NTUF’s Recommendations to the House Budget Committee for Improving CBO

The House Budget Committee announced it is holding a hearing Wednesday morning on “Creating a Culture of Fiscal Responsibility: Assessing the Role of the Congressional Budget Office.” Chairman Jodey Arrington (R-TX) and Ranking Member Brendan Boyle (D-PA) have invited Congressional Budget Office (CBO) Director Phillip Swagel to discuss how CBO can be more helpful to Congress and ways to improve CBO's accuracy, transparency, and internal structure.

Congress established CBO in 1974 so that it would have its own source of budgetary analysis instead of relying on the White House's Office of Management and Budget. The agency plays a crucial role in policymaking as its cost estimates can hinder or help passage of legislation. NTUF commends Chairman Arrington and Ranking Member Boyle for convening this important hearing, the first CBO oversight reform hearing held by the House Budget Committee since February 2018 with former Director Keith Hall.

CBO has done a lot over recent years to improve transparency of its operations and to better highlight the assumptions it uses in producing cost estimates as well as the points of uncertainty entailed in scoring complex proposals. Many of the problems with its cost estimates result from the scoring rules that Congress requires CBO to use and the budgetary gimmicks employed in legislation to obscure the true costs. Reform proposals and guidance from the House and Senate Budget Committees can help CBO to produce more accurate estimates and projections. NTUF offers the following recommendations.

  • Dynamic Scoring of Major Proposals: The Rules of the House for the 118th Congress provide for CBO to conduct dynamic analysis of revenue and mandatory spending in proposals that would have a budgetary impact of at least 0.25 percent of GDP.

    Dynamic scoring assesses the macroeconomic impact analysis of major proposals, a critical tool that helps lawmakers understand how economic behavior will respond to changes in policy. For example, under the current static analysis used by CBO and the Joint Committee on Taxation, reducing marginal income tax rates would lower tax revenues. A dynamic score would also look at how the lower rate would enable further investment and economic growth, which could potentially offset a portion of the foregone revenues.

    This should be made the standard for CBO scores – not just subject to House rules – so that Representatives and Senators can consider the full economic impact of major bills.

  • Provide for Fair-Value Accounting of Credit Programs: The number of federal loan and loan guarantee programs are increasing, and so are the obligations of taxpayer dollars. The current scoring rules for these credit programs do not adequately account for the market risk of default. The Fair-Value Accounting and Budget Act, introduced by Representatives Ralph Norman (R-SC) and Glenn Grothman (R-WI), would provide for better transparency of the risks and true costs of the federal government’s 131 different loan programs.
  • Include Estimates of Debt Interest Payments in Cost Estimates: Rep. Michael Cloud’s (R-TX) Cost Estimate Improvement Act would require that CBO include the estimated impact of proposed legislation on debt interest payments in its estimates. In addition, the bill would have CBO include a duplication report in its estimates to identify existing federal programs that overlap with new proposals.

  • Enhance CBO’s Access to Agency Data: Senators Gary Peters (D-MI) and Susan Collins (R-ME) introduced legislation to make it easier for CBO to get information it needs from federal agencies to produce cost estimates of legislation. Their bill, the Congressional Budget Office Data Access Act, will help CBO to respond to congressional requests for legislative analyses in a timelier manner and can also increase the quality and detail of the cost estimates. The bill would add the CBO to the same exemption to the Privacy Act of 1974 that is provided to the Government Accountability Office and both chambers of Congress.

    With expedited access to more detailed data, CBO can more efficiently provide higher quality cost estimates to Congress.

  • Scorekeeping Reports Transparency: CBO is required to report to the House and Senate Budget Committees on the cost of legislation enacted in Congress as well as the allocation of funds by committee area and whether these funds are constrained by caps. Under the Congressional Budget Act, these committees are supposed to update their respective chambers about the status of budget allocations and cap levels, but there are sometimes gaps with no updates. CBO’s scorekeeping reports should be made public.

  • Have CBO Show More of its Work: CBO has made strides to improve its transparency, but the CBO Show Your Work Act introduced by Rep. Warren Davidson (R-OH) would take this a step further. The proposal would further promote scorekeeping transparency by requiring CBO to make available more of the underlying data and models used in its estimates. In cases where the CBO uses proprietary information that it is unable to disclose, the bill would have CBO identify why the data is restricted and provide contact information on the source of the data.

These proposals would help improve CBO’s important work. NTUF again applauds the House Budget Committee for holding this hearing and we stand ready to assist with additional recommendations, guidance, and analyses so that lawmakers and taxpayers have access to accurate budgetary information.