Conservatives Split on Keeping or Ditching CBO’s Elmendorf
Policy + Politics

Conservatives Split on Keeping or Ditching CBO’s Elmendorf

Even as he refused to say whether or not he would support the renomination of Congressional Budget Office Director Doug Elmendorf to another term, Sen. Jeff Sessions (R-AL), the man expected to chair the Senate Budget Committee as of January, went out of his way to praise the current CBO director when talking to reporters a few days after the election.

“I like Director Elmendorf and I have a lot of respect for him,” Sessions said. And in the days following the midterm elections, he was far from alone. 

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Former CBO director Peter Orszag penned a column for Fortune in which he implored the incoming GOP leadership to reappoint Elmendorf, arguing that continuity at the top of the Congressional spending watchdog at a time when partisan feelings are running particularly high would be a strong sign that the Republicans were serious about sober policymaking.

In case the GOP wasn’t willing to take the advice of Orszag, who left CBO in 2008 to become then-President-elect Barack Obama’s first Director of the Office of Management and Budget, they could turn to N. Gregory Mankiw, the chair of the economics Department at Harvard, who served as the chairman of the Council of Economic Advisers in the George W. Bush White House.

Elmendorf, he wrote on his personal blog, is the “clear choice” to continue running CBO.

“Someone recently said to me that the CBO director is not really a player in the political game,” Mankiw wrote. “He is more like the referee. That analogy sheds light on why Doug is the right person for the job. What do you want in a good referee? Competence and impartiality. Doug has demonstrated both. He is a superb economist and, over the past six years as CBO director, has shown himself to be scrupulously non-partisan.”

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“I understand that GOP leaders may be tempted to put their own stamp on the Congressional Budget Office,” Mankiw continued. “But sometimes the benefits of continuity transcend ideology and political affiliation.”

However, late last week, other conservatives began coming forward with far less laudatory assessments of Elmendorf, who took office in 2009 to finish Orszag’s term, and was later appointed to a full term of his own. 

“Stop the Democrat Sponsored Elmendorf Bandwagon,” read the headline of an op-ed on e21, the economics portal of the Manhattan Institute. Grover Norquist, the anti-tax activist who founded Americans for Tax Reform, published an opinion piece entitled, “The Case Against Doug Elmendorf at CBO.”

The primary objection of many conservatives appears to be Elmendorf’s reluctance to adopt a more widespread use of “dynamic scoring” in budget analysis. Dynamic scoring counts the “macroeconomic effects” of policies as part of their impact on the federal budget. In particular, it attempts to consider changes in consumer behavior that result from changes to the tax code.

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Republicans like this approach because, coupled with the supply-side economics theory that lowering tax rates actually results in higher tax revenue, using dynamic scoring to assess policy proposals would make tax cuts appear to cost less. Some could argue that they would actually pay for themselves.

In Elmendorf’s CBO, as it was under his predecessors, dynamic scoring is little-used. The majority of economists believe that macroeconomic effects of policy are so difficult to model that dynamic scoring would produce unreliable data.

While dynamic scoring might be the biggest issue for conservatives, it’s not the only problem they have with Elmendorf. Among other things, Norquist notes, is that Elmendorf’s CBO delivered a favorable ruling on the costs of the Affordable Care Act. This has become a potent issue lately because of the discovery of videotapes in which MIT professor Jonathan Gruber, a key figure in the development of the law, suggested that the law’s architects, in addition to relying on “the stupidity of the American voter” also worked hard to game CBO’s rules in search of a good budget score.

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Norquist also hit Elmendorf for his statement, over the summer, claiming that the CBO can no longer produce budget scores for the ACA now that it is established law.

“A retrospective analysis of the effects of a current law is very different from a cost estimate for proposed legislation, particularly because it requires formulation of a counterfactual benchmark representing what would have happened if the law had not been enacted—a challenging undertaking that is beyond the scope of CBO’s usual analyses,” Elmendorf wrote.

Norquist described the decision as “another way of saying that CBO had given up the Gruber-led façade that Obamacare would reduce the deficit, but was not willing to show their math in getting there.”

Writing for e21, Ernest C. Christian, an attorney and former Treasury Department official, was a little less charitable.

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“In a trick worthy of Houdini, the Democrats are trying to convert Elmendorf into an imaginary paragon of intellectual integrity and nonpartisanship,” Christian wrote.

Why this matters:
The non-partisan Congressional Budget Office is one of the most widely-respected institutions in Washington. A push from the hard right to install a new head, preferably one in favor of the controversial practice of “dynamic scoring” could cost CBO a lot of its hard-won credibility. 

“The only realistic consequence” of his reappointment, he said, “would be to allow Elmendorf and the Democrats to sabotage all such reforms by continuing to ‘cook the books’ in ways that cynically misstate the toxic side effects that taxes, regulations and spending have on the economy, jobs and families.” 

Christian’s and, to a lesser extent Norquists’s critiques of Elmendorf are well outside the mainstream. Economists from conservative redoubts like the Hoover Institution and the American Enterprise Institute have all praised Elmendorf as a person of integrity and competence.

The economic mainstream, however, hasn’t always won policy debates in the GOP, especially when the issue of taxation is concerned. So, despite the best efforts of his colleagues in the fraternity of government economists, Elmendorf’s perch may not be as safe as his advocates would like. 

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