CBO’s wrong forecasts annoy Republicans

October 29, 2017 GMT

When California went to court this month to challenge President Trump’s cancellation of “cost sharing” Obamacare payments, the states repeatedly pointed to a Congressional Budget Office study projecting that nixing the payments would leave 1 million more Americans uninsured.

U.S. District Judge Vince Chhabria rejected the argument and said the CBO got it wrong.

CBO projected in its August report that cutting the payments would cause insurance companies to flee the Obamacare exchanges, leaving people without options next year. But a few months later, it’s clear “that hasn’t happened (at least not for 2018),” Judge Chhabria, an Obama appointee to the federal bench, wrote in his decision.

It was a small but telling jab at the CBO.

Congress’ top analysts are among the most-powerful yet least-known actors on Capitol Hill, shaping the contours of the debate and determining what bills do or do not get through.

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But having that much power in the hands of technocrats is increasingly troubling to some Republicans in Congress, who blame the CBO for helping scuttle their chance at repealing Obamacare by offering dire predictions of tens of millions of Americans knocked off health care coverage.

Republicans said the CBO was guessing badly at how Americans would respond.

“Something’s going on, and I don’t know what it is and I can’t tell you I know how to fix ’em, but there’s something going on over there at CBO,” said Rep. H. Morgan Griffith, Virginia Republican. “They seem to be consistently pretty far off, and then they don’t use common sense.

“I’m open to any suggestions,” Mr. Griffith said. “All I know is, as a congressman, I need to have faith that we’re at least close or somewhere in the ballpark, and I don’t have that faith in the CBO today.”

Keith Hall, the office’s current director, said they do get projections wrong but that the CBO is also held to unfair standards on complex issues that inherently contain a great degree of uncertainty.

That’s particularly true on health care, he said, because analysts have to weigh not only behavioral responses to legislation, but also any future technological developments, market reactions, and other factors that could affect coverage and cost.

“I think there’s a little bit of cherry-picking going on, because people focus on just the exchanges, but [when you] focus more on the number of uninsured, we didn’t do so badly and such,” Mr. Hall said. “But obviously, I think predicting the future is difficult and we can be wrong.”

For now, Mr. Hall and his team appear to be on safe ground.

Yet efforts to curtail CBO’s power have fallen short; lawmakers said a bad referee is better than no referee at all.

‘They are woefully incorrect’

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The CBO is a creation of Congress, staffed with about 240 economists, researchers and budget analysts. The executive branch has its own financial analysis teams in the White House Office of Management and Budget, as well as at the various departments and agencies.

But Congress, with the constitutional power of the purse strings and the normal political give-and-take on Capitol Hill, has generally concluded that its office does a job better than the administration’s.

Rep. Tim Ryan, Ohio Democrat, said the CBO sincerely tries to give lawmakers the best information available but that estimates shift along with changing circumstances, notably when it comes to health care.

“When you’re talking about one-sixth of the entire United States economy, it’s going to be difficult to give you entirely accurate information,” Mr. Ryan said. “But not having this essential service here, I think, would be detrimental to this Congress detrimental to our ability to even gauge and forecast into the future.”

That’s not good enough for Republicans, who say the CBO’s estimates have been so erratic that they are no longer good yardsticks for legislation.

“Oftentimes, they are late, and unfortunately too often they are woefully incorrect,” said Rep. Scott Perry, Pennsylvania Republican.

“I don’t mean to impugn the fine people who work at the CBO, but something is amiss, and if we just keep on accepting it, how are we ever going to get our policy right?” he said.

In the face of such criticism, Mr. Hall said, he is trying to keep his team out of the fray and focused on its work. He argues that CBO projections are typically in line with those of other forecasters.

“Some of the things they ask us to do are harder than others they have more uncertainty,” he said. “I do think generally when we’re way off, everybody else is too. We don’t go out there on our own that much.”

A prime example appeared in 2003, when the CBO was tasked with calculating the cost of President George W. Bush’s plan to add a prescription drug program to Medicare.

The CBO came up with a $552 billion projected cost for the first decade, from 2004 to 2013. Two years later, the CBO revised that upward, fixing the 10-year price tag at $593 billion.

But when the CBO looked back years later, it acknowledged that it missed the mark. Badly. Analysts had overestimated the costs by 40 percent, and the actual 10-year total was $358 billion.

It turned out that the markets were more efficient, and medical advances less dramatic, than CBO analysts predicted in 2003.

In addition to the prescription drug cost miss, the CBO estimated that more than 20 million people would ultimately purchase private health insurance through Obamacare exchanges more than double the actual totals from 2016.

The agency recently cited the enrollment miss as one reason why a projected $77 billion cost for health care tax credits and subsidies in 2016 turned out to be $36 billion less than half of a 2010 estimate.

Several years ago, CBO pegged the potential government profit from selling off broadband spectrum at $15 billion over 10 years. But one 2015 auction alone raised more than $40 billion after the office estimated that particular sale would net zero dollars accounting for costs associated with reallocating the systems.

“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,” FCC Commissioner Jessica Rosenworcel said at the time.

Mr. Hall said there are a number of possible reasons for the misses. In the case of Obamacare enrollments, early website glitches, a Supreme Court ruling and states’ decision-making some chose not to expand Medicaid coverage or to use the federal health care exchange rather than set up their own affected the law’s performance.

Mr. Hall said his analysts’ work isn’t necessarily to predict the future but to provide Congress with a range of estimates on how legislation might affect the fiscal picture down the road.

“Part of what we’re doing is we’re telling you what path the federal government is on, so it’s under current law, this is the effect,” he said. “And we don’t actually expect current law will remain unchanged, right? We’re trying to give Congress an idea of the direction that they’re pushing the budget when they pass legislation.”

