U.S. GOVERNMENT PUBLISHING OFFICE

30–541 WASHINGTON : 2018

CBO OVERSIGHT: MEMBER DAY 

HEARING 

BEFORE THE

COMMITTEE ON THE BUDGET 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

SECOND SESSION 

HEARING HELD IN WASHINGTON, D.C., MARCH 7, 2018 

Serial No. 115–11 

Printed for the use of the Committee on the Budget 

( 

Available on the Internet: 

www.govinfo.gov 

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(II) 

COMMITTEE ON THE BUDGET 

STEVE WOMACK, Arkansas, Chairman 

TODD ROKITA, Indiana, Vice Chairman 

DIANE BLACK, Tennessee 

MARIO DIAZ-BALART, Florida 

TOM COLE, Oklahoma 

TOM MCCLINTOCK, California 

ROB WOODALL, Georgia 

MARK SANFORD, South Carolina 

DAVE BRAT, Virginia 

GLENN GROTHMAN, Wisconsin 

GARY J. PALMER, Alabama 

BRUCE WESTERMAN, Arkansas 

JAMES B. RENACCI, Ohio 

BILL JOHNSON, Ohio 

JASON SMITH, Missouri 

JASON LEWIS, Minnesota 

JACK BERGMAN, Michigan 

JOHN J. FASO, New York 

LLOYD SMUCKER, Pennsylvania 

MATT GAETZ, Florida 

JODEY C. ARRINGTON, Texas 

A. DREW FERGUSON IV, Georgia 

JOHN A. YARMUTH, Kentucky, 

Ranking Minority Member 

BARBARA LEE, California 

MICHELLE LUJAN GRISHAM, New Mexico 

SETH MOULTON, Massachusetts 

HAKEEM S. JEFFRIES, New York 

BRIAN HIGGINS, New York 

SUZAN K. DELBENE, Washington 

DEBBIE WASSERMAN SCHULTZ, Florida 

BRENDAN F. BOYLE, Pennsylvania 

RO KHANNA, California 

PRAMILA JAYAPAL, Washington, 

Vice Ranking Minority Member 

SALUD O. CARBAJAL, California 

SHEILA JACKSON LEE, Texas 

JANICE D. SCHAKOWSKY, Illinois 

PROFESSIONAL STAFF

DAN KENIRY, Staff Director 

ELLEN BALIS, Minority Staff Director 

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CONTENTS 

Page 

Hearing held in Washington D.C., March 7, 2018 ................................................ 1 

Hon. Steve Womack, Chairman, Committee on the Budget ......................... 1 

Prepared statement of ............................................................................... 3 

Hon. John A. Yarmuth, Ranking Member, Committee on the Budget ........ 5 

Prepared statement of ............................................................................... 6 

Hon. Warren Davidson, a Representative in Congress from the state 

of Ohio ............................................................................................................ 8 

Prepared statement of ............................................................................... 10 

Hon. Scott Perry a Representative in Congress from the state of Pennsylvania .............................................................................................................. 17 

Prepared statement of ............................................................................... 20 

Hon. Michael C. Burgess, M.D., a Representative in Congress from the 

state of Texas ................................................................................................ 25 

Prepared statement of ............................................................................... 27 

Additional statements submitted for the record: ........................................... 31 

Hon. William M. Thornberry, a Representative in Congress from 

the state of Texas ................................................................................... 31 

Hon. Sam Johnson a Representative in Congress from the state 

of Texas ................................................................................................... 33 

Hon. Rau ́l Grijalva a Representative in Congress from the state 

of Arizona ............................................................................................... 36 

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(1) 

CBO OVERSIGHT: MEMBER DAY 

WEDNESDAY, MARCH 7, 2018 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON THE BUDGET, 

Washington, D.C. 

The Committee met, pursuant to call, at 10:30 a.m., in Room 

1334, Longworth House Office Building, Hon. Steve Womack 

[Chairman of the Committee] presiding. 

Present: Representatives Womack, Woodall, Grothman, Ferguson, Black, Faso, Yarmuth, and Jayapal. 

Chairman WOMACK. The hearing will come to order. Good morning, and welcome to the Budget Committee Members’ Day Hearing 

on Oversight of the Congressional Budget Office. Before we begin, 

I would ask a unanimous consent that consistent with clause 4 of 

House rule XVI, the Chairman be authorized to declare a recess at 

any time. Without objection, the request is agreed to. 

