Let’s not be so quick to thank the CBO

The Campaign to Fix the Debt, an organization dedicated to deficit reduction, recently sent around an email asking people to send the Congressional Budget Office (CBO), a nonpartisan agency that provides estimates of the budgetary impact of policy proposals, a supportive note. Touching as the sentiment may be, Americans should not be so quick to thank the CBO, an agency that has been front and center of some of the biggest policy blunders of the last couple decades.

To be clear, the fault does not lie with the agency’s employees. CBO is staffed with talented and hardworking professionals, but they are victims of budget scoring rules and institutional incentives that harm its ability to accurately provide a picture of the impact legislation will have on the budget. For example, CBO is prohibited from taking into account savings that arise from spending to combat waste. Front-end investments that yield back-end savings, thus, are bizarrely scored by as adding to the deficit rather than reducing it.

{mosads}CBO’s structural problems have played a role in the passage of some significant legislation. For example, the Affordable Care Act (ACA) included an entitlement known as the CLASS Act, which was doomed from the start. However, it had one good thing going for it: the CBO’s budget scoring method. The agency uses a ten-year budget scoring window, but the legislation included a five-year vesting period, during which it would be collecting premiums but not paying out benefits. Not surprisingly, the resulting CBO score was favorable on paper. Fast forward two years to 2011, and the CLASS Act was quietly scrapped; an ignominious end to legislation that existed almost solely to make the ACA look more palatable to Americans concerned about the federal deficit.

Another area where CBO has come up short has been in its estimates of farm bills. Analysis in this area seems to be getting progressively worse, having underestimated the cost of the 2002 farm bill by $137 billion and the 2008 farm bill by $309 billion. The most recent legislation was sold with the promise of $16.5 billion in CBO-scored savings, driven by new commodity and disaster relief programs that were estimated to be $14.3 billion cheaper than the costly direct subsidy programs they replaced. Instead, these programs are actually on track to be more expensive than their predecessors.

Bill scoring isn’t the only place where CBO falls short of its goal. It consistently overestimates the effects of government spending on GDP growth, which was a major factor in missing the target on its estimate of the stimulus bill’s impact on employment.

CBO also has a tendency to underestimate the debt. An analysis by Dr. Antony Davies and Dr. James Harrigan found that, over the past two decades, the CBO has underestimated debt levels 99 percent of the time when projecting more than five years into the future. During this time, the debt has turned out to be, on average, about 20 percent larger than the CBO predicted five years before, and about 250 percent larger than the CBO predicted ten years earlier. Revenue projections have been off as well, with ten-year projections off by, on average, about 25 percent over the past 20 years.

Failures like these are why the National Taxpayers Union Foundation decided to launch the Taxpayers’ Budget Office, a new initiative with the aim of providing constructive guidance to the CBO. This “TBO” will aim to help fill gaps in the CBO’s analysis, and provide more accurate and helpful analysis of legislation for Congress and the American taxpayer.

With this in mind, perhaps taxpayers should not tell the CBO to “keep up the good work,” as the Campaign to Fix the Debt suggests. Instead, they should be thankful for the public scrutiny the agency is facing. Americans deserve to know how much of their money Congress will be spending, and the CBO needs to do a better job providing this information.

Andrew Wilford is an Associate Policy Analyst with the National Taxpayers Union Foundation. You can follow him on Twitter @PolicyWilford.

The views expressed by this author are their own and are not the views of The Hill.