CBO's WRONG NUMBERS
May 26, 1997
On May 1, the Congressional Budget Office (CBO) suddenly decided that its January estimate of federal budget deficits between now and 2002 were high by a total of $225 billion. This extra money clearly was the grease that made the budget deal between Bill Clinton and congressional Republicans possible. But however welcome this news may have been, it is further evidence of CBO's failure to give Congress accurate information. Indeed, much of the Republican Congress's political woes over the last three years can be laid directly at the feet of CBO's forecasting errors.
The Republicans' problems with CBO began the first day they took control of Congress. Because the House and Senate could not agree on a new director for the CBO, Democrat Robert Reischauer stayed on the post until March, well into the budget cycle. It was he who supervised CBO's economic and budget forecast upon which Congress based its initial budget plans. This forecast projected budget deficits significantly larger than those predicted by Clinton's Office of Management and Budget (OMB).
As it turned out, OMB was closer to the mark all along than CBO. But because Republicans had committed themselves to using CBO numbers, they were forced to cut more spending than necessary in 1995 to meet their goal of budget balance by 2002. Had they had an accurate CBO budget forecast, they might have avoided a confrontation with President Clinton in October and November that shut down the government, and saved themselves enormous grief. By the time CBO got around to fixing its forecast in December, it was too late.
Since then, CBO has continued its pessimistic ways, under its Republican Director June O'Neill. As recently as January 1997 it was projecting a deficit for fiscal year 1997, which began last October, of $124 billion. Yet just 3 months later CBO concluded that the deficit may be as low as $70 billion. Had Republicans had a more accurate estimate of the deficit for this year it might have had a significant impact on their strategy, resulting in a budget deal with considerably less spending and more tax cuts.
To be sure, forecasting the economy, government spending and revenues is difficult. But CBO's recent record is clearly very poor. Unfortunately, Republicans invested an enormous amount of political capital in standing by CBO's numbers. Had they not done so, they might well have saved themselves the anguish of their 1995 budget debacle. They might also have crafted a better deal with Clinton this year. The result of CBO's failures is that federal spending and taxes will be higher than necessary for years to come.
Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, May 26, 1997.
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