by Ross Marchand · August 9, 2017
The Congressional Budget Office is a pretty darn good research institution. That doesn’t mean that it couldn’t stand some improvement.
The “CBO Show Your Work” Act, introduced by Sen. Mike Lee, R-Utah, would improve the nonpartisan budget watchdog by forcing it to show its math and methodology in detail when it analyzes legislation. Having the CBO “open their books” would lead to a better debate over how best to model the world, and most importantly, give taxpayers a realistic glimpse into how much politicians’ promises would actually cost.
Criticism of the CBO is not new. In 2009, the CBO lowballed the costs of the Affordable Care Act (ACA) at less than $1 trillion. As The Weekly Standard pointed out,
“For a variety of reasons, this tally doesn’t remotely reflect the bill’s real ten-year costs. First, it includes 2010 as the initial year. As most people are well aware, 2010 has now been underway for some time…If the clock were started in 2011, the first full year that the bill could possibly be in effect, the CBO says that the bill’s ten-year costs would be $1.2 trillion.”
As the budgetary “scoring” debate over the ACA and now the GOP alternatives demonstrates, transparency in modeling would have spared the CBO a good deal of embarrassment. During this repeal debate, for example, the CBO ascribed “near magical powers” to the individual mandate to buy health insurance, assuming that its repeal would instantly produce millions of new uninsured. This conclusion gave rise to the “GOP would cut off 22 million from health insurance” talking point. It also wasn’t backed up by any serious evidence.
In a 2015 analysis, the Commonwealth Fund found that the CBO “overestimated marketplace enrollment by 30 percent and marketplace costs by 28 percent, while it underestimated Medicaid enrollment by about 14 percent.” The most telling part of the analysis, however, came when the Commonwealth researchers tried to determine how accurate the CBO would have been if it could have correctly guessed insurance premiums in advance. There were so many question marks about the parameters used by the CBO, though, that the researchers cautioned that their results were not “directly comparable to the CBO’s 2010 estimates.”
That’s not to say that the CBO’s estimates are worse than other forecasters’, like the Lewin Group or Urban Institute. In fact, the aforementioned Commonwealth researchers believe that the CBO generally performed better than other institutions in the insurance enrollment guessing game.
But, as I was repeatedly implored to do as a research assistant, it’s important to “show all of your work” when making projections based on data. If the CBO fully disclosed how they managed to create a model that showed such large effects from the mandate, a robust debate could develop about that model’s validity. And, everyone on both sides of the debate would be better off for it.
Nor is the CBO being asked to go above and beyond the call of duty. In the academic world, there’s been an increased trend towards documenting research step by step, and publishing various Excel and Stata sheets online showcasing the process. As Sen. Lee pointed out in his piece promoting the bill, the American Economic Association requires researchers to ensure their data “are readily available to any researcher for purposes of replication.” Transparency of economic modeling allows the tinkering process that makes for more improved models and fulfilling discourse.
Any bill threatening to shake up the status-quo will encounter criticism from both sides of the aisle. From the Left, any legislation trying to meddle in CBO processes undermines the legitimacy of a neutral arbiter of fiscal disputes. This hot take paints Sen. Lee’s bill as just the latest attack in an escalating war on a “nonpartisan, reality-based” institution.
But other countries’ budget agencies have seamlessly managed to show their work in budgetary analysis without somehow impugning their reputation. Would it kill the CBO to have meticulous web-based documentation of their forecasting parameters, along the lines of the UK’s Office for Budget Responsibility?
In a world where basic spreadsheet errors can have immense research ramifications, it’s important for the CBO to open their research books to the public. If the Budget Office could only show their work, researchers and taxpayers alike would no longer be in the dark about lawmakers’ best-laid plans.
Ross Marchand is a policy analyst for the Taxpayers Protection Alliance.