Questions sparked on CBO reform

Demands to reform the Congressional Budget Office’s (CBO) rules have roared into life amid bitter accusations of disingenuousness following Friday’s collapse of a key component of President Obama’s healthcare law.

The implosion of the long-term care benefit known as the CLASS Act, which administration officials acknowledged could not be made to pay for itself, as its critics had always maintained, is giving new life to lawmaker proposals to change the way CBO scores legislation. 

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“Congress knows the scoring rules and then manipulates them to achieve the appearance of savings that don’t really exist,” said Stephen Miller, a spokesman for Sen. Jeff Sessions (R-Ala.), the ranking member of the Senate Budget Committee. 

Sessions, who has introduced legislation to end a host of budget gimmicks, sees the CLASS Act’s scoring as “one of the most spectacular examples” of budgetary manipulation in history, according to Miller.

CBO scored the CLASS Act as cutting the deficit by $86 billion over 10 years, rather than ballooning it, because even though CBO looked at later years, it's headline 10-year budget score does not encompass the later data. The optimistic CBO score was crucial to getting Obama’s healthcare reform passed.

The same issue — scoring based on unrealistic assumptions — is evident when legislation scored by CBO includes revenues from the Alternative Minimum Tax (AMT). Those revenues are routinely wiped out by a “patch” that prevents the tax from hitting middle-class households, but rosier estimates of the budget are provided by CBO because it must assume that the AMT will be imposed. 

Likewise, the “doc fix” annually prevents physicians’ Medicare payments being cut, but the CBO, basing its scoring on written law, must assume that payments will be lower. 

Both the AMT and “doc fix” have won criticism for years, but the collapse of the CLASS Act, coming amid efforts to get the deficit supercommittee to revamp the budget process, has prompted critics to say enough is enough. 

Critics place the blame squarely on Congress, and there is some question about how much new rules could corral lawmakers determined to win a favorable score. 

“The real problem in this case is not so much CBO’s rules as it is Congress’s willingness to game them,” said Brandon Greife of the conservative National Taxpayers Union. “If we really want the CBO to reflect fiscal realities, the focus shouldn’t just be on changing the rules, which can always be gamed, but on encouraging our elected officials to be honest with taxpayers.”

Both Democrats and Republicans have gamed the system to their advantage over the last decade, according to budget watchers across the ideological spectrum. 

Many of the tricks involve deferring payments until later years to claim a small spending level in the first year enacted. Others involve claiming “savings” by counting budget authority reductions instead of actual outlays, or counting cuts to mandatory spending in later years as a reduction in appropriations for a given fiscal year.

The biggest tricks, including the AMT and “doc fix,” involve the baseline CBO uses to determine its score.

When making a score, CBO relies on current law rather than what is actually likely to happen. This means, for example, that CBO assumes the Bush tax rates are temporary since they are scheduled to expire, even though Congress is likely to extend most if not all of them. As a result, CBO’s deficit score is rosier than it should be.

Changing CBO’s rules to emphasize a current policy prediction rather than current law could present a more realistic picture of the budget. 

In the case of the CLASS Act, critics say the CBO could have emphasized the fact it was unlikely to be implemented, rather than taking it on face value that the administration would find a way for the program to pay for itself.

James Capretta of the Heritage Foundation pointed out that the healthcare law contained a provision saying if the CLASS Act could not be found to be sustainable over a 75-year window, then it could not go into effect. The Obama administration triggered that provision when it said last week it was suspending the program indefinitely. 

“That provision should have been enough to score it as having zero effect on the budget from the start,” said Capretta. He argues rules should be put in place whereby programs that are obviously not going to go into effect should be discounted by CBO.

Opponents of such changes say this would give too much discretion and power to the CBO.

House Budget Committee Chairman Paul Ryan (R-Wis.) is working on a package of reforms this fall, including possible changes to the way CBO operates, that could make its way into the report of the deficit supercommittee. 

A spokesman for Ryan said the basis for his new proposals would be 2009 legislation backed by Ryan and supercommittee co-chairman Rep. Jeb Hensarling (R-Texas). 

Their bill required CBO and the Office of Management and Budget (OMB) to make 75-year projections and compare them to “sustainability benchmarks” for Social Security, Medicare and Medicaid. They also would have required Congress to review the long-term budgets every five years and put spending on a “sustainable” path.

Steve Bell, a former Senate Budget Committee staff director, said that CBO should be required to produce a 30-year budget score alongside its traditional 10-year score. CBO does so on occasion now, but is not required to make such projections.

But Greife, echoing a former CBO official, said that longer-term projections are unreliable and should not be given more weight.

Correction: This story has been corrected to reflect the fact CBO did look at the fiscal status of the Class Act outside the 10-year budget window.