While CBO was established by the Congressional Budget Impoundment Act of 1974, the agency has not undergone a comprehensive review since its founding more than 40 years ago. 

CBO’s mission has remained the same over the years, but expectations have clearly changed and evolved over time. 

So, these hearings in the House Budget Committee are intended 

to help us learn more about how CBO carries out its nonpartisan 

mandate to consider potential areas for improvement and to ensure 

the agency has everything it needs to fulfill its mission. 

We started this series of hearings discussing the agency’s organizational and operational structure with CBO Director, Dr. Keith 

Hall. In our second hearing, we began to explore some of the more 

technical aspects of how they work in crafting an impartial work 

product to Congress that relies on the CBO to make informed legislative decisions. And last week, we took an even deeper dive into 

CBO’s use of models as a tool in scoring legislative proposals, and 

what kinds of assumptions are made in that process. 

Today will be a little different than the previous discussions. We 

are providing interested Members of the House the opportunity to 

be part of the ongoing conversation about CBO’s mission, work 

product, and transparency efforts. 

Members who do not serve on this Committee engage with CBO 

in different ways and can present additional perspectives on the 

challenges they have experienced in working with CBO and possible improvements on how the agency supports Congress. CBO is 

necessary for a successful and fully functioning budget process, so 

we do not take light of any of these conversations. 

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2 

I look forward to considering ideas brought by Members of the 

House and continuing to identify potential areas improvement at 

the agency. Thank you, and with that I will yield to the ranking 

member, Mr. Yarmuth. 

[The prepared statement of Chairman Womack follows:] 

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Chairman Steve Womack's Opening Statement: 

Hearing on CBO Oversight: Member's Day 

Washington, March 7, 2018 

As prepared for delivery- House Budget Committee Chairman Steve Womack 

Good morning, and thank you for joining us as we continue our series of hearings on 

the Congressional Budget Office-a vital and nonpartisan congressional support 

agency that directly assists the House and Senate Budget Committees. 

While CBO was established by the Congressional Budget and Impoundment Act of 

1974, the agency has not undergone a comprehensive review since its founding more 

than 40 years ago. 

CBO's mission has remained the same over the years, but expectations have clearly 

changed and evolved over time. 

So these hearings in the House Budget Committee are intended to help us learn 

more about how CBO carries out its nonpartisan mandate, to consider potential 

areas for improvement, and to ensure the agency has everything it needs to fulfill 

its mission. 

We started this series of hearings discussing the agency's organizational and 

operational structure with CBO Director Dr. Keith Hall. 

In our second hearing, we began to explore some of the more technical aspects of 

how CBO actually crafts the impartial work-products Congress relies on to make 

informed legislative decisions. 

And last week, we took a deeper dive into CBO's use of models as a tool in scoring 

legislative proposals and what kinds of assumptions are made in the process. 

Today will be a little different than the previous three discussions. 

We're providing interested Members of the House the opportunity to be part of the 

ongoing conversation about CBO's mission, work product, and transparency efforts. 

Members who do not serve on this Committee engage with CBO in different ways 

and can present additional perspectives on the challenges they have experienced in 

working with CBO and possible improvements to how the agency supports 

Congress. 
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CEO is necessary for a successful and fully functioning budget process, so we do not 

take light of any of these conversations. 

I look forward to considering ideas brought by Members of the House and 

continuing to identify potential areas of improvement at the agency. 

Thank you, and with that, I yield to the Ranking Member, Mr. Yarmuth. 
5 

Mr. YARMUTH. Thank you very much, Mr. Chairman. I appreciate your holding this hearing. I am pleased to join you in welcoming our witnesses for Members’ Day, our fourth CBO Oversight 

Hearing. The Congressional Budget Act of 1974 created CBO. For 

more than 40 years as you mentioned CBO, a nonpartisan agency, 

has provided Congress with objective and impartial information 

about budgetary and economic issues. 

The agency assists Congress by developing our Nation’s fiscal 

and economic outlook, which helps us understand where we are, 

and where we are going in terms of deficits and debt under current 

law. CBO also provides cost estimates for legislation being considered by Congress, which are extremely important in detailing a 

bill’s potential impact, and its effects on deficits. 

