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.
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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.
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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 Expenditures
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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
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Last CBO score of the final version of H.R. 1628 prior to being considered by the U.S. Senate.
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Note-
this joint committee was dissolved with the ’74 Budget Act an
d 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.
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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 Model
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or the Tax Foundation
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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
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“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
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http://budgetmodel.wharton.upenn.edu/
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https://taxfoundation.org/