What is this CBO?

Posted: Feb 20, 2014 11:25 AM

Over the past three weeks the Congressional Budget Office (better known as the CBO) has made a great deal of news.

First, opponents of Obamacare (of whom I am one) pointed to a report at the beginning of February in which the CBO seemed to claim that the law would cause the loss of some 2.3 million jobs over the next three years.

It appears that what the CBO really said was even worse: The jobs will be there but more than two million people will find it financially more beneficial to sit at home and watch NCIS reruns leaving home only to get their prescriptions for medical marijuana filled.

As I wrote at the time, any government program that puts a penalty on work is a bad program.

Then, earlier this week, the CBO released a study that claimed raising the minimum wage to $10.10 per hour (from its current floor of $7.25) would cost 500,000 jobs. But, the report went on to say, it would also have the effect of lifting 900,000 workers above the poverty line and would improve the lot of some 16.5 million workers overall.

GOP press shops were so busy pumping out reaction to that first figure (as someone who has been there, I can tell you was as far as many of them had read) that they had the effect of launching a denial of service attack at DC-based news organizations.

So, just who - or what - is this Congressional Budget Office, anyway?

According to the CBO's website, from the 1920s onward the Executive Branch assumed greater and greater responsibility for setting budget priorities. In contrast, the CBO site says:

Congress lacked the institutional capacity to establish and enforce budgetary priorities, coordinate actions on spending and revenue legislation, or develop budgetary and economic information independently of the executive branch.

Richard Nixon was President of the United States in 1974. In an argument that will sound all-too-familiar these 40 years on, Nixon threatened to withhold spending on programs that were in opposition to his policies.

The Congress (firmly in the hands of Democrats back then - Newt wouldn't lead the GOP out of the wilderness for another 20 years) responded by passing the Congressional Budget and Impoundment Control Act of 1974.

As part of that act, Congress established a non-partisan and more importantly a non-Executive Branch organization, that it named the Congressional Budget Office.

The bill also created the House Budget Committee and the Senate Budget Committee.

The CBO's main job is to support the two Budget Committees as well as "the Appropriations, Ways and Means, and Finance Committees-and the Congressional leadership."

A good deal of the products the CBO develops are "forward looking." If the Congress does X it is likely to have Y (and perhaps Z) results.

This is in contrast to many Executive Branch institutions, like the Bureau of Labor Statistics, that report on the effects of programs and policies already in place.

The BLS is the organization located within the Department of Labor that analyzes employment data and reports the unemployment report that is breathlessly awaited on the first Friday of each month.

It is a matter of Washington lore that if these agencies' reports reflect your political view, they were prepared by the modern equivalent of economic saints in white robes, and are truthful, accurate and prove your point.

If, on the other hand, they do not reflect your political view then they were prepared by a bunch of drunks and interns (I recognize that is a redundancy) who are operating at the behest of your political opponents and their output is not worth the thumb drive it was copied to.

A most egregious example of this was the aforementioned Richard Nixon, who according to Woodward and Bernstein in "The Final Days" via the Washington Post:

"became obsessed with the idea that a 'Jewish cabal' at BLS was undermining him by issuing negative labor numbers. Nixon ordered his subordinates to tally up the number of Democrats and Jews in the agency."

As to the latest CBO estimate of jobs and the minimum wage, the White House trotted out the Chairman of the White House Council of Economic Advisors whose best response was: "Zero is a perfectly reasonable estimate of the impact of the minimum wage on employment."

I had an Econ professor who used to say that if you laid all the economists in the world end-to-end they still wouldn't reach a conclusion.

Still true.