The Congressional Budget Office (CBO) is responsible for helping analyze economic and budgetary decisions, as well as financial programs administered by the federal government. Additionally, the CBO provides estimates for the Congressional budget process, and issues studies, reports, briefs, presentations, background papers, letters, and other publications on the budgetary process and testifies before Congress on a variety of economic issues. The $700 billion bailout of troubled Wall Street companies in 2008 forced the CBO into new territory as the nation’s deficit climbs to record levels.
The Congressional Budget Office (CBO) was created on July 12, 1974, during the Nixon administration. The underlying legislation was the Congressional Budget and Impoundment Control Act. The office began operations on February 24, 1975, with Alice Rivlin as its first director.
The authorizing legislation was created as a result of the growing distrust of President Richard Nixon, as well as his cabinet members and their policies. After the law was passed, the federal government no longer had to rely on the President’s personal assessments of the economy and instead gave Congress its own independent budget office that was meant to be non-partisan in nature.
Since then, the CBO has worked closely with various House and Senate committees by preparing special reports that analyze the potential costs of bills being studied. The CBO projects costs over time and advises members of Congress on the President’s annual budget and other requests for funds from executive branch agencies. Officially, the CBO does not take sides with either political party.
In 2010, the CBO issued 33 studies and reports, 12 briefs, 12 Monthly Budget Reviews, 35 letters, 14 presentations, and two background papers, along with additional supplemental data. Representatives from the CBO also testified before Congress on 14 occasions and completed approximately 650 formal federal cost estimates and 475 estimates forecasting the impact of unfunded mandates on state and local governments. Finally, the CBO created about 475 estimates on the impact of unfunded mandates on the private sector.
The Congressional Budget Office (CBO) is responsible for providing analysis and estimates on issues affecting the budget, costs of pending legislation and an economic outlook for the U.S. For every bill that comes before Congress or a committee, the CBO provides cost estimates that project the price tag of the potential new law over its complete term. According to the Congressional Budget and Impoundment Control Act of 1974 and the Unfunded Mandates Act of 1995 (pdf), the CBO must produce a cost estimate and mandate statement for every bill reported by a Congressional committee.
The CBO’s cost estimates assess a complete range of financial effects for each bill. Each cost estimate must address discretionary spending, direct spending, and any impact on federal revenues, such as laws that could change the federal tax code or affect the work done by the Joint Committee on Taxation.
Cost estimates often include intergovernmental and private-sector mandate statements, which identify any federal mandates and estimate the costs that these mandates would impose on state, local or tribal governments, as well as private sector companies. Occasionally, the CBO is asked to provide informal estimates and statements for proposals or bills at earlier stages in the process (and sometimes later in the process).
The CBO also prepares reports on the budget and economic outlook for the next 10 years. These provide a baseline from which other changes in spending or tax laws are measured. In its various analyses, the CBO works with the CBO Panel of Economic Advisers, and the Panel of Health Advisers, as well as governmental employees from other agencies.
The agency also estimates proposals contained in the President’s budget, which enables Congress to compare the administration’s spending and revenue proposals to the CBO’s baseline projections.
The CBO publishes the Budget and Economic Outlook and An Analysis of the President’s Budget to help Congress make budgetary decisions. Additional documents the CBO publishes include:
The CBO is composed of economists and public policy analysts. The director of the CBO serves for a term of four years and is appointed by the Speaker of the House and the President pro Tempore of the Senate. However, the House or Senate can remove the director by adopting a resolution.
From the Web Site of the CBO
The Congressional Budget Office (CBO) purchases such items and services as IT hardware and software, including network equipment, computers, commercial software and maintenance agreements; IT consulting services; subscriptions to online collections and print publications; and training.
About 90% of CBO’s budget is allotted to compensation of personnel.
CBO’S Recent Analysis of Healthcare Reform Causes Controversy
Within a year’s time, the nonpartisan Congressional Budget Office (CBO) demonstrated how its analyses of healthcare reform could upset both Democrats and Republicans. In March 2012, the CBO released a new estimate on the new law intended to provide health insurance for the tens of millions lacking coverage. The assessment’s worst-case scenario warned that up to 20 million Americans could lose their employer-based health insurance because of the number of corporations threatening to drop coverage for their workers due to the new law. Under a different scenario, congressional analysts said the law could increase the number of people with employer-based coverage by three million in 2019.