CBO has never claimed, nor has it ever been expected, to perfectly predict the future. If the staff could I am sure they would be 

in a much more profitable line of work. However, CBO and its experienced nonpartisan analysts do provide their best estimates possible within the time and resource constraints that Congress gives 

them. 

Nevertheless, CBO has recently been the target of harsh and 

sometimes unjust attacks. We may hear some of those criticisms 

today, but I hope the fact that just a handful of Members are testifying at this hearing is an indication that cooler heads are prevailing. 

To be fair, Congress has a duty to review CBO’s work and ask 

questions about economic assumptions and methodologies used. 

And CBO should do its best to provide Congress with explanations 

for that work, as they have done over the last few hearings. Democrats have certainly raised questions about CBO’s assumptions in 

the past, and I am sure we will in the future. However, we Democrats and Republicans have not been given any reason, in my opinion, to question the integrity of CBO or its analysts. 

In the three CBO oversight hearings we have already held this 

year we have heard nothing that should lead anyone to doubt the 

character of CBO staff or the soundness of their work. So, I hope 

and expect that Members giving testimony today will focus on appropriate areas for oversight and will not sink to the level of making ad hominem attacks on CBO staffers, or questioning the integrity or political impartiality of the institution. 

CBO tells Congress what we need to know regardless of whether 

or not it is what we want to hear. That is invaluable. So, Mr. 

Chairman, I will not take any more time. I look forward to hearing 

from what our colleagues have to add to this conversation today, 

and I yield back the balance of my time. 

[The prepared statement of Mr. Yarmuth follows:] 

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Ranking Member John Yarmuth's Opening Statement: 

Hearing on CBO Oversight: Member's Day 

Washington, March 7, 2018 

As prepared for delivery- Honse Budget Committee Ranking Member John Yannuth 

Thank you, Chairman Womack, for holding this hearing today. I am pleased to join 

you in welcoming our witnesses for Members' Day, our fourth CEO oversight 

hearing. 

The Congressional Budget Act of 1974 created CEO. For more than 40 years, CEO, 

a nonpartisan agency, has provided Congress with objective and impartial 

information about budgetary and economic issues. The agency assists Congress by 

developing our nation's fiscal and economic outlook, which helps us understand 

where we are and where we are going in terms of deficits and debt under current 

law. CEO also provides cost estimates for legislation being considered by Congress, 

which are extremely important in detailing a bill's potential impact and its effects 

on deficits. 

CEO has never claimed, nor has it even been expected, to perfectly predict the 

future. If their staff could, I'm sure they would be in a much more profitable line of 

work. However, CEO and its experienced, nonpartisan analysts do provide their 

best estimates possible within the time and resource constraints that Congress 

gives them. 

Nevertheless, CEO has recently been the target of harsh and sometimes unjust 

attacks. We may hear some of those criticisms today, but I hope the fact that just a 

handful of Members are testifying at this hearing is an indication that cooler heads 

are prevailing. 

To be fair, Congress has a duty to review CEO's work and ask questions about 

economic assumptions and methodologies used, and CEO should do its best to 

provide Congress with explanations for that work. Democrats have certainly raised 

questions about CEO's assumptions in the past and I'm sure we will in the future. 

However, we, Democrats and Republicans, have not been given any reason to 

question the integrity of CEO or its analysts. In the three CEO oversight hearings 

we've already had this year, we've heard nothing that should lead anyone to doubt 

the character of CEO staff or the soundness of their work. 

So I hope and expect that Members giving testimony today will focus on 

appropriate areas for oversight and will not sink to the level of making ad hominem 

attacks on CEO staffers or questioning the integrity or political impartiality of the 
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institution. CEO tells Congress what we need to know, regardless of whether or not 

it's what we want to hear. That is invaluable. 

Mr. Chairman, I will not take any more time. I look forward to hearing what our 

colleagues have to add to this conversation today and yield back the balance of my 

time. 
8 

Chairman WOMACK. I thank the ranking member. As a reminder, 

Members have 5 minutes to give their oral testimony. Their written statements will be submitted for the record. Additionally, the 

majority and minority will each be given 5 minutes per side for 

members to question each witness following their statement. 

