This morning, the House Budget Committee held a hearing about CBO’s work. I submitted written testimony and also made some remarks. Because people who do not work with CBO regularly are sometimes unfamiliar with our role and operations, I would like to share those remarks, which concern 10 things to know about CBO.
First, lawmakers created CBO to give the Congress a stronger role in budget matters. CBO was established under the Congressional Budget Act of 1974 to provide objective, nonpartisan information that would support the budget process. CBO’s mission is to help the Congress make effective budget and economic policy. In carrying out that mission, the agency offers an alternative to the information provided by the Office of Management and Budget in the executive branch.
Second, the Congress sets CBO’s priorities. CBO follows processes specified in statute or developed by the agency in concert with the Budget Committees and Congressional leadership. CBO’s chief responsibility under the Budget Act is to help the Budget Committees with the matters under their jurisdiction. The agency also supports other committees—particularly the Appropriations, Ways and Means, and Finance Committees—and the leadership.
Among CBO’s statutory requirements is producing certain reports, the best known of which is the annual Budget and Economic Outlook. That report includes CBO’s baseline budgetary and economic projections. CBO is also required by law to produce a formal cost estimate for nearly every bill that is approved by a full committee of either the House or the Senate. Those cost estimates are only advisory. They can—but do not have to—be used to enforce budgetary rules or targets. Moreover, CBO does not enforce such budgetary rules; the Budget Committees do.
Third, CBO produces a lot of work each year. For example, last year the agency published 740 formal cost estimates; provided technical assistance to Congressional staff as they developed thousands of legislative proposals and amendments; and published many reports about the budget, the economy, and related issues. Nevertheless, because of limited resources, the number of estimates and analyses that CBO can produce falls short of Congressional requests. Moreover, we must balance our commitment to respond quickly to the Congress with our professional responsibility to release estimates and analyses only when their quality is high enough.
Fourth, in order to provide the Congress with the high-quality analysis that it needs, CBO’s staff has expertise in many areas. Among CBO’s roughly 235 people, the largest concentration of expertise is in the area of health. Other areas of focus include national security, labor, taxes, energy, and macroeconomics. Maintaining a broad array of expertise allows CBO to respond to policymakers’ needs quickly. Analysts are organized into a number of divisions, but much of CBO’s work requires work from more than one division.
CBO’s analysts always pursue high quality and accuracy. They approach issues with a detailed understanding of federal programs and the tax code. They carefully and critically read the relevant research literature. They painstakingly analyze data collected by the government’s statistical agencies and by private organizations. And they regularly consult with a diverse range of outside experts, including professors, analysts at think tanks, representatives of industry groups, other private-sector experts, and government employees at the federal, state, and local levels. Some of the consultations occur during periodic meetings with CBO’s Panel of Economic Advisers and Panel of Health Advisers.
Fifth, CBO’s analysis is objective, impartial, and nonpartisan. We maintain our objectivity in a number of ways. One is that we make no policy recommendations. Another is that we hire people on the basis of their expertise—nearly 80 percent of CBO’s employees have advanced degrees—and without regard to political affiliation. We carefully consider whether potential analysts can perform objective analysis, regardless of their own personal views, and we enforce strict rules to prevent employees from having financial conflicts of interest and to limit their political activities.
We aim to reflect the full range of experts’ views as we present the likely consequences of proposals being considered by the Congress. Our estimates are inherently uncertain, but our goal is to produce estimates that are in the middle of the distribution of potential outcomes.
Sixth, models do not produce CBO’s estimates; CBO does. CBO’s estimates often require projections of how people and institutions would respond to proposed changes in law. A computer model is one tool that analysts may use to make such a projection. There are various kinds of models, such as complex simulation models, regression models, and calculations in spreadsheets. CBO’s models are constantly being enriched and improved.
Nonetheless, models often cannot show the full scope of the effects of a legislative proposal. Analysts must routinely go farther, combining what can be learned from a model with other information so that the estimates correspond as closely as possible to what the best available research suggests.
Seventh, CBO has a rigorous system of checks and balances. All of CBO’s cost estimates and reports are reviewed internally for objectivity, analytical soundness, and clarity. That process involves many people at various levels in the agency. Analysts’ consultations with outside experts help them hear all perspectives on an issue. And we continually revisit our past work and learn from the differences between our projections and actual outcomes. We also compare our analysis to others’ work and incorporate outside feedback into our projects.
Eighth, CBO prioritizes transparency. Since its inception, the agency has used many approaches to be transparent. To begin with, CBO’s cost estimates and publications include documentation of the basis of their findings. In addition, we document the revisions to our budget projections and estimates. We report on the accuracy of our projections, including our projections about the economy, spending, revenues, and health insurance subsidies. We publish analyses of how sensitive our estimates are to key parameters. And we seek external review of our reports before they are released and of the methods on which our products are based.
CBO also promotes transparency by providing broad access. When CBO completes a formal cost estimate, it is made available immediately to all Members of Congress, their staff, and the public on CBO’s website. Furthermore, CBO’s analysts regularly explain their analyses to Congressional staff. For instance, earlier this month, in collaboration with the Congressional Research Service, my colleagues gave presentations to 150 Congressional staff members about how CBO develops estimates of health insurance costs and coverage.
Unfortunately, the pace of Congressional action sometimes limits the time available for providing extensive explanations of estimates. And because the overall demand for CBO’s work is high and our resources are constrained, we need to balance requests to explain more about finished analyses with requests for new analyses and with our other responsibilities, such as regularly updating our baseline projections.
Ninth, CBO evolves as the needs of the Congress evolve. Though CBO has remained true to its original mission, we work with the Congress in ways probably not envisioned when the agency was first created. For example, as legislation has grown more complex, we have found ourselves spending more time providing preliminary analyses and technical assistance during the drafting stage. And we are being asked more often to prepare cost estimates for bills that are heading for votes without being marked up by committees first.
To accommodate the Congress’s needs and agenda, CBO shifts staffing and develops new analytical tools. For example, we devoted significant resources to strengthening our ability to analyze health care issues so that we would be prepared for large-scale legislative proposals on that front. Similarly, we improved our capability to study how legislative proposals would affect the economy and thus the budget as the Congress’s desire for such “dynamic analysis” intensified.
Tenth, CBO is always looking for ways to do things better. For example, we are reviewing and updating every aspect of our simulation model of health insurance coverage, which forms the backbone of our budget projections related to federal health care spending for people younger than 65. In addition, we will further improve our capability to perform dynamic analysis, as well as our ability to analyze how changes in federal regulations affect the economy and the budget.
Responsiveness and transparency are top priorities of mine, and CBO has plans to bolster them further. The agency will make greater use of team approaches to handle surges in demand for analysis of particular issues. We will increase the public documentation of our computer models. We will also do more to explain how analysts employ models while producing estimates. The extent to which CBO can accomplish those objectives will depend partly on whether we receive the funding that we have requested for them.
Keith Hall is CBO’s Director.