The last-minute deal to raise the debt ceiling will trim the national deficit by at least $2.1 trillion over the next decade, according to a Congressional Budget Office study released Monday. The budget office, which provides economic analyses for lawmakers, is often touted as "independent" and "nonpartisan." But how does a government agency remain unbiased amid such political tension?
Law and pride. The Congressional Budget Act of 1974 created the CBO and set the rules for choosing its director: The Speaker of the House (now Ohio's John Boehner) and the president pro tempore of the Senate (Hawaii's Daniel Inouye, not to be confused with the president of the Senate, Joseph Biden) make the appointment jointly, based on recommendations from the House and Senate budget committees. Congress can also remove the director via a resolution in either chamber, but that's never happened.
By law, Congress must evaluate potential directors "without regard to political affiliation and solely on the basis of fitness to perform his duties." A similar rule applies to the CBO director in hiring roughly 250 underlings. The office has an internal code of ethics and an administrative manual that prohibits employees from "participating in partisan political activity if such participation would identify or appear to identify CBO with a candidate, campaign, or cause." That said, its reputation for being unbiased relies, for the most part, on the pride and effort of its workers.
Despite the lack of strict rules, the arrangement appears to be working. For one, the CBO routinely succeeds in frustrating Republicans and Democrats alike. The agency also has a strong track record. A study in the journal Polity examined the accuracy of economic forecasts made by the White House, the Federal Reserve, and the CBO between 1979 and 1997. During that time, the administration's forecasts were the least accurate and the CBO's were the most accurate. (The Fed forecasted inflation as accurately as the CBO but wasn't as good on gross-national-product growth and unemployment.) The study also found partisan bias in the White House forecasts: Republican administrations tend to exaggerate inflation while Democratic ones exaggerate unemployment. Neither of these tendencies shows up in the CBO's projections.
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Explainer thanks Deborah Kilroe of the Congressional Budget Office and reader Adam Conner-Simons for asking the question.