CBO, Transparency, and Obamacare’s Impact on the Deficit
Before a House rules change in January, CBO generally had not applied “dynamic scoring” to major legislation, or considered likely macro-economic effects when analyzing a bill’s potential impact on the deficit. On Friday, in response to follow-up questions from a January congressional hearing, CBO said that had it conducted such an analysis of Obamacare, it would have found that the bill reduced the federal deficit by less than its original projections.
In short: Because CBO believes the health-care law will discourage work, it would lower federal revenues—but the agency did not consider the revenue impacts of these effects in 2010, when it projected that the law would reduce the federal deficit.
Although CBO does not usually estimate macroeconomic effects of major bills, it has done this. In 2013 the agency “relaxed” its score-keeping convention with respect to immigration legislation in the Senate, concluding that the bills under consideration would increase the labor supply and economic growth and thus federal revenues. Both the 2013 Senate immigration bill and Obamacare would have altered the U.S. workforce by millions of workers. That CBO went to great lengths to estimate the macroeconomic and fiscal effects of Senate legislation never enacted but has yet to do so with Obamacare raises questions about the agency’s policies for scoring legislative measures.
CBO has conducted two analyses of the health-care law’s impact on labor markets, but these did not say that the law’s effects on the labor force would impact its potential deficit reduction. The first analysis, released in August 2010, said that Obamacare would reduce the workforce by about half a percent, or approximately 800,000 workers, by 2021. The second analysis, released in February 2014, roughly tripled that estimate, to 1.5% to 2% of the labor force—the equivalent of approximately 2.3 million workers in 2021. CBO could have publicly stated that these labor-force changes, and the related revenue effects, would negatively affect the deficit, even if it could not specify by how much.
CBO said last summer that it would no longer produce estimates for the fiscal impact of the health law as a whole. It also declined to release a score of legislation repealing the law before last month’s House vote. In a blog post last June, Mr. Elmendorf wrote that CBO and the Joint Committee on Taxation “have no reason to think that their initial [March 2010] assessment that the ACA would reduce budget deficits was incorrect.” But the agency’s statement on Friday illustrates that the 2010 deficit assessment was incomplete and could be incorrect. CBO appears to have no intention of correcting this flaw or revealing Obamacare’s true fiscal impact.
CBO’s statement Friday was released to select congressional offices the same day Keith Hall was named as Mr. Elmendorf’s replacement. As CBO’s past analyses of Obamacare’s impact on the labor market received much press fanfare, the down-playing of this information seems straight out of “The West Wing.”
One hopes that under Dr. Hall’s leadership CBO will address a few issues, including a revised score of Obamacare that accounts for the legislation’s impact on labor markets and a broader discussion about the need to consider macroeconomic effects when analyzing bills as large in size and scope as the 2,700-page health-care law. CBO is accountable to Congress and taxpayers; it can act accordingly starting with more transparency.
This post was originally published at the Wall Street Journal Think Tank blog.