The Boring Bureaucrats of the CBO Score

The Congressional Budget Office is back in the news, what with all this fuss about repealing Obamacare and replacing it something or another that in any case isn’t to be called Trumpcare, and we’re heartened to see their reassuring initials again. Back when political news was mostly a boring affair about arcane accounting questions the boring bureaucrats of the CBO were always in the lead or at least third paragraph of every story, but that was before the political news became more entertainingly about the latest “tweets” and the accusations of treason being flung from both sides, so lately we find ourselves missing the old days.
That good ol’ CBO finds itself back in the news because of its long-awaited “scoring” of the first of three promised phases of repeal of Obamacare and replacement with something that nobody is calling Trumpcare. The report contains plenty of argumentative ammunition for the Democrats who are unanimously opposed to the plan, possibly enough to scare some of the Republicans with whetted thumbs against the political winds, and a few big numbers that speak well for the first phase of the scheme but might embolden its conservative critics. All in all it was the desultory conclusion that you’d expect from a numbers-crunching bunch of boring bureaucrats, which is what the CBO is paid to be, and within a certain margin of error involved in all human undertakings we’re inclined to accept their findings.
One finding is that 24 million fewer Americans will have health insurance over the next decade if the current proposals of repeal and replace are enacted, which is a number hard for the most pro-reform media to spin, and which the anti-reform media gleefully headlined. The pro-reform forces therefore questioned the supposedly boring objectivity of the bureaucrats at the CBO, rightly noting its past errors in overstating the benefits and understating the costs of Obamacare, but they’ve conveniently forgotten how that happened. We were among the anti-Obamacare voices who noted that the CBO was diligently “scoring” those costs and benefits according to the pie-in-the-sky assumptions and spreadsheet legerdemain that the Democratic administration and Democratic majorities in Congress had described, and that the CBO had made that disclaimer quite clear, and when you take into account that the CBO’s forecasts couldn’t have taken into account subsequent Supreme Court decisions and other events they did about as well as anybody. If the current Republican administration and Republican administrations in Congress didn’t offer such helpful guidelines we can hardly blame those boring bureaucrats as the CBO.
Even without any helpful guidance from the Republicans the CBO has concluded that the first part of more or less Grand Old Party’s three-phase plan would lower federal deficits by a not insignificant $337 billion, given the nation’s poor fiscal health, and would eventually reduce the average American’s health insurance premiums by 10 percent, which by the now the average American would not consider an insignificant sum. The Republicans should be able make some political hay out of those numbers, but at the moment they’re busy discrediting everything the CBO says, and the eventual part will only play out long after the next election cycle and just before the president’s reelection race. The CBO’s past miscalculations were based on the garbage-in-garbage-out assumption of the Democrats who front-loaded their carefully planned Obamacare with early benefits and defrayed costs, while the CBO’s current calculations reflect the Republicans’ longstanding preference for paying up front, and although that makes for good policy we can’t fault the CBO if it makes for lousy politics. If the American public isn’t taking a longer range view of the situation, neither can we fault the CBO for that.
So far as we can tell from the CBO reports and everything else we read and hear and see this Obamacare thing has made things better for some people and worse for others and on the whole worse all around, and we’re quite sure this three-phased real and replacement with something that won’t be called Trumpcare might prove better but surely won’t be perfect. We’re holding out hope that nuns won’t be forced to pay for contraceptive coverage and monogamous married couples won’t have to fork out for sexually transmitted disease plans and teetotaling types aren’t hit up for alcoholism treatment, and that the the youngsters who only need catastrophic care can pay on the cheap, and that the daredevils can continue to defy the actuarial tables, but by now we have to admit that the benefits won’t come without costs, that those costs are actually figured in the long term that people rarely consider, and even those boring bureaucrats at the CBO can’t make any reliable predictions.
We always liked those old-fashined Republicans who used to acknowledge such uncertainties, but these days the party is represented by President Donald Trump and his campaign promises that everyone was going to be covered and the government would pay for it and premiums would go down and care would go up and everything would be great. He was never clear about the details, and being a big picture guy he seems to have left those details up to those Republican establishment guys he ran against, and they seem to have some old-fashioned ideas about paying up front and letting some number of Americans that might approach 24 million go without health insurance, and although there are philosophical arguments to made for that which the CBO can’t score he doesn’t seem able to make it, and this repeal and replace thing seems to be the very first time in his life that he doesn’t want his name on something.
As bad as Obamacare was we’ll still expect something better, but not matter what happens we won’t blame those boring boring bureaucrats at the CBO.

