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The Congressional Budget Office, explained

CBO’s score of Republicans’ health plan is out, and it looks grim. Here’s why the agency has such influence.

CBO director Keith Hall testifies before a congressional committee in 2015.
Tom Williams/CQ Roll Call/Getty

Congress votes on bills, and the president signs them. And yet, to hear some tell it, it’s an entirely different institution that really calls the shots in Washington.

“I say all the time that CBO is God around here,” Sen. Chuck Grassley (R-IA) mused back in 2006. “Because policy lives and dies by CBO’s word.”

Indeed, in the four decades since its creation, the nonpartisan Congressional Budget Office has carved out an institutional role for itself as the well-respected arbiter not only of how much proposed legislation in Congress would cost but also what its economic effects would likely be.

CBO has no formal power over anything, and it never takes an explicit position for or against any bill. But despite — or perhaps because of — those facts, its estimates have been so influential among the political class that Sen. Ron Wyden (D-OR) could say in 2008, “The history of health reform is congressmen sending health legislation off to the Congressional Budget Office to die.”

Now it’s the fate of Republicans’ attempt to repeal and replace Obamacare that could well be determined by CBO’s pronouncements. On Monday, CBO released a report estimating the effects of the Senate health care bill, and they look grim — the office projected that if the bill became law, 22 million fewer people would be insured by 2026.

It’s possible that this could cause swing vote senators to turn against the bill en masse, or force major changes to it. Sen. Dean Heller (R-NV) has already said that he opposes the current version of the bill because it causes “tens of millions” of people to lose coverage, and another moderate holdout, Sen. Susan Collins (R-ME) has told reporters that she was waiting to hear what the CBO score would be. However, Senate Majority Leader Mitch McConnell also has to avoid losing too many votes from the right.

Perhaps anticipating a grim CBO assessment, Trump administration officials have preemptively tried to discredit the office. “They were way, way off the last time,” press secretary Sean Spicer said in March. “If you’re looking at the CBO for accuracy, you’re looking in the wrong place.” (Per the Commonwealth Fund, CBO overestimated how many people would sign up for Obamacare’s exchanges, but its projections were closer to reality than those of “many other prominent forecasters.”)

The budget office has never claimed to be able to perfectly predict the future. Instead, former director Robert Reischauer tells me that in a world full of politically motivated projections, “CBO’s function is to provide a dose of reality.” And now, faced with an administration that often advances “alternative facts,” it could face its greatest challenge yet.

1) What is the Congressional Budget Office?

On paper, the CBO is a number-crunching agency with the unglamorous task of helping members of Congress estimate just how much their fun-sounding new bills would actually cost, and writing reports on federal spending.

But in practice, it has evolved into something much more powerful. Some call it Washington’s scorekeeper, umpire, or referee. Others view it, effectively, as a political power center in its own right, since politicians often reshape (or abandon) proposed legislation as a result of CBO’s pronouncements.

The CBO is run by a director, who is appointed by Congress and serves a four-year term. The current director, Keith Hall, was picked by House Republicans (including then-Budget Committee chair and now HHS Secretary Tom Price) in 2015. Beneath the director is a staff of about 230, most of whom, the agency says, “are economists or public policy analysts with advanced degrees.”

Over the office’s four-decade existence, a distinct culture has been instilled in those employees. It’s in part a culture of wonky analysis. “Most people are there as researchers,” says Jonathan Schwabish, who worked at CBO from 2005 to 2014. “As researchers your DNA is to approach the world and say, ‘There’s a question that I want to answer, or get as close to the truth as I can.’”

But CBO’s culture isn’t an ivory tower one. Since it’s tasked with communicating with members of Congress, it’s also tried to focus on making its analyses accessible. “We should break with the ponderous prose of most official economic writing and aim at giving Congressmen themselves something they can actually read and understand,” CBO’s first director, Alice Rivlin, wrote in 1975.

