Jonathan Chait

CBO Numbers Or Fight!

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The Committee for a Responsible Federal Budget is criticizing the Obama administration's budget for, among other things, using economic estimates from the Office of management and Budget that are more optimistic than those put forth by the Congressional Budget Office. Andrew Sullivan calls this "mendacity and delusion." What's interesting here is that this question, esoteric as it may sound, was the flashpoint of the Clinton-Gingrich budget showdown.

Republicans insisted that any budget agreement use CBO's more pessimistic projections, which Republicans called "real numbers." Indeed, hard as it may be to understand now, the GOP demand that both sides attain a balanced budget based on "real numbers" was a major impetus for the government shutdown.

Across the country, families were torn apart as some members sided with the CBO and others with the OMB. Okay, that part isn't true. But it was a massive source of conflict -- much as Tea Party Republicans now view the $100 billion threshold as a holy grail of budget-reduction, the CBO-OMB dispute took on a towering symbolic importance to the conservative base. Reporters and editorialists overwhelmingly endorsed the suspicion that the OMB's budget was too optimistic, making the task of deficit reduction appear too easy. For instance --

Eric Pianin, Washington Post, June 17, 1995:

When Clinton introduced a major deficit reduction plan in 1993, he intentionally used CBO baselines instead of the administration's projections to underscore the credibility of the proposals and to undercut charges he was using "smoke and mirrors." This time, however, the president is using the more upbeat administration estimates, which has left him open to attacks by Kasich and others that he is engaging in "rosy scenario" tactics. That is a reference to the budgetary sleight of hand used by Reagan administration budget director David A. Stockman during the early 1980s.

Post editorial, June 20, 1995:

On the budget, President Clinton tried last week to make himself look better than he deserved, and in the process succeeded in making himself look worse. He announced a plan to balance the budget over 10 years. Good. He failed to announce that the plan achieved its objective partly by adopting several assumptions whose effect was to cut the size of the problem in half. Not good. In pursuit of a few untrammeled headlines, he and some of the senior people who advise him on such matters converted an uphill fiscal problem into a credibility problem as well. Do they never learn?

Steven Pearlstein and Clay Chandler, Washington Post, November 15, 1995:

In 1981, the CBO took a leading role in challenging the "rosy scenario" that undergirded Ronald Reagan's first budget, in which he promised to cut taxes, increase defense spending and balance the federal budget all at the same time. The head of the CBO at that time was Alice M. Rivlin, who seems to be taking a rosier view herself now that she has become the Clinton White House's OMB director.

David Rosenbaum, New York Times, November 16, 1995:

Prudence might dictate giving more credence to the more conservative estimates of the Congressional Budget Office. This is not because its estimators are more honest or skillful but because over the years, unexpected developments in spending and revenues have worsened the deficit outlook more often than they have improved it.

For instance, neither of this year's estimates allows for a recession before 2002, an event that would make achieving a balanced budget far more difficult. The last recession ended in 1991. Since World War II, the country has never gone 11 straight years without a recession.

New York Times editorial, December 8, 1995

The Administration knew it would come under heavy criticism for substituting its budget projections for those of the Congressional Budget Office. Leon Panetta, the White House chief of staff, says the issue is moot because the White House will propose a procedure by which spending would be automatically cut if its budget estimates proved optimistic. But the purpose of proposing alternative budgets is candor. Voters deserve a side-by-side comparison of Republican and Administration budgets to see which they like better. By stopping the budget-cutting hundreds of billions short of the mark, the Administration has short-circuited this vital comparison process.

So, which prediction turned out to be correct? Well, the CBO's prediction of 2.3% annual growth through 2002 turned out to be too pessimistic. OMB's prediction of 2.5% growth turned out to be... too pessimistic. The actual result was 3.5% growth. The deficit disappeared with much less fiscal pain than anybody predicted would be needed.

 

 

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