Congressional Budget Office Director Doug Elmendorf addressed the National Economists Club luncheon today in D.C. He started with the good news: "In the near term (FY10-FY12), we expect the economy to recover." However, his job outlook was grim: "More pain of unemployment lies ahead of us than behind us." That's because this recession has had much more permanent job loss than past recessions and because our recovery is likely to be weak, with subpar job growth. We've lost 8.5 million jobs so far, and it would take 11 million new jobs to reach the level we would have had if the recession hadn't occurred. He expects the unemployment rate to drop to 5% by FY13, but, "That's a long ways away."

That’s what former Joint Committee on Taxation Chief of Staff Ed Kleinbard proposed in footnote 111 on page 43 of this draft paper recently. He stated: “It is the author’s view that the CBO [Congressional Budget Office] is better suited to this task [scoring tax bills] than is the JCT Staff, from the perspective of both the relative stature and the independence of the two organizations.” 

First, I worked on the Joint Committee on Taxation from March 1, 1974 until February 1, 1981, and I maintain strong ties there. 

Second, along with other Joint Tax staff, I helped pass the 1974 Congressional Budget and Impoundment Control Act which set up CBO. Ever since, Joint Tax has supported CBO every step of the way, often without getting much credit. I personally pulled a lot of all-nighters to supply CBO with estimates, as have Joint Tax staff ever since. 

My column from Roll Call today explains why the 2009 deficit was lower than expected, who's to blame, and why 2011 rather than 2010 is when the real deficit reduction fight will start.  Then again, the 2011 fight will begin in only a few months.

Oct. 13, 2009

The Congressional Budget Office was much in the news Wednesday when its cost estimate showed that the health care bill being considered by the Senate Finance Committee would reduce rather than increase the deficit.

I have been a huge fan of the Congressional Budget Office since it opened its doors more than three decades ago.  It's a critically important part of the congressional budget process and has had a big positive impact on the outcome of many, many policy debates.

Many of CBO's biggest successes have been hidden from view, especially when it's assessments have stopped expensive ideas that otherwise might have been debated from moving forward or from being considered in their original forms.  In other cases -- especially when it determined that Bill Clinton's health care reform plan should be counted on-budget -- its impact has been widely noted.  Indeed, CBO's assessment of the Clinton plan is often credited with it's demise.

But as this report from Brian Faler at Bloomberg points out, especially when it comes to big policy changes like health care, CBO's estimates are often not just wrong, but by hundreds of billions of dollars wildy inaccurate.

At this point there's little doubt  that CBO is coming under attack from health care reform proponents for its analysis.

For example, take a look at this column by Bruce Vladek in yesterday's Roll Call.  Although there are many, here's what I consider to be the money quote:

...CBO’s track record in predicting the effects of health legislation is abysmal. Over the last two decades, the CBO has routinely overestimated the costs of expanded government health care benefits and underestimated the savings from program changes designed to reduce expenditures.

This is actually a debate that's been raging for weeks in a variety of ways within the budgeting community.  I received a lengthy e-mail several days ago from a friend and budget scholar (whose name and material I don't have permission to use) that went into great detail about this.  That's typical.  After all, a discussion on estimating techniques is the stuff that dreams are made of for many budget wonks.

Via Ezra Klein...Mark Schmitt has an interesting perspective on what and how the Congressional Budget Office is doing on and to health care reform.

Here's my "Fiscal Fitness" column from this week's Roll Call.

CBO Has It Wrong: A Higher Deficit Isn’t Necessarily Evil

January 13, 2009
By Stan Collender
Roll Call Contributing Writer   

I’m a huge Congressional Budget Office fan, and its Budget and Economic Outlook report released last week did nothing to reduce my enthusiasm for what the CBO does and how it does it. This annual report is now almost as widely anticipated and as much a must-read as the budget the president sends to Congress each year.

But there’s one thing I strongly disagree with in the current report: the way the CBO characterizes the deficit. According to the opening statement (page 13), the 2009 budget outlook “will be dramatically worse than it was in 2008.” In the next paragraph, CBO the says there has been a “deterioration in the fiscal picture.” (The italics are mine in both quotes.)

The Associated Press is reporting this morning what everyone already knows: the Congressional Budget Office will project that the deficit will increase from fiscal 2007 to 2008. Including the not-yet-but-absolutely-certain-to-be-proposed-and enacted supplemental appropriations for Iraq and Afghanistan, the 2008 deficit will reach about $250 billion, a $90 billion or so increase from the $162 billion deficit in 2007.