Limited Governments Best Friend: The CBO

Remember the Democrats claim that by empowering a new panel (the Independent Medicare Advisory Council) to recommend future spending reductions we could save several billions of dollars in healthcare costs? If this was before the creation of the CBO (1974, according to Wiki), such claims would be nearly impossible to disprove. Democrats could get away with making the claim and fiscally conservative politicians would have little to say in opposition. The whole debate would break down into a he-said she-said debate, with Republicans pointing to some economist at some University showing the proposal would barely save a few billion dollars and Democrats responding with their own economist and study arguing that it would save multiple billions. How would the average citizen distinguish who is right?

Of course, years after the policy changes had been put into effect, the truth would have come out – which is why in every single healthcare change, including the recent Massachusetts healthcare reforms, the healthcare policies have turned out to cost far more than people assumed – but by then the changes would have already been in affect for atleast a couple of years. New special interest groups would have already been created, and the government program, like any other government program, would become nearly impossible to stop.

But that was before the CBO had so much influence. Today, Democrats have to get their claims past the CBO and are having a very difficult time doing it. The latest is their claim that an Independent Medicare Advisory Council would save several billions of dollars. The CBO argues that that simply is not true, Donald Marron reports:

CBO estimates that the proposed legislation would save a paltry $2 billion over the next ten years, less than 1/500 of the 10-year cost of health reform.

This is on top of the earlier headaches the CBO has given Democrats.

Long gone are the days when Democrats could simply propose some theoretical cost saving legislation and ask the public to take it on good faith. Imagine if the CBO had existed when FDR was around? LBJ?

Although that doesn’t mean the CBO itself doesn’t have serious shortcomings, on the contrary, it too tends to underestimate the costs of policies, as it recently did in predicting the fiscal stimulus recovery (see here and here) but atleast now the Democrats proposals have to pass a higher standard than simply their word.

Keith Hennessey has more here.

Update: The Economist has more.

2 Responses to “Limited Governments Best Friend: The CBO”


  • Not to nitpick, since I agree with HP’s general theme: “The CBO is a good thing to have”, but the blog post would have sounded much less partisan, and therefore much more credible, to have replaced all references to “the Democrats” with “the party in power”.

    My point, of course, is that the CBO was just as much a thorn in the side of Republicans for the past eight years as it is now for the Democrats. (Feel free to Google it.) This blog post, however, would lead the casual reader to believe that only Democrats wildly underestimate the cost of their bills. Not true, of course.

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