— Bud Norman

Minimum Wages and Minimal Logic

Those mischievous economists at the Congressional Budget Office are back in the news, this time with a report suggesting that raising the minimum wage would also raise the unemployment rate.
The notion that raising the cost of something such as unskilled labor might also reduce the demand for it will seem reasonable enough to anyone with a rudimentary understanding of economics, but it has provoked an outcry among those with a more sophisticated view of these things. There apparently are studies out there by some experts or another suggesting that raising the cost of something doesn’t affect the demand for it and that people will gladly continue paying a higher price for something long after the cost has exceed its actual economic value, no matter how many centuries of economic history sense suggest otherwise, and we are told that it would be downright anti-science to argue with an expert’s study. Advocates for an increase in the minimum wage also note that the CBO has concluded that minimum wage workers would make more money if the minimum wage were increased, which will also seem reasonable enough to anyone with a rudimentary understanding of economics, and argue that so far as social justice and all the jazz goes the lost jobs would be offset by the gains those lucky enough to keep their swelled wages.
Neither argument is convincing. The president and any economists supporting his call for raising the minimum wage to $10.10 an hour clearly haven’t spent much time lately in the drive-thru lane of a fast-food restaurant, where they surely would have encountered uncouth and innumerate workers whose feeble efforts could not possibly provide a profitable return on that exorbitant amount, and we don’t doubt there are far more of them than the 500,000 or that the CBO has estimated will get the axe. There’s also the distinct possibility that a few million more over-paid workers will demand a bump up above the minimum and find that they are no longer worth the cost. Despite our dissatisfaction with these workers’ performances we are not so insouciant about their fates as the more high-minded activists seem to be, and we don’t share the view that they’re better of unemployed at $10.10 an hour rather than employed at the current rates.
This is a most unfashionable point of view, however, and it remains to be seen if it will prevail. The last time the CBO raised such a fuss was when it reported that more than a million people will be induced to leave the labor force rather than relinquish their Obamacare subsidies, and presidential and bien-pensant opinion concluded that they’d all better off and free to pursue careers in the arts. As much as we’re looking forward to the artistic renaissance that will surely flower from all those fast-food workers laid off to make room burger-flipping robots, it doesn’t seem likely to spur an economic revival any time soon.

— Bud Norman

Pursuing a Dream

Those prolific folks at the Congressional Budget Office have written up yet another installment in their annual “Budget and Economic Outlook” series, and it might be their best work yet. That’s high praise, given how the president used to gush about the non-partisan brilliance of these eyeshade-wearing savants of the bureaucracy, but their latest look at Obamacare really is quite a read.
In a taut 175 pages of impeccable public policy prose, including the numerous charts and tables and citations of sources and such, the report lays out all the sorry facts about the nation’s fiscal health. This has been a recurring theme of the series for so long now that it’s become too boring to prompt comment, but the parts about Obamacare offer an intriguing if somewhat predictable plot twist. To hear the CBO boys tell it, the law isn’t working out well.
The report projects that the law will result in the loss of 2.5 million full-time equivalent jobs in the next decade, leave 31 million people still without health insurance but paying for the privilege, add $1.4 trillion to the federal deficit, cause millions of Americans to lose the health insurance plans that they liked, and wind up costing the average American money out of his paycheck. Given that the law’s eponymous president repeatedly promised that it would spur economic activity, insure everyone, wouldn’t add a single dime to the deficit, anyone who liked his health insurance plan could keep it, and the average American would wind up with an extra $2,500 in his paycheck, it seems fair to say that things aren’t going as intended.
Back when the president was making such preposterous promises on behalf of Obamacare he had CBO reports to back them up, all based on the equally preposterous presumptions the agency was forced to proceed from, which is probably why he used to gush about its non-partisan brilliance. The latest report is based on assumptions more closely resembling reality, and is therefore less to the president’s liking, but all that past praise forced the White House to carefully interpret rather haughtily dismiss the CBO’s conclusion.
By far the most entertaining portion of White House spokesman Jay Carney’s juggling act was his insistence that the 2.5 million lost jobs is proof the law’s unexpected success. After correctly noting that the report does not blame the job losses on disincentives for employers to provide jobs, and without noting that it also said such an effect might well occur when the delayed employer-mandate at last kicks in after the mid-term elections, Carney seemed proud that CBO found the initial job losses would result from Obamacare’s disincentives for employees to accept low-wage jobs rather than relinquish their health care subsidies and other benefits. As Carney thus explains it, those 2.5 million lost jobs mean “Americans would no longer be trapped in a job just to provide coverage for their families, and would have the opportunity to pursue their dreams.”
Any Americans who don’t dream of a life of care-free welfare dependency probably wouldn’t put it in such poetic terms, but at this point they likely comprise only a small share of the Democratic votership. It remains to be seen how the economy will fare under the guidance of an administration that takes such pride in lost jobs, and we’ll be looking forward to next year’s installment in the “Budget and Economic Outlook” to find out.

