by Gene Steuerle

Economic Perspective columnist Gene Steuerle praises the Congressional Budget Office for its work in consistently releasing balanced, nonpartisan reports.

Date: Feb. 21, 1-94

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On February 8, the Congressional Budget Office released its analysis of the administration's health proposal. Since then, newspaper articles and talk show pundits have been fairly kind, even praiseworthy, in their remarks on the agency and on the report. But why the CBO? Why now? And what are the real lessons for the organization of government and the development of government policy?

The immediate reason for the recognition given to the CBO is that it put out a balanced report. Not only did it use solid research, but its conclusions offered some solace to every side of the health debate. The Republicans can't really attack the report because it indicates that accounting for health should be done in the budget and implies that the administration's bill would cost more than it projected. The administration can't go too far in attacking the CBO since the president previously has praised the agency. The report, moreover, isn't all that critical.

The more complex, but crucial, reason for the current recognition is that years of effort went into the development of a nonpartisan, highly skilled agency capable of examining and reporting on important issues facing the nation. The report itself is only one small manifestation of what the agency does. At first, this explanation may appear trite and obvious. But, if it is so obvious, why hasn't the lesson been applied elsewhere? In particular, to what policy offices of the executive branch has similar recognition been given lately? The sad answer is, "Almost none."

Almost two decades of effort have gone into building up the CBO. Its success is due to many individuals, including its three directors, Alice Rivlin, Rudolph Penner, and Robert Reischauer, and acting directors Edward Gramlich and James Blum. The agency also was able to build capability through the active support and backing of many members of the Senate and House Budget Committees, both Democrat and Republican, over the years. Although the staff of the CBO lacks certain civil service rights, it has never been politicized. Only the director and sometimes the deputy director really serve in what might be considered equivalent to "political" positions, and, even then, expertise has been a primary requirement for the appointment. From its beginning under Alice Rivlin, the agency has used nonpartisan reports and estimates as its primary outputs. The going has not always been smooth: attacks were made when the CBO issued reports that members of Congress or of the executive branch didn't like.

Building up an organization is a multiyear effort. It often takes several years simply to develop a data file, say, from tax or Census data and then apply a variety of calculations to that file to try to imitate current tax or expenditure law. Recruiting and teaching new staff is vital, but the payoff may be years down the road. These efforts must be made continuously; like any organization, maintaining morale and common purpose is crucial.

In the executive branch, by contrast, not one agency today is as well known for putting out important, nonpartisan reports. The agency that is closest in organizational design to the CBO is the Office of Tax Analysis (OTA) in Treasury. It, too, is organized to cover a wide range of issues, is involved in almost all major budget, tax, and expenditure reforms (there's always a tax side), and has developed significant capability to make budget estimates and run computer models and simulations of the law. The OTA does put out reports, often in conjunction with the legal side of the Office of Tax Policy -- the 1984 report on tax reform being a prime example. The OTA, however, is much smaller than the CBO. Its reports often are pared or delayed for political reasons. The 1984 report on tax reform was virtually snuck out the door by the then-treasury secretary because he feared that the White House bureaucracy would mangle it.

The Office of Management and Budget is another example of a highly respected executive branch agency with broad responsibilities, but whose role has been weakened over the years. The OMB and its predecessors were created partly to take charge of the multiple budget efforts of many executive branch agencies, as well as to subject programs to review and management audit. The OMB, however, has never developed much model-building capability and issues almost no reports outside of the president's budget each year. Many of its analyses of programs and needed reforms are left in the file cabinet rather than released to the public.

The Council of Economic Advisers, too, has significant budgetary responsibilities and a quite talented but small staff. It, however, has almost no direct executive or legislative responsibilities. Its advisory role is largely dependent on the relationship of its chair and members with the president. It only issues one major report each year -- the Economic Report of the President. Although this report contains several useful pieces of economic analysis, it serves in large part to justify and support the economic policies of the president.

In all three of these cases, one of the great contrasts with the CBO is that issues become politicized just beyond the agency level, and the agencies then are not as free to disseminate their analysis and information to the public. While "firefighting" is unavoidable, it often becomes the primary occupation of the staffs of these agencies. Rather than develop long-term capabilities and prepare detailed analyses, the staffs instead spend a greater portion of time responding to short-term requests from the White House, Congress, and high-level officials in other executive branch agencies. This firefighting often involves ex post justifications of positions already taken by the administration.

Although within the executive branch the OTA, OMB, and CEA are the three analysis groups with the greatest likelihood of being involved in major economic, budget, expenditure, and tax issues, there are many other capable policy groups within the departments or agencies. In almost all cases, they are several steps removed from being outstanding policy shops. In many cases, the failure has been one of organizational neglect over the years; to turn the situation around will require years of effort.

A major difficulty, moreover, is that the long-term organization and development of policy capabilities has not been a goal of the executive branch for years. The original organizational efforts behind OMB and CEA were extraordinarily important in developing them into influential organizations. No similar efforts are on the table currently nor have they been for years. Even the vice president's attempt to reorganize government is directed mainly at paring back duplication and excess, rather than developing of new potential.

The executive branch also has been increasingly politicized over the past couple of decades, in large part by the expansion in number of political appointees. This has left systems of communication quite vulnerable, as important information often can't work its way through all the political appointees in the system. Many political appointees, moreover, are only there for the short term. They often take little interest and invest little effort in building up personnel and modeling capabilities for years down the road: the beneficiaries, after all, will likely be members of the next administration.

The real effects of this neglect can be seen in the administration's health reform proposal. Part of the proposal's weakness was due to the lack of better data and models -- information that should have been developed much more thoroughly by previous administrations. Part was due to the lack of any obvious place in which to center the effort. It's final resting place in the White House may have been the necessary residual choice, but the White House has never really been very good at the initial levels of detailed policy design and analysis. Part was due to the failure of the executive branch over the years to issue detailed policy studies before a final policy proposal had to be put forward. The tradition of "white papers" that fall short of presidential endorsement has never been well developed within the United States. Finally, part of the problem must be placed at the feet of this administration and its own failure to understand how to organize policy development and develop long-term analytic capability.

I do not mean to overstate the case for the CBO, which has a number of limitations, or understate the case for the executive branch, which has many outstanding individuals working within it. The recent CBO report, however, offers an opportunity to make the striking contrast between the CBO and the executive branch in the ways that policy analysis capabilities have been developed in recent years -- and how the consequences play out on issues such as health reform.

Gene Steuerle is a senior fellow at the Urban Institute and an economic consultant to Tax Notes.

Tax Analysts Information

Code Section: No Code Section Applicable
Jurisdiction: United States
Index Terms: tax policy
Author: Steuerle, Gene
Institutional Author: Tax Analysts
Tax Analysts Electronic Citation: 94 TNT 37-77
Cross Reference: