Former Fed chair Alan Greenspan praises the Congressional Budget Office as a “first-rate operation,” but that doesn’t mean they get everything right. What happens if the CBO guesses wrong on ObamaCare? Greenspan told Jake Tapper yesterday on This Week that with the country’s ability to borrow becoming rapidly more difficult, Congress should have erred on the side of fiscal conservatism:
Well, the CBO, incidentally, Congressional Budget Office, which is really a first-rate operation, says that it does [contain costs enough]. The problem is not their estimates, but the range of potential error in those estimates.
And when you’re dealing with an economy in which debt is becoming — federal debt is becoming ever increasingly a problem, it strikes me that when you’re dealing with public policy and you’re in a position where you have to ask yourself, “What happens if we are wrong?”
In other words, in the case now, where our buffer between our capacity to borrow and our actual debt is narrowing, for the first time, I think, in the American history, there’s a question, supposing we are wrong on the cost estimates, and, indeed, they are actually much higher than the best estimates can generate, the consequences are very severe, whereas if they are too high, it’s very easy to adjust.
How can we determine whether the CBO might have gotten it wrong? How about tracking the results of all the previous entitlement programs on costs? Not only did programs like Medicare and Medicaid cost more in the short term than Congress or its analysts predicted at the time, it cost vastly more than anyone predicted in the long term. The track record on entitlement program projections is long and almost entirely embarrassing.
What happens if we’re wrong? We go broke, in a not dissimilar manner than the “social democracies” of Europe.
Update: Yes, I’m aware that the CBO wasn’t around when Medicare was proposed, but I got sloppy when I wrote this. The point was that Medicare was predicted to consist of modest costs and growth. Now it’s verging on collapse, and we’re expanding it rather than scaling it back.
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