The CBO can’t perfectly predict the future, but it can improve

It’s never been trendier to have a hot take on the Congressional Budget Office (CBO).

Okay, maybe it’s still not exactly “trendy,” but in political circles, the CBO remains a hot topic since its scores of the American Health Care Act (AHCA) and the Better Care Reconciliation Act (BCRA). They were immediately heralded by Democrats as yet another reason to oppose the bills, while drawing ire from Republicans over what they say are calculation errors.

This time, though, the somewhat predictable partisan grumbling is coming from within government agencies and President Trump’s closest advisors.

It’s not going away. On Wednesday, the president’s Council of Economic Advisors released a biting statement, which said that “although CBO’s estimates should be discounted because of the large errors made by the agency in estimating [Obamacare’s] toll” the media is still inaccurately reporting the score.

That’s because the widely publicized Medicaid “cuts” actually refer to adjusted growth rates. In fact, the CBO says that the BCRA results “in at least $265 billion more federal Medicaid spending between 2018 and 2026, relative to 2017 levels of spending.”

These critiques may be harsh but are not new. 

Mick Mulvaney, head of the president’s Office of Management and Budget (OMB) last month told the Washington Examiner that “the day of the CBO has probably come and gone” and quipped that, “You can have a government without a Congressional Budget Office.” Many past CBO directors appointed under both Republican and Democratic administrations criticized his comments. 

There are some valid complaints, but the truth is more nuanced than the current firestorm.

Many have echoed Wednesday’s claim that the CBO missed the mark in predicting the number of insured under Obamacare, and that is true. But several independent analyses have shown that CBO’s estimates were relatively accurate overall — they just underestimated the number of Medicaid enrollees relative to those who found health insurance on the exchanges.

This is an important distinction even though the critique is still valid, especially for those of us inclined to prefer private options to government-run Medicaid.

The agency’s second attack is more apt, if a bit more of a complaint about media reporting than CBO data. Of course, there are legitimate reasons to consider a baseline, such as rising cost of living or changing population. But accepting the projections as sacrosanct and reporting rising spending as “cuts” is specious at best.

As economist Arnold Kling has pointed out, “[M]odels are subject to all sorts of errors. GDP growth could turn out to be higher or lower than expected. Interest rates could be higher or lower than expected. Your estimates of the cost of programs could be off, because people may respond to incentives differently than what you expect. Laws may change.”

Ultimately, most complaints come down to the fact that the CBO does not have a monopoly on predicting the future. Estimates can be wrong, and its models are subject to the same potential errors as those provided by other sources, including other government agencies and private entities.

No one can know the future.

But it is important to note that while agencies like the OMB and the Council of Economic Advisors are also acting under imperfect information, they report to the president, and the CBO remains — criticism aside — an independent entity.

That doesn’t mean there’s no room to improve. There are a host of reforms, for instance, that 27 independent advocacy and educational organizations recently agreed to. Remember also that the CBO acts according to congressional mandate, which can be changed. It would be helpful, for instance, for CBO models to consider a range of potential inputs and present a range of estimates, but its mandate currently prevents it from doing so.

There are a host of steps that the CBO can take in order to improve transparency and be more useful in the 21st century. But the agency still provides a stable benchmark. As you learned in school, there is a difference between accuracy and precision — and precision is important to policymakers and the public alike.

One may not be inclined to value the precision the CBO provides, particularly when its projections are snarling already-tense policy battles and when these projections may be flawed. But these discussions should not ignore the inherent volatility in attempting to predict the future — and the practical options for making these predictions better. 

Jonathan Bydlak is the founder and president of the Coalition to Reduce Spending, an advocate for lower federal spending. He’s also the creator of SpendingTracker.org. He is a fiscal policy expert and also served as director of fundraising on Ron Paul’s 2008 presidential campaign. Follow him on Twitter @jbydlak and @Reduce_Spending.

The views expressed by contributors are their own and not the views of The Hill.