After nearly 25 years, the Congressional Budget Office is finally getting the public accountability and the editorial scrutiny it has mostly avoided since its creation. When the CBO was enacted on July 12, 1974, President Nixon's impeachment hearings were in full swing, and I was serving my second term as U.S. Representative from Delaware. I was among those who voted for the Congressional Budget Act of 1974.
It sounded like a good idea at the time. The White House controlled the Office of Management and Budget, and now the U.S. Congress would have a fiscal agency that could determine the costs of various proposals and also provide some economic forecasting, just like Nixon's OMB.
In 1974, computerized econometric modeling was years away. Just five years earlier, in 1969, the federal budget was balanced and trillion dollar annual budgets were barely on the horizon. Inflation was heating up. And the CBO was preparing to staff itself with 1960s-styled disciples of John Maynard Keynes, not the followers of free market thinkers like Milton Friedman. Democratic Speaker of the House Carl Albert and Democratic Senate Majority Leader Mike Mansfield had all the power, and there were no free market thinkers advising them of differing economic points of view.
Twenty-five years later, both impeachment and the CBO are back in the news. Political observers are reflecting back on the events of the first ten days of August, 1974, when Democrats and Republicans alike were lining up to publicly rebuke and demonize the president. In that turbulent time no one was paying a bit of attention to a new Congressional agency called the CBO. Yet the CBO has had a much greater impact on the psyche of the U.S. Congress and the federal budget than the legacy of Richard Nixon ever would.
While discussing CBO isn't nearly as sexy and divisive as discussing the Starr Report, fiscal policy makers on Capitol Hill should be spending more time and energy on the future of the CBO than on the future of the Clinton Administration.
CBO's mantra for the past 25 years has been "big government does it better." Nearly all progressive, free market ideas proposed by the Republican congresses of the past four years have been met with hostility by CBO: capital gains tax reductions, Medical Savings Accounts, federal agency reforms, creating incentives to save money rather than incentives to spend, and of course income tax cuts.
We are not the nation we were 25 years ago. Since 1974, we have recovered from Watergate, rebuilt our cities, won the Cold War, and we continue to experience our longest period of sustained economic growth. Inflation has been kept in check, employment is at record highs, and we are possessed of a balanced budget at last.
But the Congressional Budget Office is still locked in the past. Its Keynsian economic thinking is the same in 1998 as it was in 1974, keeping Americans from enjoying more of their hard-earned dollars. CBO has hamstrung innovations in health care, education and entitlements. It ridicules the very free market principles that are responsible for our economic successes in the 1980s and 1990s.
Republicans had an opportunity to change the thinking of the CBO when they took control of the Congress in 1974, but they failed to do so. Now, with the end of June O'Neill's term as head of the CBO, opportunity is knocking again.
The bipartisan economic agenda for the next several Congresses will require a thorough and fair review by an agency with a clear understanding of market economies. That will be true regardless of which party controls the Congress. Social Security reform, Medicare reform, the handling of federal budget surpluses, determining the impact of the capital gains tax on economic expansion, and future efforts to reduce taxes are all bipartisan issues whose fates will be determined by the new Congressional Budget Director.
The first task of Sen. Pete Domenici (R-N.M.), who will make the choice of the new director, is to name a person with an understanding of market economics. Then the new CBO director must repopulate the new CBO with like-minded individuals.
The impeachment of President Clinton will be decided in the next few weeks, but the economic principles of the new CBO will impact the lives and fortunes of American families for a decade to come. It is up to the new Republican Congressional leadership to set the CBO on a new course before this golden opportunity passes them by again.
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The National Center for Policy Analysis is a public policy research institute founded in 1983 and internationally known for its studies on public policy issues.