CBO also has a culture of skepticism. Doug Holtz-Eakin, who was director from 2003 to 2005, once said: “Every advocate comes to CBO and their null hypothesis is that they are right and they think CBO’s null hypothesis is that CBO is right. But that’s not CBO’s null. CBO’s null is you’re wrong.” That quote comes from University of Maryland public policy professor Philip Joyce’s excellent book The Congressional Budget Office: Honest Numbers, Power, and Policy, and Joyce elaborated on it to me: “It’s the same bias shared by all good budget offices, they think people coming to them with a proposal to do anything are looking for a free lunch.”

Finally, CBO’s culture prizes ignoring political pressure — even if that pressure comes from the director’s own political party. The office’s staff style themselves as not just telling political leaders what they want to hear. “CBO is an island of nonpartisanship in a roiling congressional sea of partisanship,” says Doug Elmendorf, director from 2009 to 2015.

2) Why is CBO so influential?

Whether for substantive or political reasons, moderate senators like Susan Collins of Maine watch CBO scores closely.
Melina Mara/The Washington Post via Getty

CBO’s influence stems entirely from its credibility and reputation as a politically neutral arbiter. And that reputation is strongest among two very important groups of people who have come to take CBO’s projections extremely seriously: swing vote politicians, and the media.

Swing vote politicians are often looking to burnish a moderate image. So they try to determine whether particular bills are too budget-busting or extreme to support — either for substantive or political reasons. Indeed, because the swing vote Congress members and senators glom onto CBO, party leaders are frequently forced to rework their bills in hopes of getting better results from the office.

For example: Back when health reform was debated in 2009, a group of red-state Democratic senators were adamant that the 10-year cost of the bill be less than $1 trillion. Whether they were genuinely concerned about overspending, or they just feared political attacks on them for supporting a “trillion-dollar health care bill,” the important thing for our purposes is that they were focused CBO’s score as their metric.

The second source of CBO’s influence is its reputation in the mainstream media, which treats its estimates as essentially the gold standard. “The media has a tendency to play up the information coming out of CBO because they believe it to be objective and nonpartisan,” Joyce says. “They believe their numbers are less biased than numbers coming out of, for example, the executive branch.”

More partisan politicians and outlets, naturally, may not have such a fair-minded interest in CBO. But even they have a use for its estimates: as ammo against their political opponents. President Trump, for instance, repeatedly cited CBO to attack Obamacare before the election. “Both sides use CBO — and I mean use — in whatever sense they can,” says Holtz-Eakin.

3) Why does CBO exist?

Alice Rivlin, CBO’s first director, testifies before a congressional committee in 2013.
Tom Williams/CQ Roll Call/Getty

The background for CBO’s creation lies in conflict between President Richard Nixon and Congress, which was then controlled by Democrats. Nixon had been “impounding” (refusing to spend) money Congress had appropriated for particular projects, including the Clean Water Act. This naturally made Congress quite unhappy, so legislators drew up a bill that would ban this practice.

Since they were tackling spending reform anyway, lawmakers decided they might as well tackle what they saw as a bigger related problem: Congress’s growing weakness in a budgeting process increasingly steered by the White House.

Though the Constitution gave Congress power over spending, the federal government had grown big and complex, and Congress hadn’t kept up. So legislators decided to modernize the budgeting process in a way they hoped would make themselves players again.

Nixon was embattled by the Watergate scandal and unable to effectively push back, so in the end, the Congressional Budget and Impoundment Control Act of 1974 passed with huge majorities. The new law created the House and Senate Budget Committees and the modern budget resolution (and reconciliation) process.

It also, almost as an afterthought, created the CBO — Congress’s own budget office, envisioned as a counterpart to the White House’s Office of Management and Budget (OMB). The rationale was that Congress was sick of relying on the White House budget office’s projections, and viewed them as frequently biased, either for institutional or partisan reasons. So members seem to have decided, well, why not get our own?

But the CBO we know today was truly defined by its first director, Rivlin. As Joyce’s book recounts, Rivlin made a strategic decision to build CBO into a truly nonpartisan and analytically credible agency, rather than one that would carry Congress’s water in its squabbles with the White House or openly advocate for certain bills. To this end, Rivlin decided to make CBO an agency that would work for all of Congress — not just the budget committee chairs or the leaders of the majority party — which carved out space for her to act more independently.