I now would like to recognize our first witness, Representative 

Warren Davidson from the Buckeye State. Thank you for taking 

time to share your views with the Budget Committee. The Committee has received your written statement; it will be part of the 

formal hearing record and you will have 5 minutes to deliver your 

remarks, give or take, given our short turnout here today. And I 

am going to turn the floor over to you, Representative Davidson. 

STATEMENT OF HON. WARREN DAVIDSON, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO 

Mr. DAVIDSON. Chairman, thank you. And to the Committee, 

thank you for taking up this time in your Committee’s schedule to 

hear from other Members. And I appreciate your interest in the 

CBO Show Your Work Act, H.R. 3822. 

This is a bill that deals not with pejorative accusations or ad 

hominem attacks on CBO, it simply says whatever you are doing 

please show your work. It could be PhD level algorithms, or a 

Magic 8 Ball, but whatever they do they could show it to the world. 

The goal is to strengthen the transparency and, therefore, accountability. And in the long run accuracy because they would benefit 

from the same sorts of open source methods that are popularized 

throughout the for-profit economy. 

Before coming to Congress, I was a manufacturer. Whenever our 

company was deciding how to price for a quote, or a new product 

line, or how to value an acquisition, I always worked closely with 

our CFO and our cost accountants. Owner actions were iterative as 

we worked to model the critical decisions that shaped our companies. At times, a quick summary report, a chart, graph, or a simple 

email was sufficient. But I can always get as much detail as needed 

to understand how the cost stacked up, so that I could accurately 

assess how the various alternative courses of action could influence 

the desired outcome. 

This open and transparent relationship helped my executive 

team communicate effectively and my businesses run more efficiently. I was able to execute transactions knowing I had the best 

data. No section or department within the business held the other 

hostage. 

Congress, and indeed the American people, need the same relationship with CBO. CBO has the vital role as our accounting department in Congress. Given the enormous weight CBO scores 

have on the ability of the Members of Congress to make policy decisions, it should be a top priority for CBO standards and scores to 

be transparent, accurate, and of the highest possible quality. 

Requiring CBO to release how it scores legislation for informational purposes can help lawmakers fairly judge these bills effectively and accurately model alternative courses of actions. I did not 

have to guess in business, and when the stakes are even higher 

here in Congress, we should not hope we should know. For that 

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9 

reason, last September I introduced H.R. 3822, the CBO Show 

Your Work Act. 

The bill does three things. First, it requires the CBO to publish 

all data, models, and processes utilized in the analysis and scoring 

of legislation online. Next, it specifies that the data and information provided must be sufficient so that individuals outside of CBO 

can understand, replicate, and reproduce the results found within 

CBO scores. 

Finally, should CBO not disclose certain datasets due to privacy, 

they must, instead, publish a complete list of data variables for 

that data. This would give users of the model an opportunity to 

modify inputs using aggregates based on private details kept at 

CBO. So, for example, you could have the sum but not the individual components, say, of tax returns or prescription drug costs. 

Data such as these descriptive statistics, averages, standard deviations, or correlations could include reference to the statute or 

rule preventing their disclosure. In considering this bill, it is important to remember that academic institutions around the world already do this. 

Economists understand that transparency and openness of communication provides a strong safeguard against errors, omissions, 

and bias. This is why the academic community increasingly requires scholars and economists to show their work before publishing; to ensure the integrity is upheld of the published work. 

In one example, the American Economic Association Data Availability Policy reads, ‘‘It is the policy of the American Economic Association to publish papers only if the data used in the analysis are 

clearly and precisely documented and are readily available to any 

researcher for purposes of replication.’’ 

In light of most recent glaring need for transparency concerning 

the increasingly contentious healthcare and tax reform debates, it 

is vitally important that CBO adopts this widely accepted and acknowledge data availability standard. So that Members can do our 

job, and that we have access to our accounting department, and we 

have access to expertise that may not even be available on Capitol 

Hill. I look forward to your questions. 

[The prepared statement of Warren Davidson follows:] 

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The Honorable Warren Davidson 

Member of Congress 

sth District, Ohio 

CBO Oversight: Member Day 

House Budget Committee 

March 7, 2018 

Chaim1an Womack, Ranking Member Yammth, and Members of Congress, thank you for 

inviting me to testify this morning about my bill H.R. 3822, the CBO Show Your Work Act. 

