The Congressional Budget Office (CBO) is the nonpartisan analytical agency that assists Congress in its role in preparing the federal government's budget. It also assists Congress by evaluating the economic and budgetary effects of policies. CBO was created as part of the Congressional Budget and Impoundment Control Act of 1974. This law resulted from what Allen Schick ( 1980
The authors of the 1974 Budget Act believed that for Congress to have a strong independent voice in fiscal policy, it was necessary for it to have its own source of numbers and analysis. The alternative would have been to have Congress rely on the Office of Management and Budget (OMB) for economic and budgetary figures. This was considered unworkable because OMB, which is part of the Executive Office of the President, works for the executive branch. CBO, therefore, was to serve as Congress's agency.
Although several models for a legislative budget office were considered (including having the analytical function reported directly to the Budget Committees), the law ultimately created an agency that operated outside of the congressional committee structure. The most significant provisions of the law, which continue to define CBO's responsibilities, are as follows ( adapted from Joyce 2011, 18–19 ):
CBO is headed by a director and a deputy director, who acts as director in the event the director position is vacant or if the director is absent or incapable of performing his or her duties. The term of the first director was to expire on January 3, 1979. Subsequent terms have expired at four-year intervals.
The director is appointed by the Speaker of the House and the president pro tempore of the Senate upon recommendations from the Budget Committees “without regard to political affiliation and solely on the basis of his fitness to perform his duties.” The director can be removed by either House by resolution. (The president pro tempore is traditionally the most senior senator in the majority party.)
The director is empowered to appoint all other CBO personnel, who should likewise be appointed without regard to political affiliation. The director has wide latitude in terms of organizing CBO and establishing the duties and responsibilities of CBO staff.
The law specified a hierarchy for CBO assistance to Congress. Its first responsibilities are to the money committees in Congress—the budget committees, the appropriations committees, the House Ways and Means Committee, and the Senate Finance Committee. Other committees are assisted as resources permit. CBO does not, in general, do work for individual members of Congress.
CBO prepares an annual report called the Budget and Economic Outlook. This report, typically published in early February, includes CBO's baseline budget estimates. These estimates are revised two more times, usually around April and September each year. CBO is empowered to conduct other studies as it sees fit, although in practice its studies are usually requested by congressional committees.
A separate section of the Budget Act instructs CBO to prepare cost estimates of proposed legislation. These estimates provide Congress with information on the (initially five-year, but now ten-year) cost of legislation reported by a Congressional committee, relative to the CBO baseline. The law specifies that the cost estimate should be included in the committee report accompanying such reported legislation.
CBO's first director was Alice Rivlin ( 1931– ), who had headed up budget and economic studies at the Brookings Institution. Rivlin was appointed in February 1975, and immediately turned her attention to staffing the agency and preparing it to begin operations. This included deciding to vest cost estimating and baseline budget responsibilities in a Budget Analysis Division, which remains the largest division in CBO. CBO has other divisions that are responsible for doing macroeconomic analysis, tax analysis, and policy analysis covering various areas of the federal budget, such as national security and health. Rivlin was also concerned that it would be difficult for the agency to remain partisan if it took sides on controversial policy issues. For this reason, she made the crucial decision that CBO would not make policy recommendations.
After Alice Rivlin (a moderate Democrat) stepped down in 1983, Rudy Penner (an equally moderate Republican), became director. As of 2014, CBO has had six subsequent directors and three periods when the agency was headed by acting directors. The listing of those CBO directors is as follows:
Although CBO has been influential throughout its history, three important aspects are worth noting:
CBO has made Congress more equal to the executive branch.
The agency has changed the nature of congressional policymaking through its cost estimates of proposed legislation.
Federal budgeting has generally become more transparent, and information on the budget is more widely available, because of the activities of CBO.
The independence of CBO was demonstrated when the agency did a separate economic forecast underlying its first baseline projections in 1975. Early in its history, CBO analyses discouraged proposals of both Democratic President Jimmy Carter (over his energy policy) and Republican President Ronald Reagan (over his optimistic supply-side economic estimates). More specifically, CBO annually re-estimates the president's budget using CBO assumptions, an exercise that frequently presents a more pessimistic view of economic growth and budget projections. These differences can have real consequences. In 1995 the new Republican Congress actually shut down the federal government because the Clinton administration refused to use the more pessimistic CBO assumptions in putting a plan together to balance the budget ( more detail on these and other controversies can be found in Joyce 2011, 53–92 ).
Controversies concerning CBO reactions to presidential policy initiatives continued into the twenty-first century. In 2014 two separate analytical disputes occurred between CBO and the Obama administration—over the employment effects of the Patient Protection and Affordable Care Act (popularly known as “Obamacare” ) and the impact on jobs of a proposed increase in the minimum wage—that clearly illustrated the potential power of CBO ( Paletta 2014 ). In both cases the White House challenged the CBO analysis, but without CBO as a credible alternative voice, Congress would have had no real analytical alternative.
Beyond just allowing Congress to have its own independent voice to challenge executive branch proposals, CBO has eclipsed OMB as the source of “honest numbers” on the federal budget ( Williams 1998 ). CBO has gotten high praise for the credibility of its figures, and increasingly the news media and the general public have come to rely on CBO as the oracle on matters related to the economy and the budget.
In addition to overall budget estimating, the creation of CBO put Congress in the position, for the first time, of having an independent source of information on the cost of individual pieces of legislation. This represented a crucial difference from prior practice, which often involved favorable cost estimates being developed by committees or groups that proposed changes in policy. CBO cost estimates have been particularly important during times when budget enforcement procedures have been in place, because they often dictate whether a particular piece of legislation will trigger those procedures. Perhaps the biggest influence of CBO cost estimating lies in the frequent informal communication between CBO and congressional committees, which results in many pieces of legislation being changed to receive a more favorable “score.” Certainly the highest profile example of this occurred during the debate on the Affordable Care Act, when President Obama's pledge to only sign a deficit-neutral bill that limited the ten-year increase in spending to no more than $1 trillion resulted in substantial changes being made to obtain a more favorable cost estimate.
Regardless of these positive effects, however, it must be acknowledged that CBO appears to be a functional institution in the midst of what has become a highly dysfunctional budget process. Congress has been unable to cope with the long-term fiscal problems facing the country, and the budget and appropriations processes do not operate well. ( As an example, in only three of the thirty-eight years until 2014 did all appropriation bills become law prior to the beginning of the fiscal year ). Thus, the story of CBO is in part a story about the limits of analysis and information when faced with larger political and institutional problems.
SEE ALSO Federal Budget Process .
Joyce, Philip. The Congressional Budget Office: Honest Numbers, Power, and Policymaking. Washington, DC: Georgetown University Press, 2011.
Paletta, Damian. “CBO Chief Poses Test for White House.” Wall Street Journal online. February 19, 2014. http://online.wsj.com/news/articles/SB10001424052702303636404579393433486576314 .
Schick, Allen. Congress and Money. Washington, DC: Urban Institute, 1980.
Williams, Walter. Honest Numbers and Democracy: Social Policy Analysis in the White House, Congress, and in Federal Agencies. Washington, DC: Georgetown University Press, 1998.
School of Public Policy University of Maryland