If you have been watching the news coming from Washington in recent months, you will likely have heard mentioned again and again “the CBO score.” The release of the CBO score on a federal legislative proposal is treated as a marquee event. When a score is released, it is treated by the media as the definitive cost assessment of a proposal’s impact.
Because the CBO has been consistently wrong, I believe its image as an authoritative arbiter is undeserved.
First of all, what is the CBO? It is the Congressional Budget Office, created by the 1974 Congressional Budget and Impoundment Control Act. It was intended to provide Congress with a budgetary resource of its own in order to reclaim authority from the executive branch. However, it is now undermining that goal. When the supposedly authoritative experts at the CBO release a score, their predictions are treated as gospel by the media. Congress often defers to these predictions. When it does so, it effectively lets the CBO call the shots on decisions that should be made by the people’s elected representatives.
This deference is more concerning considering the CBO’s questionable track record of predictions. The agency admits, “Judging the accuracy of the CBO’s cost estimates for legislation that is ultimately enacted is often quite difficult.” I agree this is true. Because it is true, we should use a different and hopefully more accurate approach for scoring proposals.
For example, the CBO has repeatedly underestimated revenues generated by the sale of wireless spectrum. When Congress authorized the Federal Communications Commission to auction spectrum in 2012, the CBO predicted that the total profit to the government over ten years would be $15 billion. One particular auction in 2015 was predicted by CBO to generate no revenue. Instead, that sale netted $40 billion. As then-FCC Commissioner Jessica Rosenworcel, an Obama appointee, observed after that auction, “Our airwaves are extraordinarily valuable but our accounting systems for measuring them in the legislative process don’t appear to be fully up to date.”
The CBO has also misjudged farm bills, which are reauthorized roughly every five years, by considerable margins. It underestimated the cost of the 2002 bill by $137 Billion and the 2008 bill by $309 Billion. Predictions on the most recent farm bill look unlikely to be on target as well.
The CBO often gets its predictions wrong because it fails to take into account how laws might lead people to change their behavior. For example, in March 2010, the month that Obamacare was signed into law, the CBO predicted that 8 million people would be covered by the insurance exchanges in 2014, 13 million people in 2015, and 21 million people in 2016. As it turned out, only 6.3 million people had a paid-for plan through the exchanges in 2014, 8.8 million in 2015, and 9.1 million in 2016. The CBO overestimated the number of people covered by the Obamacare exchanges because it assumed that people would buy insurance simply because they were mandated to do so. The analysis did not consider that many people would look at the products on the exchanges, find them of poor value, and decide that paying the penalty for not buying insurance made more financial sense. People are not a variable to be inserted into an equation, but will change their behavior based on what makes sense for them in a given set of circumstances.
When an agency repeatedly gives you inaccurate information, should you keep listening to them? I don’t think so.
I believe the CBO has accrued undue influence in the legislative process. The CBO was created to help elected officials craft better policy, not to decide policy for them. I am working with some of my colleagues to restructure the CBO so that it better fulfills its mission of providing budgetary advice. The CBO can have a constructive role to play, but it should not stand in the way of solving problems.