NCPA - National Center for Policy Analysis

Congressional Budget Office Has Many Detractors

February 4, 1998

The Congressional Budget Office (CBO), one of the most powerful economic policymaking organizations in Washington, was set up in 1974 to give Congress its own budget numbers and economic projections, independent of the President's Office of Management and Budget (OMB). Today, CBO has some 200 professional economists and a budget of $25 million.

For many years, Republicans have believed the CBO tilts its analyses against them. Among their complaints:

  • The CBO employs Keynesian methods which are favorable to higher spending and unfavorable to tax cuts.
  • In 1988, the CBO estimated that raising the minimum wage would destroy 500,000 jobs, but withdrew the estimate when Democrats complained.
  • According to Congress' Joint Economic Committee, the CBO grossly overestimated capital gains realizations in 1989 and 1990, which made the revenue loss from a proposed capital gains tax cut seem much larger than it actually was and helped torpedo the proposal.
  • For many years the CBO produced data, which Republicans complained was based on unsound research, showing the distribution of income becoming much more unequal.

Republicans chose June O'Neill, a respected labor economist, to be the new CBO director when they took control of Congress in 1994. O'Neill is conservative and free market-oriented, but when the CBO produced new analyses critical of proposals for medical savings accounts and missile defense systems, many Republicans felt betrayed. Others believe CBO has undermined efforts to implement "dynamic scoring" for tax cuts, which would take account of the macroeconomic effects and reduce their budgetary cost.

Reportedly, an effort is under way to fire O'Neill a year before her term expires. A major catalyst for this effort was the CBO's poor performance in estimating federal revenues for fiscal year 1998, which have been revised by $100 billion since March 1997.

Source: Bruce Bartlett (senior fellow, National Center for Policy Analysis), February 4, 1998.


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