What is CBO and what does it do for you?
Q. What is CBO and why is it so important?
A. CBO is an acronym for the Congressional Budget Office. It was established by law in 1974 to provide non-partisan assistance in analyzing the cost and effect of current legislation as well as analyzing the budget over time. More directly, it is supposed to give an objective assessment of what a law would cost and of the greater economic contribution.
The CBO began working in 1975 with the appointment of its first director, Alice Rivlin. While it attracts attention when analyzing high-profile laws like President Biden’s Build Back Better Bill or President Trump’s Tax Cut and Jobs Act, the office has a number of legislated responsibilities that are important, although much less visible.
The CBO prepares annual fiscal and economic outlook reports, which are used by Congress to prepare legislation. They assess a range of budget issues, including the impact of things like unfunded mandates. The CBO may also be tasked with doing analysis by the House or the Senate based on the rules and requirements of the House. Today almost every bill receives a report from the CBO in addition to the many informal estimates the CBO makes for members of Congress on new proposals.
CBO plays an important role in the legislative debate because its cost estimates, or ratings, and economic impact analysis are meant to be objective. The CBO does not support or oppose the legislation. It simply tells you what it will cost and what the impact of a bill would be on the national economy. The impact of a CBO analysis can be crucial and can even derail legislation, but not always.
In 2017, the CBO’s estimate for President Trump’s Tax Cuts and Jobs Act found it would increase the deficit by $ 1.4 trillion over a decade. This sparked much debate about the costs and accuracy of the CBO report. Indeed, then Treasury Secretary Steven Mnuchin, unlike the CBO, claimed that tax reform would generate so much growth and revenue that it would essentially be self-financing. The bill itself was passed and the observed effect of the law largely supported the CBO. As the Brookings Institute observed, the tax bill has “dramatically reduced income.”
While this is an example, it should be noted that discussing CBO scores is a bipartisan practice. The CBO report has become so important that members of Congress will regularly delay announcing a position on a bill until there is a CBO report, as has been the case this year with infrastructure legislation as well as the Build Back Better bill. But, in truth, members are more than willing to ignore the scores if the CBO does not report the impact of the bill in the way they would prefer.
Kevin Wagner is a constitutional scholar and professor of political science at Florida Atlantic University. The answers provided do not necessarily represent the views of the university. If you have a question about how the US government works and politics, email him at [email protected] or contact him on Twitter @kevinwagnerphd.