How the CBO Estimates Cost

UPDATE: Pete Davis and Donald Marron commented on this story and defend the CBO as the best way to estimate cost. Douglas Holtz-Eakin explains that the CBO has to stay out of politics. Even if future cost cutting is politically unlikely, the CBO must provide cost estimates based on the legislation it is presented.

Today The Washington Post has a story about the process the CBO goes through to produce its cost estimates for healthcare reform proposals. The power CBO has in the health debate is undeniable; a high cost estimate on a bill can be enough to send lawmakers back to the drawing board.

While many believe that the CBO is too conservative, too liberal, or not transparent enough, the fact remains that the CBO is the most trustworthy institution that exists to assess the effect of legislation on the federal budget. To score legislation, the CBO uses a computer model based on survey data and past policy experiences, such as Massachusetts’s experiment with universal healthcare. The Post quotes Doug Elmendorf, director of the CBO, as saying:

"With such consequential decisions on the table, we feel the weight of responsibility to provide the best information that we possibly can.”