CBO Chief on the Impossible Job of Gauging How Much Legislation Costs

The director of the nonpartisan Congressional Budget Office on Monday defended his agency’s accuracy in projecting future costs of pending legislation.

Doug Elmendorf used a blogpost to answer a member of Congress who asked whether CBO goes back to review its past estimates against real-world eventual results, focusing on spending on the Recovery Act, Medicare Part D’s prescription drug benefit, auctions of spectrum space and unemployment insurance.

Though CBO “routinely monitors” its budgetary estimates and updates its baselines several times a year, “it is often difficult or impossible to determine, even in retrospect, the incremental impact on the budget of a particular piece of legislation,” Elmendorf wrote. “Although CBO often provides updated cost estimates (especially for direct spending provisions) prior to the enactment of legislation, proposals are sometimes amended after cost estimates are prepared.”

Another difficulty is that the spending that stems from a bill may end up as a “small part of a large budget account or revenue stream,” he said, and since many bills that are scored never become law, it is impossible to check the accuracy of CBO’s projections on the bulk of the agency’s estimates.

On Medicare Part D, CBO overestimated spending by 35 percent, for a host of reasons, ranging from patents expiring (thus allowing more use of less expensive generic drugs) to lower than expected enrollment.

On the 2009 Recovery Act, CBO underestimated spending by $36 billion from 2009 to 2012, or about 6.5 percent.

Estimates of proceeds to the government from multi-year auctioning of spectrum were sometimes too low and sometimes too high, Elmendorf wrote.

Projected costs for a dozen laws from the past several years extending unemployment benefits were 5 percent below what the Labor Department later determined were the actual costs, $208 billion against the original score of $199 billion.