CBO: The Political Budget Office

As the nation patiently waits for perhaps the final cost estimate of President Obama’s health care plan, taxpayers might be surprised to learn that today the most powerful office in Washington, D.C. is not the Speaker’s office or the Oval Office, but the Congressional Budget Office (CBO).

In the next few days, CBO will release perhaps its most determinative cost estimate for President Obama’s health care bill.  Remarkably, the estimate will be the sixteenth score since the original legislation, H.R. 3200, was introduced in the summer.  

At perhaps no time in history has a small bureaucratic agency wielded so much power, even though the science of pricing government legislation is far from perfect.  Since its July 14 estimate, when CBO projected the House version of health care reform would cost upwards of $1 trillion, Washington’s power players have used the agency as a convenient political ping pong ball.  

Democrats have been hit with projections that their legislation would increase the deficit by over $1 trillion, while Republicans recently had to explain Obamacare’s newest estimate of a $132 billion deficit decrease.

Earlier in the debate, Republicans and critics of the bill used the extraordinary costs and new spending schemes to rally a broad-based grassroots movement against Obamacare. Since then, Democrats have taken earlier estimates from CBO to heart and have learned to hide much of their spending from its calculations.

The rise and fall of Obama’s presidency could coincide with CBO’s small band of green eyeshade analysts and their preliminary projections.  As Congress and the rest of the nation await the final score, it appears that CBO, not the White House and Congress, runs the country. As Reason Magazine’s Peter Suderman recently wrote, the CBO is “not just the scorekeeper; it’s the gatekeeper.”

Of course, this is not the first stretch of fame for the scoring agency. In 2003, during the debate over another large expansion of health care, President Bush’s Prescription Drug Bill, the CBO placed four cost estimates on the legislation.  They ranged from the $393 billion estimate of the Republican bill to the Democratic substitute of $968 billion, and finally to the conference report score of $395 billion.  

The budgetary back and forth didn’t end with final Congressional passage of the legislation.  A few months later, the chief of Medicare placed a $534 billion cost on the drug bill.  Then the White House released a mea culpa and estimated that its bill could cost upwards of $1.2 trillion, more than four times CBO’s original estimate.

With all the authority attributed to cost estimates, one must ask whether health care estimates can come close to accuracy. Judging from the wide range of estimates for prescription drugs, the answer is generally no. Budget projections for health care vary greatly and, more often than not, vastly underestimate actual expenditures.

The Joint Economic Committee took note of the speculative nature of health care cost estimates. In a July 2009 paper, it determined that the original cost estimate for Medicare HI was off by 744%; the Medicare program as a whole came in 917% over original estimates and the Medicaid DHS program exceeded original scores by 1700%. Washington’s crystal ball tends to cloud when projecting future health care costs.   

To credit CBO, even critics admit that the agency is neutral and does the best forecasting possible given the inherent uncertainties in projecting long-term government spending.  But consider that it’s not the agency’s neutrality that matters, but how politicians use CBO to advance their own policy agenda.

For example, after CBO priced early estimates of health care reform above the magic number of $1 trillion, Democrats got scared, and then got crafty.  Using an accounting sleight-of-hand that even Bernie Madoff would envy, Democrats have now pushed most of the actual cost of their “reform” agenda outside of the ten-year budget window.  

Since estimates about the consumption of health services are mostly educated guesses, CBO generally limits all cost estimates to a ten-year period.  Democrats on Capitol Hill know this, and a majority of the federal subsidies included in their current health care bill won’t begin until 2014.  Even Max Baucus, the early architect of the Senate legislation, admitted that the actual ten-year cost is well over $1 trillion.

Additionally, in the Senate, the original CBO score of Harry Reid’s legislation was a mere $848 billion, but that projection assumed massive cuts to physician reimbursement that Congress will never allow. Even if CBO “wins” and the bill does only cost $848 billion over the next ten years, patients and taxpayers will still lose. Because CBO is generally forbidden to make policy recommendations, all Congress takes from the CBO is one number, which politicians can easily manipulate.

Since health care entitlements never seem to go away, the affect on taxpayers has been either more debt or higher taxes.  Expect both if the Obama-Pelosi-Reid health care reform plan is ultimately passed.