Let's back it up

Ok folks. I feel like I came on a little strong on that last one. Kind of like opening an '82 Lafite when you're just sitting down to appetizers with new friends. My goal here is to help make sense of some of the nuances of two of my favorite subjects, and I might have missed the mark. So let's back up a bit.

I'm going to introduce you to one of my favorite places to get interesting analysis on a wide range of topics - the Congressional Budget Office, or CBO. I want to make sure you are familiar with them because I will reference them from time to time.

The CBO is the non-partisan "scorekeeper" of legislation being considered by Congress. It was established as part of a sweeping 1974 act that reformed much of the Congressional budget process. Its existence as a non-partisan entity is important, as the cost of any piece of legislation, or its effect on the national debt, should be considered through as objective a lens as possible. Until CBO's establishment, the President's cadre of economists and analysts (known today as the Office of Management and Budget (OMB)) published their estimated costs of legislation. You can imagine that OMB's numbers tended to be calculated using slightly more optimistic assumptions than other analysts'.

Let's stop on that for a moment. I recommend that when the cost or effects of a proposed piece of legislation are thrown around (which happens all too often on cable TV and the Sunday talk shows), you should consider two things: 1) who did the calculation? 2) what assumptions were used? I say this because almost any complex bill can touch on so many different areas of the economy. This requires analysts to make myriad assumptions about a number of net effects and how those effects will influence other areas. The bottom line will say $1.2 trillion and you're left wondering how anyone had enough computing power to get there. Well, assumptions are a necessary part of calculating that number, but tweaking a few here and there can produce a vastly different result. Just remember to at least give a passing thought to what that bottom line represents.

The CBO strives to ensure that an objective analysis of costs of legislation is captured for public use. They even score themselves to let you know how they're doing.

In addition to legislation being considered in Congress, CBO performs analyses of the President's budget (the President's budget is required by law to be submitted annually to Congress by the first Monday in February) and responds to requests for analysis from members of Congress. For example, a letter from CBO Director Doug Elmendorf to Rep. George Miller on September 11 responded to a request for a review and estimate of the Student Loan Community proposal.

In conclusion (that's a little formal, isn't it?), I want to put something of a face on the organization that works hard to ensure that the public and our elected representatives have the best information possible to decide whether the fiscal effects of legislation align with our interests. So the next time a legislative debate appears to only have two sides - "it will bankrupt our country"/"it won't cost a nickel" - check with CBO. They probably crunched the numbers last week.