Republicans, who opposed the new law, were happy to use the CBO’s worst-case scenario to blast President Barack Obama. The president had promised that Americans who liked their current coverage would be able to keep it. Only a year earlier, it was Republicans who received some sobering news from the CBO, when it said the healthcare reform law could prove to be a money-saver and that the GOP bill to repeal the law would raise the federal deficit by $230 billion.
CBO Report Says Healthcare Law Could Cause as Many as 20M To Lose Coverage (by Julian Pecquet, The Hill)
No, the CBO Hasn’t Doubled Its Cost Estimate for Health-Care Reform (by Ezra Klein, Washington Post)
Despite GOP Slam, CBO Confirms Health Care Savings (by Merrill Goozner, The Fiscal Times)
CBO Report Revealed Another Large Deficit
The Congressional Budget Office projected a $1.2 trillion deficit for FY 2012, slightly less than it was in 2011, which had the third-largest shortfall in the past 65 years. It also projected a cumulative deficit of $6.4 trillion for the coming decade, from 2013 to 2023. In 2011 the agency said that “economic recovery is likely to remain sluggish and recent turmoil in financial markets threatens to prolong the slump.”
CBO Says True Cost of Wall Street Bailout Unknown
On September 24, 2008, the CBO’s then-Director Peter Orszag told the House Budget Committee that it was “impossible” to estimate the final cost of the Bush administration’s proposed Wall Street bailout. He did say that not acting on some form of bailout would lead to “a financial meltdown…on the order of Great Depression effects.”
Bailout cost unknown—CBO (by Jeanne Sahadi, CNN Money)
The true cost of the bank bailout (video, PBS)
CBO finds 2009 stimulus still benefiting economy (by Erik Wasson, The Hill)
CBO Projected Higher Deficit than Bush Administration Admitted
In 2004, the Congressional Budget Office issued a report projecting a much higher deficit than had been anticipated. The report immediately generated controversy when the ranking Democrat on the Senate Budget Committee accused President George W. Bush of leading the country down a “dangerous path of fiscal irresponsibility.” The deficit at that time was the highest it had ever been in the country’s history—$477 billion. Additional reports wondered what, if any, efforts were being considered to cut the ballooning deficit and put forth a few suggestions.
In the Red (News Hour with Jim Lehrer transcript, between Margaret Warner and Douglas Holtz-Eakin)
Deficit efforts stay modest (by Peronet Despeignes, USA Today)
Air Force Gives $5.7 Billion Gift to Boeing
In September 2003, the Christian Science Monitor reported that the Air Force wanted to replace its aging KC-135 aerial tankers that refuel jets in mid flight. The proposal stirred controversy because the Air Force wanted to lease rather than buy the tankers. While leasing would spend less of the Air Force’s budget, the CBO estimated that if the Air Force were to buy the tankers at the end of the six-year lease, there would be added cost of $5.7 billion. Critics called the Air Force’s plan a giveaway to Boeing, but the Air Force and Boeing disputed the CBO’s findings. Sen. John McCain (R-Arizona) pointed to the large number of emails between Boeing and the Air Force as indicative of an unduly cozy relationship and wondered if it was in the best interests of the country. The controversy did not break down along partisan lines, as many Democrats, whose constituents were hard hit in the economic aftermath of 9/11, supported Boeing’s efforts in the past.
Air Force says deal for in-flight refuelers makes sense. Critics see $5.7 billion giveaway to Boeing (by Brad Knickerbocker, Christian Science Monitor)
Peter R. Orszag January 18, 2007 - November 25, 2008
Douglas Holtz-Eakin February 5, 2003 - December 29, 2005
Dan L. Crippen February 3, 1999 - January 3, 2003
June E. O'Neill March 1, 1995 - January 29, 1999
Robert D. Reischauer March 6, 1989 - February 28, 1995
Rudolph G. Penner September 1, 1983 - April 28, 1987
Alice M. Rivlin February 24, 1975 - August 31, 1983
Douglas Elmendorf is arguably the most important nomination that President Barack Obama has no say over. Chosen by the leaders of the House and Senate, the director of the Congressional Budget Office (CBO) holds considerable sway on Capitol Hill because his analyses are used by lawmakers to help them make up their minds on tough decisions. When it comes to the pricey issue of health care reform, Elmendorf is experienced at issuing deadly assessments of presidential plans, having been a part of the CBO team in the mid-1990s that delivered an injurious blow to President Bill Clinton’s ambitious design for overhauling the American medical system.