You are on page 1of 4

February 21, 2019

The Honorable Mike Enzi


Chairman
Committee on the Budget
United States Senate
Washington, D.C. 20510

Dear Mr. Chairman:

There is a crying need for reform and modernization of the


Congressional Budget Office (CBO). We are writing you with specific
reform suggestions, as well as to urge you to select a completely
different type of Director than has been selected in the past, one who
has a track record of successfully reforming institutions and who will
impose significant and greatly needed reforms on CBO.

Regardless of whether you are a supporter of liberal or conservative


policies, having inaccurate data helps no one. If CBO ignores what is
actually occurring in the real world, while insisting that their inaccurate
projections cannot be changed, then relying on CBO undermines
Congress's ability to accomplish its policy objectives.

For example, the CBO’s exchange enrollment projections have been


proven highly inaccurate. They consistently and repeatedly overestimate
the number of insured by millions. What is most troubling about this is
that while actual events were proving them wrong, CBO stubbornly clung
to the very models and assumptions that were producing these
overestimates.

Graph by Doug Badger, Galen Institute


In a feat never accomplished in the history of scoring, during 2017
health reform debates the CBO scored a provision that spent an additional
fifty billion dollars to cover the uninsured as having zero impact on
coverage.1

Of course, CBO inaccuracy is not limited to health projections. As


you are likely aware, the St. Louis Federal Reserve Bank did a study of
CBO’s accuracy in projecting debt and deficits.2 What they found should
be alarming to us all. Even at these top levels, CBO estimates experienced
approximately a 2% variance each year, and proved no more accurate than
a random-walk model.

Yet despite this failed track record, it seems that CBO itself has
made little to no effort to address and correct its problems. In fact, much
of the scorekeeping rules and procedures CBO still relies on were
developed in the late 1960s (prior to CBO’s creation) by Representative
George H. Mahon, who was both chairman of the Joint Committee on
Reduction of Non-Essential Federal Expenditures3 and the House
Appropriations Committee. While these rules may have been
revolutionary in the ‘60s, they are desperately in need of updating.
Therefore, we urge you to consider the following reforms as you select the
next CBO Director:

A Commitment to and a History of Accurate Financial


Projections: A CBO Director who has a career of professional
projections that have been accurate and is committed to providing the
most accurate projections and a willingness to change them when clearly
wrong.

Retroactive Scoring: How about a score based on actual data?


CBO should institute a policy of using actual data to compare against their
projections and modify their projections regularly to accurately reflect
reality. Moreover, the new CBO director should be willing to annually go
before the House and Senate Budget Committees to publicly review and
discuss scoring accuracy.

Alternate Scores: Develop an independent group of scorers to


take a wholly different approach to scoring the most significant legislation,
and use an alternative score on the Senate floor to set a precedent. This

1 Last CBO score of the final version of H.R. 1628 prior to being considered by the
U.S. Senate.
2 https://files.stlouisfed.org/files/htdocs/publications/review/12/01/21-

40Kliesen.pdf
3 Note- this joint committee was dissolved with the ’74 Budget Act and its staff

transferred to the newly created CBO.


“Team B” approach worked particularly well during the Cold War with
Russia and corrected some significant errors.4

Bring in Artificial Intelligence: At the very least there needs


to be a hearing on how artificial intelligence could replace or supplement
the current CBO scoring process and there should be an effort to create a
test bed for new methodologies like using A.I. to produce more accurate
scores.

Make the ‘Black Box’ Transparent: CBO should be


transparent about its models and assumptions. CBO estimates are black
boxes. The public, even members of Congress, do not know very much
about the assumptions that lead to CBO’s conclusions. The CBO model
should be public domain, and CBO should publish the source code and
data files used, as Executive Branch agencies often do when they produce
estimates. This would enable academics, think tanks, and the general
public to discover errors, dispute assumptions, and run estimates based on
alternative assumptions.

Use Scores Other than from CBO: The monopoly on scoring


from the CBO must end. Before CBO was established in 1974, Congress
did not outsource its responsibility to predict the likely effects of legislative
proposals, nor did it grant to any body of unelected experts a “monopoly
on the truth.” Instead, it took into account thoughtful estimates and
predictions from a variety of sources, including professional committee
staff, executive-branch agencies, and private-sector experts, reserving final
judgment to itself, based on the weight of available evidence.

As Chairman, you have standing authority to disregard CBO scores,


on a case-by-case basis, in favor of other, more accurate projections, such
as those by the sophisticated Penn Wharton Budget Model5 or the Tax
Foundation6 or others. The Budget Chairman’s power to set aside CBO
projections, in individual cases, helps to ensure greater accountability and
accuracy in the policy-making process. We urge you to make thoughtful
use of this power in the public interest.

Do Not Pick an Academic to be CBO Director: Today,


virtually every industry utilizes some level of quantitative analysis and
projection. Such analysis drives decision making, which means inaccurate
projections can cause not only lost revenue, but failed businesses. With
the stakes that high, those running analysis divisions know they must be

4“Team B” assessments corrected serious errors of U.S. understanding of Soviet


biological and nuclear weapons capabilities. For more on “Team B” during the Cold
War, see: https://en.wikipedia.org/wiki/Team_B
5 http://budgetmodel.wharton.upenn.edu/
6 https://taxfoundation.org/
accurate and when they are not, they know changes in models and
assumptions must be made. Thus, Congress would be better served by a
CBO director who comes from a background where corrections to models
are made to reflect actual events, and who has a track record of producing
accurate analyses.

Create a Timely Scoring Process: CBO scores have been a


regular and repeated impediment to timely consideration of legislation.
Time limits for scores, as well as accuracy for scores, need to be imposed
on CBO, by reforms and modernization — not by adding staff and budget
to an antiquated institution.

We, the undersigned, urge you, Mr. Chairman, to consider these


criteria for selecting the next CBO Director because a business-as-usual
approach to filling this crucial position will result in business-as-usual at
the CBO — and we must do better.

Sincerely,

Phil Kerpen Baker Spring


American Commitment Compact for America Educational
Foundation
Dan Perrin
HSA Coalition David Wallace
FAIR Energy Foundation
Grover Norquist
Americans for Tax Reform Adam Brandon
Freedom Works
Dick Patten
American Business Defense Council George C. Landrith
Frontiers of Freedom
Dean Riesen
Arizona Free Enterprise Club Mario H. Lopez
Hispanic Leadership Fund
Norm Singleton
Campaign for Liberty Beverly Gossage
HSA Benefits Consulting
Bob Carlstrom
The Carlstrom Group Dean Clancy
HSAs for All
Ryan Ellis
Center for a Free Economy David Keene
Washington Times
Jim Backlin
Christian Coalition Jim Martin
60 Plus