‘Uncertainty is very large’

Budget analysis is as much alchemy as it is science, with cost estimates needing to predict government patterns, consumers’ reactions and the way markets will adapt to those reactions.

For a tax bill, the CBO must project what sorts of investments and spending changes Americans would make for every hike or cut. On immigration, the agency must try to gauge how a bill to legalize illegal immigrants would affect labor markets, how much the immigrants would pay in taxes, how much they would sap in welfare or education or other social spending and how many would even sign up.

“All that information comes together, and then CBO analysts discuss how to weigh the different pieces of information,” said Doug Elmendorf, a former CBO director. “Because the uncertainty is very large, everybody at CBO totally understands that.”

For example, figuring the cost of renaming a post office branch is easy, but calculating how much a terrorism risk insurance bill would cost years down the road is hard, said Doug Holtz-Eakin, another former director.

“One of the great ironies is if they’re doing something really important, it’s usually because they’re doing something that’s new,” Mr. Holtz-Eakin said. “That’s exactly when you know the least about what will happen.”

That’s the point some Republicans have made amid forecasts that their Obamacare repeal legislation would result in some 23 million fewer Americans having health care in a decade, with lawmakers floating proposals to push the agency to change.

Mr. Griffith this year offered an amendment abolishing CBO’s budget analysis division, which would have eliminated 89 employees and $15 million worth of salaries.

The proposal, when scored by the CBO, said it wouldn’t save any money. The congressman was floored.

“It’s OK to be wrong every now and then none of us have a crystal ball. I get it,” Mr. Griffith said. “But when you can’t score your own agency being cut by $15 million and you say it has no budget impact, when you think that broadband today has no value, there’s a problem. There’s a problem.”

Rep. Thomas MacArthur, New Jersey Republican, said he has met multiple times with Mr. Hall to go over issues he had with the agency’s scoring of his amendment to the House’s Obamacare repeal bill scoring that showed millions more would be uninsured compared with current law.

Mr. MacArthur said Mr. Hall acknowledged some blemishes in the CBO’s analysis, but the congressman said he questions the agency’s underlying methodology. He said analysts appear to still be using overly rosy projections of Obamacare.

“I wasn’t satisfied,” he said. “It doesn’t change the reality that their score was based on projections that I don’t really think are supportable.”

Over the summer, Sen. Mike Lee, Utah Republican, introduced the CBO Show Your Work Act, which would require the office to publish its data and modeling it uses in its scoring.

“CBO would keep its role as official scorekeeper of congressional budget proposals but now the American people and the economic community would be able to see what’s going on in all those spreadsheets and algorithms,” Mr. Lee said.

Mr. Hall said he is with Mr. Lee and the agency does need to be more transparent, giving the public a better sense of what is behind the analysis. But he cautioned that too much work on those efforts could pull resources away from the staff’s primary duties.

“We [have] this really big task if we were to take an effort to put all our models up. I mean, that’s years and years of work and a lot more people than we have right now,” he said.

“I don’t want to use the word negotiating, but we’ve got some back and forth with Congress about what’s feasible and what sort of resources we’ve got to do it in some way that’s as helpful as possible without stopping our work entirely, which would be the extreme on this,” he said.

‘Unilateral disarmament’

Though the CBO has been under the gun this year, complaints about the office date back almost to its creation in the 1970s.

President Reagan tried to oust the office’s first director, Alice Rivlin, when he didn’t like the agency’s projections for his budget, said Philip G. Joyce, a University of Maryland professor and author of “The Congressional Budget Office: Honest Numbers, Power, and Policymaking.”

“The law says that a CBO director can be removed by a vote of either house of the Congress,” Mr. Joyce said. “So the Reagan administration actually went to the Republicans in the Senate and tried to get Alice Rivlin removed as director by having the Senate vote to throw her out.”

Senate Majority Leader Bob Dole and Budget Committee Chairman Pete Domenici refused the White House’s request.

Democrats have also been displeased with the agency. In the 1990s, the CBO, under Director Robert Reischauer offered up grim projections of President Clinton’s health care plans, Mr. Joyce said.

Mr. Elmendorf said every director faces some degree of criticism, but the most recent round has been more intense and more personalized than in the past.

“What worries me about these past six months is the level of animosity toward CBO seems to have increased, and not because CBO is doing a worse job in any respect but because members of Congress promised a combination of changes that can’t be achieved,” he said.

“And CBO is the bearer of that reality. So that’s not CBO’s fault. That’s the fault of the members who overpromised,” he said.

Mr. Holtz-Eakin said it’s healthy to debate the analysis but that attacks on the analysts are wrong.

“I think it’s misplaced and, in the worst cases, completely inappropriate and disgraceful, to attack the integrity of the people running the place, to accuse them of partisan bias, to question their professionalism and otherwise impugn the integrity of the office. All of that has happened this year, and that’s a shame,” he said.

Mr. Joyce said the strangest suggestions have been for Congress to forgo using the CBO as the final arbiter. That would leave the administration, which always belongs to one political party or another, in charge.

“I find it very surprising and shortsighted when members of Congress attempt to discredit or attack CBO,” Mr. Joyce said. “Because what they’re really doing is they’re engaged in sort of unilateral disarmament.”

Mr. Hall said his office has made a conscious effort not to enter the fray and wants to focus on the task at hand: being the designated “referee” for Congress on legislative and budget issues.

“Referees don’t talk during games, right?” he said. “We’re working in this very partisan world, and our big goal is to do what we think is right, do our objective work and see this most of this for what it is, and [that’s] just people being unhappy, maybe, with the numbers or disagreeing, which is all fair.”