, is designed to provide this vital check and balance. The TBO initiative will benefit from the input of an Advisory Board consisting of former Members of Congress and staff, former CBO leaders and staff, budget experts at nonprofit organizations and academic institutions, and former executive branch officials.

An alternative legislative platform must provide an accountability standard for CBO’s public pronouncements while functioning as a valuable basis for sound policy discussions. TBO will do so by educating taxpayers and legislators about the true, hidden costs of government, initially filling four major gaps within CBO’s purview:
1. Unfunded Mandates and Regulations:

Currently, CBO only scores mandates that exceed the threshold established in the Unfunded Mandates Reform Act (UMRA) of 1995. UMRA requires CBO to assess the cost of legislative mandates imposed on private sector entities, in addition to state, local and tribal governments, setting thresholds that currently stand at $76 million for intergovernmental mandates and $152 million for private sector mandates (and are adjusted for inflation each year). 

Observance of this threshold means that dozens of mandates within legislation are not scored by CBO. Of all the mandate statements CBO issued in the 2010-2014 timespan, only 8.9 percent of 274 intergovernmental mandates and 21.1 percent of private sector mandates met the scoring threshold. Even then, one former CBO Director we interviewed noted that the methodology employed to estimate impacts of federal mandates on lower-level governments does not generate reliable, useful results.

2. Bills from New and Junior Members:

CBO generally scores only legislation that is supported by committee chairmen or leadership. This means that numerous bills introduced by more junior Members of Congress remain unscored by CBO and, as a result, languish in Congress—despite that fact that they could save taxpayers billions. One such example was Rep. Matt Salmon’s (R-AZ) introduction of a series of bills in the 113th Congress known as “Shrink Our Spending” (SOS), which would have netted $1.5 billion in savings by elimination of minor government agencies or functions. CBO has failed to score any of these proposals. Sen. Rand Paul’s (R-KY) budget cut legislation in the 112th Congress met the same fate.

As a result, innovative ideas to shrink government are held back, while the full implications of schemes to expand government only come to light long after they have gained traction among influential lawmakers. The CBO accountability initiative’s concentration on this underappreciated area of legislative work would provide a valuable service for taxpayers as an “early alert” system for both good and bad fiscal policies.

3. Program Integrity Analysis:

Many pieces of legislation authorize additional spending to monitor fraud, waste, or abuse within a government program. These “program integrity” reforms offer the potential for billions of dollars of savings for taxpayers when applied to massive entitlement programs. Unfortunately, in many instances, CBO simply cannot provide scoring for these reforms. When it is able to offer an analysis, current budget rules do not allow savings generated later in the budget window to be counted as an offset against the initial spending required. In other words, later savings potentially greater than the original expenditure do not “pay for” the initial increased activities. Such assessments from CBO, which provide an inaccurate and incomplete picture of what is at stake, fail to make beneficial changes attractive to policymakers.

4. Bills that Fail to Meet the Dynamic Scoring Threshold:

Current rules only require CBO to include an estimate of macroeconomic effects, known as “dynamic scoring,” when the proposal under consideration affects outlays, revenues, or deficits by more than 0.25 percent of the GDP. Although lawmakers may request an estimate for bills that do not meet this criterion, CBO has stated that conducting dynamic analyses for bills with less of a budgetary impact is not practical.

Only three bills in the 113th Congress would have met the 0.25 percent requirement. NTUF’s CBO accountability initiative would give dynamic scores to bills disqualified under CBO’s rules, but still have potential to significantly impact the budget and economy.

The success of our project requires a team of advocates with a technocratic understanding of laws and the legislative process. We have begun to build this team already by recruiting economic and budgetary experts to an advisory panel for our project. In addition to our series of issue briefs about CBO’s legislative gaps, we will work with our advisers to identify some of the office’s general issues, including problems with its assumptions, operations, and methodology.

A Model For Success

Precedent shows the valuable impact that TBO can have. In the early 1970s, a group of economists concerned with inflation created the Shadow Open Market Committee (SOMC) to provide alternative monetary policy recommendations to official Federal Reserve actions. Their efforts paid off; by creating an alternative by which scholars and policy analysts could judge the Federal Reserve's policies, the SOMC helped change the prevailing intellectual climate. Eventually embracing many of the SOMC's earlier suggestions, the Federal Reserve was able to tame inflation in the early 1980s, which in turn helped lay the groundwork for the economic expansion the United States experienced in the latter half of the decade.

By prompting change at CBO in a way the SOMC did with the Federal Reserve, TBO will provide a measure of balance, oversight, and thoughtful evaluation that only an entity outside of government can provide. TBO will elevate and augment CBO’s mission in a way that will dramatically improve the quality of information available to policymakers and the public.
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