Health Care, the Congressional Budget Office, and “Audit the Fed”

by Peter Conti-Brown — Monday, July 31, 2017

There’s no shortage of colorful players in the last round of health care debates. Senators battling kidney and brain cancer, the parliamentarian’s star turn, presidential surrogates and their sideshows, all preceded the ultimately fruitless (until now) effort to repeal the Affordable Care Act.

One of the most intriguing institutional players in the debate was the Congressional Budget Office. The CBO scored various proposals, and the verdict on the nature of cuts to Medicaid and the increased number of the uninsured became a rallying cry for those opposed to the Republicans’ efforts. Indeed, the lack of CBO scoring at various stages of the debate led some Republicans to withdraw their support and otherwise called into question the honesty and sincerity of congressional sponsors of these bills.

The CBO’s role in the bill’s defeat have led to deep criticisms of it. The White House cast aspersions on the credibility of past CBO analysis. President Trump’s budget director, former Republican Congressman Mick Mulvaney, offered an even more existential critique, saying that the CBO’s role providing independent analysis has “probably come and gone.” And the House Freedom Caucus, that group of legislators who pride themselves on their fiscal conservatism, would essentially gut the CBO entirely.

Congressional treatment of the CBO is especially ironic. The CBO was created toward the end of the Nixon Administration as a means of asserting Congress’s role in the budgetary process, a role enshrined in the Constitution but one that executive budgetary ambitions had long eroded. The role of the CBO, then, is to provide a belt to the executive’s own budgetary suspenders. With the CBO, Congress could look at the budgetary consequences of executive proposals without having to turn to the executive for both budgetary conclusions and budgetary analysis. Its role also extended to creating a common ground for legislators to understand the consequences of any proposed legislative change. It’s not a very old office, but its role is about resolving a conflict of interest: when the president asks Congress to exercise its power of the purse, Congress, through the CBO, has a means of checking the math behind these requests. Given the extraordinarily lopsided nature of executive versus legislative agencies (take a look at this list comparing the two), the CBO offers a welcome redundancy, at least from a congressional institutional perspective.

I have an informed citizen’s level of expertise and opinion on health care policy, not more. But the CBO’s role in the health care debate and especially its treatment by the Republican critics remind me of a similar debate about the Federal Reserve. The so-called “Audit the Fed” bill, a proposal to allow another legislative agency, the Government Accountability Office, to bolster Congress’s ability to supervise the Fed as a monetary-policy maker, has been a dominant proposal for Republican Fed reformers. Their pitch is simple: the Fed wields too much power with too little oversight. We don’t need to eliminate the central bank altogether, but we need to make it more answerable to the common citizen through her representatives in Congress.

Having written a book that is in some ways critical of the Fed’s public accountability (through its tangled governance structure), some have presumed that I would be an enthusiastic supporter of Audit the Fed. I’m not, for several reasons. First is the misleading use of accounting jargon to accomplish a task that has nothing to do with accounting. The Fed’s accounts and use of its extraordinary monetary powers is already subjected to an accounting audit. The proposal to include the GAO in the mix isn’t about accounting; it’s about politics.

That said, the strongest argument in favor of increasing Congress’s ability to oversee the Fed through the GAO has always been the CBO argument. That is, the Fed has thousands of analysts, spread throughout the Federal Reserve System, helping the central bank form its policy decisions. Congress has a few dozen overstretched staffers trying to make sure the Fed is doing the work it is designed to do. The “Audit the Fed” bill is designed, its proponents say, to even the playing field by harnessing the expertise and resources of the GAO.

Republican hostility to the CBO’s inconvenient analysis of the health care bills should call into question the sincerity of this view.

To recap what has happened recently: The CBO provided analysis that made the partisan case for repealing the ACA difficult, ultimately impossible. If partisan priors conflict with independent factual analysis, the result can go one of two ways. Partisans can change their views. Or partisans can attack the independent factual analysis. The pitch for Audit the Fed is based on the idea that we should’ve seen the former. What we saw instead was mostly the latter.

I don’t mean for this to be some kind of abstract analogy. The attacks on the CBO should have also prompted the Audit the Fed crowd to come out in defense of legislative agencies and their institutional role. The overlap between those who support Audit the Fed and those who would repeal the ACA is extensive. If the resource mismatch argument were really motivating Fed reformers—that is, if the motivation for the political audit of the Fed is about institutional credibility and congressional oversight—we should’ve seen many, many more Republicans calling foul on CBO criticism.

Instead, we see fouls called on the CBO itself. The Republican reaction to the CBO provides strong evidence that the “resource mismatch” argument is part of a marketing campaign to give partisans more tools to accomplish partisan ends. I would expect that under an Audit the Fed regime the first time the GAO reaches a conclusion about Fed policy that is inconvenient for partisans, we will see the CBO criticisms redux. At that point, the whole exercise of Audit the Fed will be worse than pointless: we will have also damaged the Fed, the GAO, and congressional oversight in the process.

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About Peter Conti-Brown

Conti-Brown is an assistant professor at The Wharton School of the University of Pennsylvania. A historian and a legal scholar, Conti-Brown focuses on central banking, financial regulation, and public finance.

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