Finally, though she was appointed by Democrats, Rivlin proved herself willing to challenge President Jimmy Carter’s White House, issuing harsh estimates about his energy plan’s effects. “Whenever you have budgeteers playing against partisan type it’s going to help send a signal about neutrality or objectivity,” says Sarah Binder, a congressional procedure expert at George Washington University.

4) How does CBO do its estimates?

Essentially, the office has built up a series of economic models that it’s used over the years, and it continues to tinker with them or build new models based on what’s on the agenda in Washington.

Each major score or forecast, Holtz-Eakin says, is “a team research project. There are people doing it, checking it, trying to make sure the research is covering the right thing, and people trying to make sure the research is understandable and defensible.”

Elmendorf estimates that about 40 people worked on CBO’s health reform analyses in 2009. “People come to meetings and say here are the papers we’ve read, here’s how we’re interpreting them, here’s how we’re putting them into the model to reflect that. There’s a discussion around the table where the director is one participant. I myself wouldn’t know the bottom line on estimates until the very end.”

Schwabish, the former CBO staffer, has a similar account: “You try to make the best model that we can, you run the model, and the chips fall where they may.”

Asked to provide more detail on how CBO modeled health reform proposals, Elmendorf elaborated:

CBO has spent the last 15 years building and improving models of health insurance in this country. Those models are based on empirical evidence about the way businesses and individuals respond to incentives regarding health insurance. The models are based on discussions by CBO analysts with the outside advisers that CBO gathers. The models are based on careful use of big data sets. And ultimately on judgment. There is no perfect model of the world.

5) How has CBO dealt with political criticism?

Then-Speaker Newt Gingrich in his office at the Capitol in 1998.
Douglas Graham/Congressional Quarterly/Getty

CBO has a long and storied tradition of making it more difficult for political leaders to get what they want, by arguing that their rosy estimates are a little too rosy. And sometimes those political leaders don’t like that very much.

  • In 1981, President Reagan called Rivlin’s CBO numbers “phony” because they differed from his own OMB’s extremely optimistic projections about the deficit.
  • In 1995, Speaker Newt Gingrich repeatedly complained that the Republican-appointed CBO director, June O’Neill, wasn’t properly accounting for the benefits of tax cuts. “Every few weeks he would say that he was firing me, and I would be called in,” says O’Neill. “In his office he had a huge dinosaur [head], which makes it look scary when you walk in. But every time I actually went to see him, he would be very cordial.”
  • In 2002, House Budget Chair Jim Nussle said, “The CBO sucks, and you can quote me on that,” because he didn’t like a score of a farm bill.

But perhaps the most pressure ever put on a CBO director came during the health reform fight under President Bill Clinton. According to Haynes Johnson and David Broder’s book The System, CBO Director Robert Reischauer was intensely and often angrily lobbied by top Democrats to make scoring decisions that they hoped could help Clinton’s health bill. He was told that his intransigence would lead to many deaths if health reform failed, as well as the destruction of the Clinton presidency.

Reischauer didn’t budge in the end, and his eventual CBO report, which found that the Clinton plan would add $70 billion to the deficit over five years, was blamed by some Clinton allies for sinking the entire effort. “You’re under a lot of pressure, there’s no question about that,” Reischauer told me. “People have strong views. They express them to you privately, and if you don’t have the hide of a rhinoceros, you would not sleep at night and be in pretty bad shape.”

Yet Elmendorf professes not to have had the same experience during the Obamacare fight. “I didn’t feel much pressure that year to come up with different answers, from anyone,” he says. “I knew that members of Congress desperately wanted all sorts of answers from us. But I knew what my job was. I knew what my colleagues and I had to do, which was produce our best objective analysis.”

Indeed, what ended up happening was that rather than spending their time pressuring Elmendorf directly, congressional Democrats spent their time reworking their bill so that it would get a better score. They found it easier to completely rework a major piece of legislation — again and again — than to twist the CBO director’s arm.

This article was originally published in March. It has been updated to reflect recent developments.