The OMB-CBO throwdown

The White House went to war with the Congressional Budget Office after Friday’s announcement that the proposed changes to Barack Obama’s health-care plan to realize big cost savings would only recover $2 billion over 10 years, at best — about 0.2% of ObamaCare’s lowest projected cost.  Budget director Peter Orszag published a statement yesterday that accused the CBO of essentially lying in its analysis:

The Obama administration is touting a proposal to give a medical advisory council the power to help decide the scope of coverage that would be eligible for reimbursement under Medicare.

Administration officials say the proposed “Independent Medicare Advisory Council” would both improve health care quality and control costs. Some health care industry groups object to the proposal, saying such a council would not be qualified to make those judgments.

The CBO’s review of the proposal found that “the probability is high that no savings would be realized … but there is also a chance that substantial savings might be realized,” Elmendorf wrote.

“Looking beyond the 10-year-budget window, CBO expects that this proposal would generate larger but still modest savings on the same probabilistic basis.” …

White House Budget Director Peter Orszag said the CBO’s analysis — which it relayed to House Majority Leader Steny Hoyer on Saturday — could feed a perception of the office’s bias toward “exaggerating costs and underestimating savings.”

Obama called Elmendorf to the White House after the CBO director testified that the present House bill would add $239 billion to the deficit over the next ten years, creating a rift between moderate and liberal Democrats in the House and abruptly halting the effort in the Senate.  Obama denied that he intended to intimidate Elmendorf into providing more sympathetic numbers in subsequent analyses, but the White House got roundly criticized for inappropriately interfering with Congress’ independence in fiscal analysis.

Now, however, the White House has dispensed with the illusion of bullying and made it as overt as possible.  This makes the intent of the earlier meeting crystal clear.  They had hoped to intimidate Elmendorf in private, and since that didn’t work, they’re now doing it openly.

Nor is that the only instance of OMB overstepping its authority to interfere with the CBO.  Orszag unexpectedly showed up at an April scorekeeping meeting regarding the controversial IMF funding demanded by the White House, which Politico reported at the time:

It’s a nerdish skirmish easily dismissed, but the IMF money — totaling $108 billion — is important in today’s global economic crisis. And Peter Orszag, a former director of the Congressional Budget Office who now leads the Office of Management and Budget, has jumped in to an unprecedented degree, pressing his old CBO colleagues to change past practices and even attending a special meeting of the scorekeepers called on short notice two weeks ago.

“I don’t think I’ve ever seen an OMB director at a scorekeeper’s meeting,” said one longtime veteran of the budget process who attended. Orszag, who admits he skipped the same sort of meetings as CBO director, made light of the matter: “It was seen as this mystical thing, so I wanted to see what it was like in person,” he told POLITICO.

But House and Senate staff confirm that it was OMB that called the April 9 meeting, which came just hours before the White House was slated to submit an $83.4 billion supplemental spending request for ongoing military operations in Iraq and Afghanistan as well as new foreign aid. Orszag not only attended but also brought with him a representative from Treasury. And persons familiar with the meeting said the administration’s apparent hope was to get a favorable response, making it easier to include the IMF funds in the request later in the day.

Keith Hennessey says the OMB has gone on the warpath because the CBO has demolished the Obama argument about cost savings in its IMAC proposal:

With this letter CBO has killed the President’s IMAC proposal.  It almost certainly would have died even without CBO’s letter.  The proposal would have transferred an enormous amount of power from Congress to the Executive Branch.  Turf-conscious Congressional committee chairmen would have fought it to protect their power base.  Medicare provider interest groups (hospitals, doctors) were starting to lobby against it.  They prefer Congress making these decisions because they’re easier to lobby and influence. …

The death of IMAC is a black eye for the Administration and another step backward for the pending health care reform bills.  This result was both predictable and avoidable.

In a Hot Air exclusive, I contacted Chuck Blahous of the Hudson Institute, formerly the deputy director of George Bush’s National Economic Council about the open and aggressive attack on the CBO from Orszag and the White House.  Blahous finds it unseemly:

“It’s routine for OMB and CBO to have scoring differences. It’s also routine for the two agencies to separately acknowledge, explain and quantify them. What’s not routine is for each to overtly criticize the other. This is a bad road to go down in any case, but even more so because OMB probably has the glass house here. Institutionally, they’re just different; CBO is purely a referee, while OMB is part referee, part player because they’re part of the President’s policy development team. Moreover, OMB’s February budget presentation attracted a lot of justified criticism for its economic assumptions and for moving various deficit-expanding policies into the budget baseline. Furthermore, most of the claims about long-term cost savings from health care reform have been purely speculative, with no data from the actuaries to back them up. Still, I don’t expect CBO to hit back and to criticize OMB scoring, nor should they. Hopefully folks will walk back and cooler heads will prevail.”

Orszag has been an embarrassment as OMB director, and now he’s becoming dangerous to the separation of powers between the branches of government. Either Obama should put Orszag on a leash, or get rid of him immediately — and find a real budget director, not just a liberal-agenda hack.

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