First, I want to applaud the Committee's efforts on taking up this important topic. 

This bipartisan effort aims to strengthen transparency and accuracy within the CBO scoring 

process. Transparency and accuracy is needed now more than ever given the enormous impact 

tax legislation has on our macro-economy. CBO has an incredibly important role as Congress' 

scorekeeper providing budget and cost analysis. In the business world, CBO essentially serves as 

our accounting department. 

Before coming to Congress, I was a manufacturer. Whenever our company was deciding how to 

price a quote, a new product line, or value and acquisition, T always worked closing with our 

CFO and cost accounts. Our interactions were iterative as we worked to model the critical 

decisions that shaped our companies. At times a quick summary report, a chart, graph or a simple 

email was sufficient, but I could always get as much detail as needed to understand how they 

costs stacked up so that I could accurately assess how the various alternative courses of action 

could influence the desired outcome. This open and transparent relationship helped my executive 

team communicate effectively, and my business itself run more efficiently. I was able to execute 

transactions knowing I had the best data available. 

No section or department within my business held the other hostage. 

Congress, indeed the American people, need the same relationship with CBO. CBO has the vital 

role as the accounting department for Congress. Given the enonnous weight CBO scores have on 

the ability of Members of Congress to make policy decisions, it should be a top priority for CBO 

standards and scores arc transparent, accurate and of the highest possible quality. Requiring CBO 

to release how it scores legislation for infom1ational purposes can help lawmakers fairly judge 

these bills effectively, and accurately model alternative courses of action. I didn't have to guess 
11 

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in business, and when the stakes are higher here in Congress, we shouldn't hope, we should 

know. 

For that reason, last September, I introduced H.R. 3822, the CBO Show Your Work Act 

This bill does three things. 

First, it requires the CBO to publish all data, models, and processes utilized in the analysis and 

scoring oflegislation online. Next, it specifies that the data and infonnation provided must be 

sufficient so that individuals outside of CBO can understand, replicate, and reproduce the results 

found within the CBO scores. Finally, should CBO not disclose certain datasets due to privacy 

concerns, they must instead publish a complete list of data variables for that data. This would 

give users of the model an opportunity to modify inputs using aggregates based on the private 

details kept at CBO. Data such as descriptive statistics, averages, standard deviations, 

correlations, would include a reference to the statute or rule preventing them from disclosing the 

data, and the contact information for the individual or entity who has access to the redacted data. 

In consideration of this bill, it's important to remember that academic institutions around the 

world already do this. Economists understand that transparency, and the openness of 

communication provides a strong safeguard against errors, omissions, and bias. This is why the 

academic community increasingly require scholars and economists to "'show their work" before 

publishing to insure integrity is upheld and the published work can stand on its own. 

In one example, the American Economic Association's "Data Availability Policy" reads: 

"'It is the policy of the American Economic Association to publish papers only if the data 

used in the analysis are clearly and precisely documented and are readily available to any 

researcher for purposes of replication." 

In light of our most recent, glaring need for more transparency concerning the increasingly 

contentious healthcare and tax reform debates, it is vitally important that CBO adopts this widely 

accepted and acknowledged data availability standard, so that members of Congress, outside 

experts, and interested parties can understand the CBO's methodology- when appropriate, raise 

concerns about its limitations or accuracy. 
12 

Chairman WOMACK. Thank you, Representative Davidson. Again, 

pursuant to the rules of the Committee hearing, 5 minutes each 

side for questions. I will yield to the ranking member. 

Mr. YARMUTH. I have no questions, Mr. Chairman. 

Chairman WOMACK. Are there any questions on the majority 

side? Mr. Woodall. 

Mr. WOODALL. Thank you, Mr. Chairman. Mr. Davidson, I was 

struck by what the ranking member said that here is an important 

issue. We all talk about CBO a great deal, yet only three Members 

have come forward to try to make a difference in that. I think that 

is partly because of a confidence that we all like to have in the men 

and women who work with us in service. I think part of it is because it is so complex. 

When you talk about replicating the CBO’s work, I believe we 

have had some hearings, Mr. Chairman, folks have said, ‘‘You 

know what we really cannot be a check and a balance on CBO because we do not have their model. We do not have their capability. 

We cannot go back and replicate it.’’ 

