In February, CBO Director Phillip Swagel testified before the House Budget Committee. Swagel ran a gauntlet of questions from both parties, largely focusing on the accuracy (or lack thereof) of CBO projections, but also several frank partisan jabs, using the Director as a conduit.
BP50 has previously published written testimony from Mercatus Distinguished Visiting Scholar Eric Leeper on improving CBO projections. Readers should refer to that for more detail on projections specifically.
However, transparency and comprehensiveness are also problems with CBO. At the end of January, EPIC budget guru Matthew Dickerson published a short paper on strengthening the CBO, addressing these problems as well as the projections.
CBO has not ignored the need for public transparency. They are, in fact, one of the better Congressional attachés for this. This is unfortunately set against the fact that they are among the most important resources available to Congress.
Therefore, there is room for improvement. Dickerson outlines some sound ideas.
Much of what CBO provides to Congress, particularly regarding appropriations bills, is not available to the public, or even Congress at large. A loophole in the Congressional Budget Act means that CBO is not required to provide formal cost estimates on the 12 appropriations bills, nor do they provide their models and data in detail. Dickerson says:
A reasonable goal should be to provide sufficient transparency so independent sources could replicate CBO's estimates. … These analyses are provided to the Appropriations Committee and other “interested parties in the Congress.” However, the data is not widely distributed to all Members of Congress, their staff, or the public.
Dickerson lays out which important elements of spending this might entail:
Gross discretionary budget authority;
The estimated outlays flowing from such budget authority;
Rescissions of budget authority and the estimated changes in outlays;
Offsetting receipts and collections;
Changes in Mandatory Programs (CHIMPs) and the changes in outlays;
Appropriated mandatory budget authority and outlays;
The effects of any other authorizing provisions in the bill;
Notations of different categorizations of budget authority and outlays (such as Defense or Nondefense categories subject to discretionary caps, and disaster, emergency, program integrity, and other adjustments to caps); and
The net total for scorekeeping purposes.
Regarding scorekeeping, the methodology used by CBO generally ignores the “other side of the equation” when evaluating the multiplier effects of fiscal policy. Rather, they should include:
… the diversion of resources from the private sector by taxes or deficit (future taxation) financing for the government spending; those private resources could have otherwise been put to uses with a higher productivity than the government spending.
Further, the Budget Committees could require CBO to provide debt-service cost estimates for each piece of legislation, as well as taking into account the market risks of credit assistance (so-called fair-value budgeting).
Dickerson also argues that CBO should actively update previous projections and estimates if new information comes to light, or if the situation changes. This would also include cases in which previously intended spending offsets for new legislation don’t pan out, and thus the new spending is not covered. A good example (also raised by Dickerson) that involves both spending and revenue is the $80bn allotted to the IRS in the Inflation Reduction Act to increase enforcement, with the objective of boosting revenues. In 2022, CBO projected $2.9bn in increased revenues for FY 2023, but only received an extra $160m. This would be less of a big deal if CBO hadn’t projected $203.7bn over the next 10 years. A revised estimate sometime soon would be helpful, to say the least.
He concludes the paper with a call for the Budget Committees (the only ones with direct oversight over the CBO) to consider an overhaul of the Office in the form of a new authorization, and to increase the frequency of oversight hearings.
A better-informed Congress and public will be a huge benefit. The other pieces remain, though: the Byzantine institutional structure of the budget process, and sheer political will.