It was 20 years ago this month that the Republican Revolution roiled Washington by securing the first unified GOP control of Congress in four decades. That control lasted just over six years and brought both successes (welfare reform, capital-gains-tax cuts) and failures (no major entitlement or tax reform). When a decade ago I interviewed key Republicans in Congress about why the GOP didn’t achieve more during that period, they were in nearly universal agreement: People are policy, and reforming institutions matters. “We didn’t do enough to change the culture of Capitol Hill, from dropping the ball on implementing dynamic scoring of tax bills to not always putting in place the right personnel,” John Kasich, the former Budget Committee chairman who is now governor of Ohio, told me.
The GOP is now in danger of repeating those mistakes as it prepares to once again take control of both houses of Congress this January. Right now, there is a fierce behind-the-scenes battle over who will head the Congressional Budget Office, an influential agency of 200 analysts that provides estimates on the cost and societal impact of legislation.
CBO’s analysis can make or break bills in Congress, and its estimates on economic growth and the budget serve as the benchmark for much of what the Federal government does. Republicans say they will promote a wholesale overhaul of both the tax code and entitlements, planning for the day in 2017 when a GOP president may sign them into law. But will they be able to overhaul anything if they don’t have in place the right people who understand their vision?
Since January 2009, the CBO has been headed by Doug Elmendorf, who served on President Clinton’s Council of Economic Advisers and in Clinton’s Treasury Department. He was appointed by Democrats at a time when they controlled both houses of Congress and is generally well respected by his fellow academic economists.
Many economists — including some conservatives such as Gregory Mankiw of Harvard — have endorsed Elmendorf for another term as CBO director. “Sometimes the benefits of continuity transcend ideology and political affiliation,” Mankiw wrote on his blog this month. That is certainly true, but there is real doubt that the CBO has been the “scrupulously non-partisan” entity that Mankiw says it was under Elmendorf. “The beneficial impact of tax cuts on the federal treasury are almost always underestimated, while proposed increases in spending and the establishment of new programs . . . are always underestimated,” journalist Peter Roff recently wrote of the CBO in U.S. News & World Report.
Take Obamacare. We now know — thanks to the serial confessions of Obamacare architect Jonathan Gruber — that the administration was able to torture the data enough to convince the CBO to adopt its dubious scoring models on health-care cost controls. These models led the CBO to forecast that Obamacare would improve health-insurance markets and reduce the deficit. This past June, the CBO belatedly announced it could no longer estimate the budget impact of Obamacare; critics claimed it had just become just too embarrassing for CBO to claim that Obamacare would save money. Clearly, the Affordable Care Act as currently constituted will become a fiscal disaster.
The CBO has been very reluctant to incorporate dynamic scoring — which projects that large fiscal or tax changes can affect economic growth — when it comes to tax-cut bills. It has argued that dynamic scoring wouldn’t have much of an impact and that it’s not feasible for its staff to complete the work.
But it has made exceptions for other bills. The CBO chose to use dynamic scoring for the 2013 comprehensive immigration bill passed by the Senate but blocked by the House. It found that the bill would increase economic growth by 3.3 percent in 2023 while decreasing average wages by 0.1 percent. That analysis was hailed by the White House. But it had obvious limitations and flaws. It claimed that the bill’s granting of taxpayer-funded legal services to every immigrant in immigration court wouldn’t cost anything. Outside analysts estimated that costs in the first few years of implementation could top $20 billion.
Stephen Moore, the chief economist at the Heritage Foundation, says it is a myth that a new CBO director appointed by the GOP couldn’t do as good a job as Elmendorf — or a better job — at ensuring the fairness and accuracy of the office’s scoring. He lists several economists who have the respect of their peers as well as an open-minded view on issues such as dynamic scoring. They include David Malpass, a former Reagan Treasury official; William Beach, the chief economist for the Senate Budget Committee; Stephen Entin of the Tax Foundation; and J. D. Foster, a former top staffer at the House Ways and Means Committee. “Liberals have always made certain they had an ally in that office when they controlled Congress, but when Republicans are in charge, [liberals] insist that their person stay in control,” Moore says.
Doug Elmendorf has been a competent CBO director who has done much good work, but he has also been in office a full six years. It’s time for fresh blood and a new approach, especially since voters have just given Republicans a mandate to oppose Obama-administration excesses in health care and regulation — issues that played a key role in many Senate races this fall. If Republicans stiff the voters and stick to CBO’s business-as-usual approach, they’ll be throwing away their mandate and repeating the same mistakes that so many say they made back in 1994 — the last time they had a political position this strong in Congress.
— John Fund is national-affairs correspondent for NRO.