the foundations of the congressional budget office · one early view of cbo: like a sewer...
TRANSCRIPT
The Foundations of the
Congressional Budget
Office
Barry AndersonOECD
Meeting of OECD Parliamentary Budget Officials
Rome, February 26-27, 2009
1
Outline
• A Note About Me
• Origins of CBO
• CBO’s Potential Value
• Fundamental Characteristics of CBO
• Additional Characteristics
• CBO’s Core Functions
• CBO’s Other Functions
• A Few Significant Events in CBO’s Past
• Implications of CBO for Other Countries
2
A Note About Me:
Experience in Both
the US Congress & the White House (as well as in IMF & OECD)
3
Office of Management & BudgetGeneral Accounting Office
Congressional Budget Office
ORIGINS OF CBO
• Budgetary Dominance of President Nixon
• Other Factors• Budgetary Weakness of Congress
4
Budgetary Dominance of
President Nixon
• Impoundment• Creation of a More Powerful
OMB• Monopoly on Budget
Information
5
Other Factors
• Deficits without War or Recession
• Complexity• Long Term Perspective• Gimmicks
6
Budgetary Weakness of
Congress
• No Budget Process• Creation of Budget
Committees• Separation of Powers: CBO vs.
OMB• Precedents of GAO, CRS, OTA
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One Early View of CBO:
Like A Sewer
―What the House wanted [when CBO was created] was
basically a manhole in which Congress would have a billor something and it would lift up the manhole cover andput the bill down it, and 20 minutes later a piece of paperwould be handed up, with the cost estimate, the answer,on it. No visibility, [just] some kind of mechanism downbelow the ground level doing this...non-controversial[work], the way the sewer system [does].‖
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CBO’s POTENTIAL VALUE
• Eliminate Executive’s Information Monopoly
• Simplifies Complexity
• Promotes Transparency
• Enhances Credibility
• Promotes Accountability
• Improves Budget Process
• Serves Both Majority & Minority
• Provides Rapid Responses9
CBO’s Value Changed
• CBO’s Value at its Creation in 1975
– More Information for the Congress relative to the President
• CBO’s Value Beginning About 1980
– More Information for the Minority Party relative to Majority
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FUNDAMENTAL
CHARACTERISTICS of CBO
• Nonpartisan (not Bipartisan)– Directors have been more technical than political
– Staff has been technical
– A strong esprit de corps has developed
• Independent
• Objective
• Informed
• Serve Both Majority & Minority
• Transparent (Everything on the Internet)
• Understandable (Subway test)
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ADDITIONAL CHARACTERISTICS
• Put core functions in law
• CBO does not make recommendations; GAO does
• Serve Committees, not Members
• Meet with anyone, but strive for balance
• Is physically separate from legislature
• Avoid limelight
• Is responsive and timely
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Characteristics of a
Good CBO Director
• Most importantly: unbiased
– A good start: takes a position contrary to those who supported him
• Avoid recommendations, but if you make them, do them orally, not in writing
• Be willing to take on unpopular issues
– This can help Members by giving them an excuse not to take on the issues themselves
• Establish a rapport with Budget Committee Chairmen
– Talk with Members, not to them
– Brief Members first, especially if news is bad
• Avoid the limelight
• Avoid the perks of power 13
CBO’s CORE FUNCTIONS
I. Economic Forecasts
II. Baseline Estimates
III.Analysis of President’s Budget Proposals
IV. Medium Term Analysis
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I: Economic Forecasts
• Objective– Not a function of policy proposals - not ―dynamic‖
– Not based on wishful thinking - no rosy scenario
– Not a means to an end - for example, interest rates, & oil & crop prices are forecasts, not targets
• Conservative - allows for better-than-forecasted performance to reduce deficits/debt
• “Centrist”, based on:– Panel of experts
– Private forecasters
– The Fed
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II: Baseline Estimates
• Projections, not Predictions
• ―Centrist‖ Economic Forecast
• Current Law Basis, including
– ―Spend Out‖ of Enacted Legislation
– Termination of Expiring Legislation
• Medium Term Focus
• Replaces Previous Year & Executive Baselines
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III: Analysis Of President’s Budget
Proposals
• An objective budgetary assessment
– A technical review - not a programmatic evaluation
• Enhances credibility – both of government as a whole and of the President’s forecasts
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IV: Medium Term Analysis
• Forces government to look beyond one year
• Estimates medium term economic and fiscal impacts of policy proposals
• Important to take account of Fiscal Risks:– Guarantees
– Pension liabilities
– Contingent liabilities
– PPPs
• Provides basis for Long-Term Analysis18
CBO’s OTHER FUNCTIONS
• Analysis of proposals
• Options for spending cuts
• Analysis of mandates (regulatory analysis)
• Economic analyses
• Tax analyses
• Long term analysis
• Policy briefs
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Function Core Other Total
Executive Direction 5 5 10
Macroeconomic Analysis 5 15 20
Tax Analysis 5 15 20
Budget Analysis 80
Baseline 20
Analysis of Proposals 45
Mandates 15
Program Divisions 75 75
Technical & Administrative 10 20 30
Total 45 190 23520
Distribution of CBO Staff
Staffing by Core Function
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Core Function CBO IBO
(NYC)
LAO
(Calif)
Executive Direction 5 6 3
Macroeconomic & Tax Analysis 10 4 5
Budget Analysis 20 12 36
Technical & Administrative 10 5 9
Total 45 27 53
A FEW SIGNIFICANT EVENTS IN
CBO’S PAST• 1975: Rivlin establishes CBO’s independence with help of
the Minority Budget Chairman
• 1980: Gramm-Rudman & the Reagan economic assumptions help establish CBO’s objectivity
• 1990: the Budget Enforcement Act enhances CBO’s role
• 1994: Reischauer & Clinton Care—CBO’s finest hour
• 1997: O’Neill (Blum) undoes a deal—CBO’s lowest point
• 2001: Crippen (Anderson)—a $5.6T surplus projection
• 2003: Crippen (Anderson)—a $2.4T deficit projection
• 2003: Holtz-Eakin takes a stand against dynamic scoring
• 2009: New CBO Director Elmendorf estimates that only 20% of the stimulus would impact 2009
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IMPLICATIONS of CBO for
OTHER COUNTRIES• Legislatures need an independent source of
information and analysis to improve theirparticipation in budget preparation.
• A nonpartisan, independent, objectiveanalytic unit such as CBO can providetransparent, clear, & accurate informationwithout polarizing relations betweenexecutive and legislature.
• Successful creation of such a unit is noteasy: in particular, it demands balance in apolitical environment.
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Acronyms Used in This
Presentation• CBO: Congressional Budget Office
• CRS: Congressional Research Service
• Fed: The Federal Reserve Board
• GAO: Government Accountability Office
• IBO (NYC): New York City’s Independent Budget Office
• IMF: International Monetary Fund
• LAO (Calif): California’s Legislative Analysts Office
• OECD: Organization for Economic Cooperation and Development
• OMB: Office of Management and Budget
• OTA: Office of Technology Assessment
• PPPs: Public-Private Partnerships24