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Congress Deserves Better from the CBO

Posted By J.D. Foster, Ph.D. On May 13, 2010 @ 1:26 pm In Economics | Comments Disabled

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While the supposedly non-partisan Congressional Budget Office (CBO) has tended toward a more partisan cast of late, in one matter at least the CBO appears to be fully non-partisan, and that is in the area of the Member kiss off. Case in point is a recent letter from CBO Director Elmendorf to Congressman Maurice D. Hinchey, a self-described progressive Democrat representing New York’s 22nd District.

Congressman Hinchey sent Director Elmendorf a letter asking for certain budgetary information relating, among other things, to the effects of the 2001 and 2003 tax cuts. In response, Elmendorf noted the projected budgetary effects of this legislation were in part conditioned on certain assumptions about economic conditions. However “economic performance and other factors have differed from those upon which the 2001 and 2003 estimates were based.” Fair enough, that’s the risk one takes in any projection.

Elmendorf goes on to say that “measuring the actual impact of the legislation would require gauging revenues and economic performance would have been in the absence of the legislation and then comparing those outcomes to those that occurred with the legislation.” Indeed, that no doubt is why Congressman Hinchey asked for the information. It would be very useful to know what CBO thinks about the economic consequences of the Bush tax cuts. It would tell us much about both the tax cuts and the CBO.

Elmendorf concludes this section with, “Such comparisons are impossible to do with any precision”.

Note the word “precision” here. CBO likes precision. Its estimates going out ten years farcically are reported to the tenth of a billion dollars, all the while knowing they could be off by tens of billions. CBO scoring was at the heart of the recent health care reform debate. Its estimates were very precise. What we know is they were wildly off, though we can’t always say in which direction.

Another curiosity about the CBO response; it is unable to estimate “with any precision” the effects of past tax policy, but it appears to be able to estimate repeatedly and with all due precision the jobs created currently through the Obama stimulus bill [2]. If they can estimate jobs, they can estimate income, which means they can estimate revenues and outlays. Apparently the CBO is very selective in when it can be precise. Of course, what makes precision in the case of the stimulus and the jobs is that CBO’s economic models [3]effectively assumed the results they sought as was revealed by Elmendorf under question some weeks ago.

As a New Yorker, no doubt Congressman Hinckey knows when he’s been given the kiss off, though New Yorkers sometimes have more colorful ways of delivering their messages. The rest of the Congress deserves better, too, from its own staff.


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URL to article: http://blog.heritage.org/2010/05/13/congress-deserves-better-from-the-cbo/

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[1] Image: http://www.foundry.org/wp-content/uploads/capitol_building100128-.jpg

[2] Obama stimulus bill: http://www.cbo.gov/ftpdocs/110xx/doc11044/02-23-ARRA.pdf

[3] CBO’s economic models : http://reason.com/blog/2010/03/26/heckuva-job-creation-estimate

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