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Congressional Budget Office Is Broken (Finally)

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Friday, 26 May 2017 07:57 AM Current | Bio | Archive

Forget the headline numbers from the Congressional Budget Office’s latest score for the Republican health-care bill. The score tells us something much more important, and much less remarked: Republicans have broken the CBO. They’ve passed a bill that, for all intents and purposes, cannot be scored by the normal CBO process. I don’t say that they’ve done this deliberately, mind you -- in fact, I’m pretty sure they it wasn’t premeditated. But they’ve done it just the same.

Oh, the fine folks at the CBO have gone in and given it their best try, and that’s what produced the headline numbers you’ve read: 14 million fewer people insured by 2018, 23 million by 2026, and a net reduction in the deficit of $119 billion in the coming decade. But after that, it starts getting a little weird. Premiums will go up for a while, and then maybe down for some people but up for others, and it’s hard to get an average … this score has a whole lot of caveats, more “difficult to predict” and “estimate uncertain,” than longtime CBO watchers are primed to expect.

The CBO process has never been perfect, for there has always been an uneasy tension between realistically outlining uncertainties and providing enough precision to guide the policy process. This nonpartisan office has at times irked Democrats, other times Republicans. Its estimates are not necessarily accurate -- as the saying goes, “predictions are hard, especially about the future” -- but they are consistent, giving politicians and the public a single, if imperfect, framework for comparing policy choices.

CBO estimates prefer a single number to a range. They limit the term over which they project the costs, because projecting the policy environment 50 years out is a mug’s game. They have declined to consider some sort of uncertainties, such as “Will future congresses have the guts to see this thing through?” because however real those risks are, analyzing them would put the CBO in the position of political advocate rather than budget wonk.

Naturally politicians have long striven to exploit those tensions. For example, the Patient Protection and Affordable Care Act was stuffed with dodgy "pay-fors" of dubious political economic or viability. Many of these were clearly not ever going to take effect, but they allowed Democrats to claim tidy budget savings from passing the bill. The timeline of the program’s rollout was also set up so that a lot of the costs fell outside the budget window, while new revenue showed up pretty quickly. The CBO tried to make it clear that these things were problems, but ultimately, they were restrained by their principles from saying: “Guys. We’re going to make everyone in America start issuing 1099s to stores? Really?”

But that’s a known limitation of CBO estimates, and careful writers take account of it when they report on CBO scores. What’s interesting is that as far as I can tell, the Republican plan doesn’t have this problem at all, partly because it was passed (and would take effect) so quickly: There’s no room to game the budget window, and as far as I can tell, the Republicans didn’t have the time to come up with ingenious gimmicks for making their bill score better than it really should.

Instead the Republican bill has a completely different problem: It relies so heavily on state level waivers that the CBO simply has no way of predicting, even imperfectly, what’s going to happen.

Just to get this week's estimates, the CBO was were forced to guess which states might use waivers, and how they might choose to implement them. But the CBO doesn’t want to be in the business of making political calls, because that opens up vast room for the political leanings of the analysts to substitute for budget analysis. So instead they try to look at structural factors within the states themselves -- which states have problems in their markets, which states are relatively stable.

I’m sure those factors will come into play. But I’m also pretty sure that the political composition of the state -- and for that matter, of the presidential administration that has to approve the waivers -- is going to matter … oh, quite a lot. On this, the CBO score is gloriously silent.

The CBO has made absolutely the right call in refusing to speculate on political risks. But that political agnosticism is going to create an increasing problem if America attempts political reforms that could heal its fractured electorate.

Late last year, I noted how strikingly America resembles two partners locked in a bad divorce: Unable to agree on even trivial matters, willing to do things that hurt themselves as long as it hurts the other party more. I also noted that “there is no divorce court for nations.” However, there is a way to give each other some space, to allow wildly disparate groups to rub along together semi-harmoniously. Fortunately for us, this solution is already enshrined in our constitution: federalism.

The more matters we push down to the state level, the less Red America and Blue America will have to quarrel about. And given how nasty our quarrels currently are, this seems like it would come as a welcome relief for almost everyone.

And indeed, that’s just what the Republican health-care bill does. For all that I’ve been hard on it, the bill gets one thing right: Instead of trying to centralize control, so that we all have one big, contentious issue to bash each other over, it offers a whole lot more latitude to states. Those states are more culturally and politically homogeneous, and should have an easier time coming to agreement over what should be done. It’s a good idea, and it’s an idea that we need to see popping up more often in federal legislation.

The problem is, such bills are likely to produce messy CBO scores like this, because the CBO is not set up to guess what 50 little laboratories of democracy will do. So the more we do what we should, and hand back power to people who can agree upon how to use it, the less sure we’re going be about what, exactly, it is that we are doing.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Megan McArdle is a Bloomberg View columnist. She wrote for the Daily Beast, Newsweek, the Atlantic and the Economist and founded the blog Asymmetrical Information. She is the author of “The Up Side of Down: Why Failing Well Is the Key to Success.”

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MeganMcArdle
Forget the headline numbers from the Congressional Budget Office's latest score for the Republican health-care bill. The score tells us something much more important, and much less remarked: Republicans have broken the CBO.
Congressional, Budget, Office, Broken
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2017-57-26
Friday, 26 May 2017 07:57 AM
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