Stan Collender Cheers for CBO and for Brian Riedl
Stan Collender is very happy with the Congressional Budget Office and with Heritage's Brian Riedl:
BUDGET BATTLES: Thank God For CBO: The Congressional Budget Office proved again last week why it is such a critically important part of the federal budget debate. CBO's most recent economic and budget outlook report [PDF] did what the agency is required to do by calculating the deficit using the unrealistic estimates mandated by law. CBO then went a giant step further by making it clear that these calculations may not tell the real story.
CBO didn't just say the budget baseline was misleading; it also provided substantial additional information that made it possible to see what the true federal budget outlook is far more likely to be. This significantly altered the upcoming budget debate. OMB Director Rob Portman used the official baseline to say the new CBO numbers were "good news."... [T]he CBO alternative baseline paints a very different picture than the official numbers. The official baseline requires that CBO make no political judgments: it has to assume that existing law will not be changed, even when it very likely will....
By contrast, the CBO alternative baseline takes political reality into account by assuming that expiring tax cuts will be extended, the AMT problem will be fixed, domestic appropriations will grow by 4 percent a year, and Iraq and Afghanistan spending will be at the midpoint between a slow and fast drawdown. The difference between the two calculations is substantial each of the next five years but most pronounced in FY12. There will be a $170 billion surplus in FY12 according to the required-by-law baseline. Under the more realistic calculation, however, there is more likely to be a $367 billion deficit....
The best example of how much the alternative baseline changes the budget outlook was provided by the Heritage Foundation, which produced an excellent analysis of the numbers the same day CBO released its report. Instead of lawmakers thinking they have $170 billion to play with in FY12, Heritage's Brian M. Riedle said that balancing the budget without tax increases will require that federal spending not increase by more than $294 billion from FY07 levels in the next five years. Riedle also noted, however, that under current law Social Security, Medicare and Medicaid alone are projected to increase by $367 billion during that period....
[T]he officially required baseline has been increasingly discredited as Congress and the White House have found ways to game it. For example, passing a popular tax cut with a set expiration date allows you to show both a limited cost because the cuts are assumed not to continue and higher revenues after the cuts are assumed to expire. The fact that the tax cut is highly likely to be extended is irrelevant; the law requires that the projections be based on what was actually enacted. It's also partially due to the tremendous erosion in OMB's credibility that has occurred in recent years. CBO's estimates simply look more credible because OMB's have become increasingly questionable...
It is interesting to remember that the same collapse of OMB's credibility happened during the Reagan and Bush I administrations. It's no accident that OMB loses credibility under budget directors like Rob Portman, Josh Bolten, and Mitch Daniels. No accident at all.