On the one hand, I would imagine that if we could replicate 

CBO’s work there might be more gaming of the system. You and 

I would sit down with CBO’s model and we would work our bill out 

so that it came back with a favorable score based on that model. 

I guess my question is when I go to the private sector and look 

at some of the big macroeconomic modeling houses they tell me 

that their formula is the most proprietary thing that they have. 

They want to keep that a secret. In fact, we had a bill about Wall 

Street the other day where stock pickers wanted to keep their formulas for picking stocks a secret in that way. 

Given your experience in the private sector you would distinguish the work that CBO does, and its need for public transparency 

from the work that all of those private sector groups do, and their 

desire for secrecy. 

Mr. DAVIDSON. Absolutely, so if you think about a trading firm, 

they are literally rewriting code all day to get the right algorithm 

to trade. If you think about, you know, Google they are writing 

stuff all day to get search results. If you are looking at people to 

do this, they have proprietary information. 

In this case, the information is the American people’s information. This is our accounting department and, you know, their formulas should not be proprietary. So, if you think about a spreadsheet or a pivot table that they are looking at, there may be proprietary information that is contained on other sheets. But the toplevel data the formula that says this is how, you know, how many 

people are affected by this change of policy. Well, that is an equation of some sorts. There is math behind it normally. And so, we 

should be able to say, ‘‘Gee, what are the variables that are driving 

that?’’ 

If you think about a company like G.E., they are undergoing 

some restructuring. I would assume the board of directors right 

now is asking lots of questions about the cost accounting in these 

various divisions of the company saying, ‘‘How are we going to save 

our company?’’ And I am confident they are not being told by their 

accounting department, ‘‘Well, we cannot really share that with 

you.’’ 

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13 

And, you know, essentially, we are here trying to steer the course 

of fiscal policy for the United States’ economy, far more consequential than any one company. And we are doing it blindly, frankly. 

We just throw stuff in and go, ‘‘Well, gee, I hope this gets a good 

score.’’ And then how dare you question the integrity of the accounting department. 

Well gee, what did you base your assumption on? I mean could 

you show me? Maybe I would understand why if I, you know, make 

this recommendation we are getting the outcome here. And it may 

be that you are exactly right, but then legislators could write effective legislation and not be shooting in the dark. 

Mr. WOODALL. You would anticipate if your bill became law that 

I would be able to grab some group of data, or a program or something, and take it down to Georgia State University, and we would 

be able to run the same model with the same variables on the same 

formula and come out with the same outcome. When you talk about 

show your work, you mean we really ought to be able to replicate 

the work that today goes on behind closed doors. 

Mr. DAVIDSON. Right. It should be reproducible. Just the same 

as the standard for academic research, and same when you are 

looking at crowd sourcing a project. If they are looking at open 

source code, it is available and it is out there. You should be able 

to put the inputs in and people would say, ‘‘Gee, what about this 

idea?’’ You may actually get even better ideas from the great American public, and the other minds that are focused on other problems. 

Mr. WOODALL. Well, I agree with Mr. Yarmuth that we ought to 

be proud of the men and women who serve us in all the different 

ways that they do. And I would wonder if anyone would have an 

objection to being able to replicate that work, because whatever 

cloud of suspicion hangs over that work today, your idea would dispel that cloud forever. And I am grateful to you for it. Mr. Chairman, I yield back. 

Chairman WOMACK. Okay, given the fact that we have 5 minutes 

each side I would seek unanimous consent to extend the time just 

a little bit longer, because we do have a couple more members that 

had a question, and, without objection, we will do that. Just be 

mindful of the fact that we are supposed to be on the clock. Mr. 

Ferguson. 

Mr. FERGUSON. Mr. Davidson, thank you so much and you too, 

Mr. Perry; glad you all are here. One of the concerns that I have 

had, or one of the questions that I have had, and just keep going 

back to is looking at the accuracy of the data within a 10-year window. Go and pick any year in which you have a CBO score, and 

then extrapolate out 10 years, and what is the accuracy of that 

data at that 10-year window? 

What we have been told by CBO is that they are 97, I think, percent accurate within 6 years. But they do not have any data to support year 7, 8, 9, and 10. And we are being asked to make longterm decisions on data which we have no idea what the accuracy 

of that data, or the likelihood of those things coming true is at the 

10-year mark. 

