STATEMENT OF Congressional Budget Office Committee on the Budget
The Foundations of the Congressional Budget Office Foundations of the Congressional Budget Office...
Transcript of The Foundations of the Congressional Budget Office Foundations of the Congressional Budget Office...
The Foundations of the
Congressional Budget
Office
Barry AndersonOECD
Meeting of OECD Parliamentary Budget Officials
Rome, February 26-27, 2009
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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
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A Note About Me:
Experience in Both
the US Congress & the White House (as well as in IMF & OECD)
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Office of Management & BudgetGeneral Accounting Office
Congressional Budget Office
ORIGINS OF CBO
• Budgetary Dominance of President Nixon
• Other Factors• Budgetary Weakness of Congress
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Budgetary Dominance of
President Nixon
• Impoundment• Creation of a More Powerful
OMB• Monopoly on Budget
Information
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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