OMB v. CBO in the "First Battle of the Blogs"

Washington policy battles usually play out in person in the Oval Office and in the offices of congressional leaders.  On Saturday, July 25, Washington witnessed the first "Battle of the Blogs."

Congressional Budget Office Director Doug Elmendorf estimated President Obama's proposal for an Independent Medicare Advisory Council would save only $2 b. over the next 10 years - a pittance in a $1 trillion health care reform bill.  Office of Management and Budget Director Peter Orszag, who had held Elmendorf's job for the prior two years, immediately blogged back "As a former CBO director, I can attest that CBO is sometimes accused of a bias toward exaggerating costs and underestimating savings. Unfortunately, parts of today's analysis from CBO could feed that perception."  Orszag put the best possible face on the estimate with "The bottom line is that it is very rare for CBO to conclude that a specific legislative proposal would generate significant long-term savings so it is noteworthy that, with some modifications, CBO reached such a conclusion with regard to the IMAC concept."  In other words, Orszag was angling for CBO, in Elmendorf's words, to raise the "[small] chance that substantial savings might be realized."  This may seem arcane, but a paltry $2 b. cost saving could torpedo the whole idea and threaten the entire health reform effort.  A much larger cost estimate could have paved the way for passage.

Orszag and Elmendorf have excellent public and private reputations among economists.  They were colleagues for years at the Brookings Institution and are friends, but, in Washington, all the gets set aside when you're appointed to a powerful position which you must defend.