Would you ever, in your business models, try to look 10 years out 

and say, ‘‘Well, we really have no idea what that could actually 

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14 

look like and cost our company.’’ And do you have any suggestions 

about, you know, what you would do with that? With that lack of 

certainty in the outlying years as we make really critical decisions 

based on data that is unclear what the long-term outlook is? 

Mr. DAVIDSON. Yeah, I think, you know, rearward looking is a 

little easier than forward-looking, right? So, when you look back on 

anything it is hard to know exactly how things are going to turn 

out in 6 to 10 years, or sometimes 6 to 10 months. But you can 

look at what the assumptions were, and why you drew that conclusion if you have access to the models. 

And so, that is my hope is that we would get more accurate models if there was transparency. And as Mr. Woodall stated, it would 

be the surest remedy to all the partisan accusations that, ‘‘Well, 

this is bias because of this assumption.’’ Look, it is math. Here is 

the formula. This is the assumptions, and if you disagree then at 

least you would know why. 

So, it may be that some people, for example, in tax modeling the 

whole debate about how much revenue does the government collect 

comes down to what your assumption on the growth rate is. Well, 

what is driving the assumptions on that? I think a lot of us looked 

at the CBO report and talked to some outside people that had more 

optimistic assumptions than CBO did. 

But we did not have the model to go off of, we just had people 

hoping that they were accurate. We could look at outside models 

and say why their assumptions were what they were, but we could 

not and still have not been able to look at what CBO’s model was. 

Chairman WOMACK. All right. Mrs. Black, Tennessee. 

Mrs. BLACK. Thank you, Mr. Chairman, and thank you Representative Davidson for being here. I, like you, would like to see 

the information and how they got to where they got to. I think 

when you are in a business, at least my experience in business, it 

is a lot easier to be able to make some of those assumptions that 

are being made because it really is just about numbers in many of 

those cases. 

The thing that I think is so difficult, and I wanted to ask you 

if you have a recommendation, or if you have looked at other models that do a better job with this are the behavioral assumptions. 

That has been my biggest complaint with CBO is they make an assumption on how someone is going to behave. 

We saw that particularly in the case of the Affordable Care Act. 

‘‘If you do this, then we think people are going to react this way 

and do that.’’ I do not know that there is a good model out there; 

do you know is there a good model out there? Is there some other 

scoring agency that you have looked at where you said, ‘‘I really 

like that behavioral assumption model, and I think they do a really 

good job on that.’’ 

Mr. DAVIDSON. Yes. I think if you look at say, for example, a 

large retail store like Walmart. How do they run their inventory? 

How is it that they know that if the store models predict this, we 

should stock these items on their shelf? They have got great data. 

They will have reasonably accurate projections off, you know, how 

many Pop-Tarts they are going to sell in a storm versus how many 

Pop-Tarts they are going to sell in good weather. And, you know, 

when they need to have stock. 

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15 

So, they understand that because it is the specifics of their business, but they really look at it differently by different regions. And 

so, I am not saying that we can use their exact model to drop in 

on health insurance, but they are very familiar with their model. 

CBO may very well be incredibly familiar with our model, but as 

the people making the decisions it is guarded, it is veiled. We still 

do not know why they assume that no matter what we do the same 

number of people lose coverage on the healthcare plan. It would be 

nice to see the model, and then we could see well, I do not know 

I model different behavior. 

Now, you could say I believe there is different behavior than the 

CBO believes, but that is all qualitative. What we would like to be 

able to do is make it quantitative with a real model. 

Mrs. BLACK. Have you seen any other models out there that you 

could point to say this particular model got things right, got it closer? Because I have not seen any of that. 

Mr. DAVIDSON. Well, at the macroeconomic level, I mean, economists exist to make weathermen look accurate, right? 

Mrs. BLACK. That is true. Thank you, I yield back. 

Chairman WOMACK. All right, Mr. Yarmuth. 

Mr. YARMUTH. Thanks, Mr. Chairman. In another day, we are 

going to start a process, Mr. Woodall is part of it, Chairman 

Womack and I are part of it, a bicameral bipartisan effort to analyze the budgeting and appropriations process and see if there are 

solutions we can come up to whatever problems we perceive. And 

I would think that your proposal would be something that this 

group might want to consider. 

