I don't believe that the CBO is not allowed to independently research the facts behind their analyses.
From the CBO FAQ (http://www.cbo.gov/aboutcbo/faqs.cfm):
By statute, CBO's baseline projections must estimate the future paths of federal spending and revenues under current law and policies. The baseline is therefore not intended to be a prediction of future budgetary outcomes; instead, it is meant to serve as a neutral benchmark that lawmakers can use to measure the effects of proposed changes to spending and taxes. So for that reason and others, actual budgetary outcomes are almost certain to differ from CBO's baseline projections. For a related discussion, see Chapter 1 of CBO's Budget and Economic Outlook; see also The Uncertainty of Budget Projections: A Discussion of Data and Methods for supplemental information.
From the CBO policies (http://www.cbo.gov/aboutcbo/policies.cfm):
CBO employs standard methods of economic analysis and closely follows professional developments in economics and related disciplines. CBO frequently seeks outside experts' advice on specific analytic matters, such as the outlook for agriculture production, spending projections for Medicare and Medicaid, and business prospects in the telecommunications industry. For its economic forecasts, CBO draws on the advice of a distinguished panel of advisers that meets twice a year.
So what happens is this: the Congressperson goes to the CBO with a plan and says "this is what we want to do." It then applies the multiplier theories assumed by the bill, and runs calculations. So the original CBO estimate that it would create X amount of jobs comes about. Now, every so often, they release an update, saying "based on the calculations, we've spent X and created Y jobs." How do they get Y? By using the same theoretical models used to establish the thing to begin with. It's all about forecasting using existing models - models that often cannot account for situations that the reporting isn't prepared for.
The best piece I've read about it was from Reason in May 2009 (http://reason.com/archives/2009/12/08/the-gatekeeper). It inadvertently details an example of how the CBO cannot act independently:
When the Senate Finance Committee released the preliminary draft of its health care bill in September 2009, the accompanying CBO analysis reported that the legislation, as written, would reduce the budget deficit over the next two decades. This projection was based on the highly dubious assumption that Congress would follow through on the bill’s proposed Medicare payment cuts—cuts Congress has been loath to make in the past. The report acknowledged these past failures, but the CBO is prohibited from making judgments about the likelihood that Congress will keep its own promises.
However, I think the point is -- there is no empirical verification possible at this point. Ultimately, we don't know yet how well it's working or not, but the best economic models we have say it probably is.
The best economic models project that it probably has, based on the idea that $1 of government spending equals X in production (http://www.theatlantic.com/politics/archive/2009/03/cbo-on-stimulus-multipliers/1126/). That doesn't have to be true in practice, it's merely the model they're working off of.
So, for instance, the model may say that the government spending $2 million on a highway project will create 40 jobs, but cannot account for the jobs lost due to the construction from local businesses or from other non-stimulus projects being abandoned as a result of the influx of federal money.
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Date: 26/8/10 03:03 (UTC)From the CBO FAQ (http://www.cbo.gov/aboutcbo/faqs.cfm):
From the CBO policies (http://www.cbo.gov/aboutcbo/policies.cfm):
So what happens is this: the Congressperson goes to the CBO with a plan and says "this is what we want to do." It then applies the multiplier theories assumed by the bill, and runs calculations. So the original CBO estimate that it would create X amount of jobs comes about. Now, every so often, they release an update, saying "based on the calculations, we've spent X and created Y jobs." How do they get Y? By using the same theoretical models used to establish the thing to begin with. It's all about forecasting using existing models - models that often cannot account for situations that the reporting isn't prepared for.
The best piece I've read about it was from Reason in May 2009 (http://reason.com/archives/2009/12/08/the-gatekeeper). It inadvertently details an example of how the CBO cannot act independently:
However, I think the point is -- there is no empirical verification possible at this point. Ultimately, we don't know yet how well it's working or not, but the best economic models we have say it probably is.
The best economic models project that it probably has, based on the idea that $1 of government spending equals X in production (http://www.theatlantic.com/politics/archive/2009/03/cbo-on-stimulus-multipliers/1126/). That doesn't have to be true in practice, it's merely the model they're working off of.
So, for instance, the model may say that the government spending $2 million on a highway project will create 40 jobs, but cannot account for the jobs lost due to the construction from local businesses or from other non-stimulus projects being abandoned as a result of the influx of federal money.