— Bud Norman

Bad News in Two Directions

We take a back seat to no one when it comes to gloominess and doomsaying, but the number-crunching folks at the Congressional Budget Office are almost our equal in that regard.

The putatively non-partisan agency released an update to its “Budget and Economic Outlook” this week, and it can be quickly summarized by saying that the outlook is bleak. There are two forecasts included in the report, and both are quite glum, so the CBO’s outlook could actually be said to be doubly bleak.

After starting off with the sobering statistic that the federal budget deficit for the year will total $1.1 trillion, bringing the federal debt held by the public to 73 percent of the nation’s gross domestic product, the CBO assures policy-makers that all of that stimulus has at least ensured that the “economic recovery” will “continue at a modest pace for the remainder of the calendar year 2012.” This modest achievement will doubtless suffice as vindication for Obama’s more stalwart supporters, but after that the CBO sees trouble in either direction it looks.

The CBO has prepared a “baseline projection” based on the assumption that current laws will continue, meaning that in January all of the Bush era tax cuts will expire, the extension of unemployment benefits and the 2 percent reduction in the Social Security payroll tax also disappear, and a number of mandatory budget cuts go into effect. Under this scenario, the CBO expects that the unemployment rate will climb to 9.2 percent, the gross domestic product will shrink by 2.9 percent, and the situation “will probably be considered a recession.” They add the cheery note that the deficit would likely shrink to 4 percent of the gross domestic product, which could delay the day of fiscal reckoning by a few weeks or so, but it is not clear if that is based on assumption that all the tax hikes won’t actually result in less government revenue and more social spending as a result of all the economic carnage.

It is still possible that the government will act to extend all of the Bush era tax cuts — although the president seems ruthlessly determined to raise taxes on the higher earners, and quite confident that the public will blame the Republicans if everyone’s taxes get raised as a result — so the CBO has prepared an “alternative fiscal scenario” that envisions such an action as well as ignoring the mandatory spending cuts. Under this scenario the country goes another $1 trillion in debt for yet another year, but the economy grows by an unimpressive 1.7 percent and the unemployment rates stays stuck at around 8 percent.

All of which leaves one hoping for some possible third scenario. Ideally it would avoid tax increases and the resulting drag on economic activity, allowing the private sector to spend the available capital more productively than the various “czars” has done the past four years, with the ensuing growth and some well-chosen spending cuts whittling down the debt to manageable levels. The CBO does not speculate about such a course, but we suspect it would lead to a happier future.

— Bud Norman

Downbeat Reading

Few things in life provide the emotional stimulation of depressing literature, so our bookshelves are well-stocked with such grim fare as Nathaniel West’s “Miss Lonelyhearts” and Sylvia Plath’s “The Bell Jar,” but for unrelentingly gloomy reading nothing can top the latest offerings from the Commerce Department and the Congressional Budget Office.

A stiff drink is recommended before delving into the Commerce Department’s look back at the past three months of the American economy, which reports that the nation’s gross domestic product increased by a mere 2.8 percent annual rate during the final quarter of a year, meaning that the economy grew by only 0.7 percent during the holiday shopping months. The figure is ugly enough at first glance, but upon closer examination it becomes even more gruesome.

Slog through the Commerce Department’s bureaucratic prose and you’ll discover that 75 percent of the growth was due to businesses restocking inventories with as-yet unsold goods, which they will not continue to do indefinitely. Careful readers will also note that the Commerce Department arrived at its GDP number by assuming an inflation rate of just 0.4 percent, an assumption that will seem suspicious to anyone who has shopped for groceries in recent months.

Another stiff drink, perhaps hemlock, is recommended to anyone reading the Congressional Budget Office’s look ahead to the next decade of the American economy, which paints a picture of our economic future as disturbing as anything Hieronymus Bosch ever put on canvas. The CBO predicts the unemployment rate rate will rise to 8.9 percent by the end of the year and to 9.2 percent in 2013, that GDP growth will be only 2 percent in the coming year, and that the budget deficit will be $1.08 trillion in 2012 and very high years to come.

Again, the ugly numbers get uglier with a closer look. The report modestly admits that “Many developments could produce economic outcomes that differ from the CBO’s forecast,” citing a “significant worsening of the of the banking and fiscal problems in Europe” as one example, and when that one inevitably develops the current gloomy predictions will seem wildly optimistic.

All of this is bad news if you’re looking for a job, but even more so if you’re hoping to hang on to your current job as president of the United States, which might be the only ray of hope to shine through such dark clouds.

— Bud Norman