My question about it is, and part of it relates to what former 

Chairman Black mentioned, but when you listen to CBO here—and 

we have had three hearings and they have spent a lot of time talking about the components of their analysis. And when you listen 

to them it actually seems there is more subjective artistic modeling 

than there is actual data, and so much of it has to do with human 

behavior. 

We know that, for instance, with the ACA all the anticipation 

was that a lot of companies would decide it was in their economic 

interest to pay the $2,000 per employee rather than continuing to 

provide coverage. And very few companies did that, because they 

made the judgment that it was more important to retain their 

workers, to treat their employees well, and that that is something 

that no model, I think, could have anticipated. And, in fact, I do 

not think any outside analysis of the ACA anticipated that so few 

companies would actually make that decision. 

So that is one point I want to make. But my question to you is: 

if we were to have all this information—knowing Congress as I 

think I do in my now my 12th year—what do you think Congress 

would make of it if they had all of this information? And what 

would be the repercussions if you or 10 Members or 50 Members 

came and said we are convinced that this modeling was wrong, 

that this process was wrong, this methodology was wrong. What 

would be the repercussions of that if we had your suggestions in 

place? 

Mr. DAVIDSON. Well I think, you know, so you make the point 

that how much of it is qualitative versus quantitative. And I think 

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16 

that is one of the concerns, frankly, that we rely a lot on qualitative data. And you have got companies out there in the private 

sector where, you know, quant folks, high caliber math folks, are 

some of the highest demand. I mean you have Ph.D.’s in math signing for million-dollar initial jobs because math is so important to 

their business. 

They are not hoping on some qualitative assumptions. They are 

building great datasets and using math. I am not saying CBO can 

pay those, but it may be we have companies making million-dollar 

decisions with better support than we are making trillion-dollar decisions. And if it were working really well I suppose I would not 

be as concerned. But if you just back in, in macro, take all the politics away and look at the math, think of all the assumptions we 

have to have going for us to believe that we are somehow going to 

collect a trillion dollars extra revenue. Because we are borrowing 

a trillion dollars, somehow, I assume some people that vote for this 

stuff believe that in the long run we are going to be able to afford 

it. 

If you are just doing qualitative decisions, maybe it is okay to 

keep doing that. We have got to get more quant in our accounting 

department. And if they do have it, I think that making it public 

might even drive behavior where it becomes common for Members 

of Congress to have a quant person in their office. I would be looking at that. 

I mean, one of the most important hires that we had in our company was cost accounting, because we were pricing stuff, you know, 

the fate of the company hangs out sometimes on a 10th of a penny 

in terms of pricing it. You cannot guess at that you have to be, you 

know, quantitatively accurate. 

And I think sometimes when we are modeling these things they 

are incredibly consequential for the entire economy in the United 

States but have really big impact on the global economy. And so, 

I really believe that we are way behind what is happening in the 

private sector with respect to quantitative data. 

Mr. YARMUTH. Well, you did not answer the one question I had 

was if Congress had all this data, and you have a number of Members who say, ‘‘Oh, this is wrong. They should not have done it this 

way.’’ What happens at that point? 

Mr. DAVIDSON. Well, this is common in a business as well, you 

know, you will have, you know, this person might believe that no, 

this is the right course of action, but they are supporting it with 

data. And generally, some people are persuaded more by emotion 

and qualitative reasoning, and that might be the right answer 

sometimes. 

But facts matter; they are stubborn. And when you have quantitative data and it is supported by, you know, sound logic and 

math a lot of people are persuaded by that. Now, we would have 

our debate. We would still have our privileges as Members of Congress. We would make our arguments, but I think we would have 

the supporting documents. And then, you know, as is the case we 

would probably have Brookings look at the data and believe that 

it is this way, and have Heritage look at it and it is that way. It 

may still have the same kinds of debates, but I think the quality 

of our debate would be better because it would be based on matheBU00-A363290 with DISTILLER

17 

matical models more and more frequently, and we would get more 

and more accurate just as we have seen the private sector do. 

Chairman WOMACK. All right. 

Mrs. BLACK. Mr. Chairman, may I just ask if you would yield on 

just the end of that question, because it was a very interesting 

question. 

Chairman WOMACK. Sure. 

Mrs. BLACK. Representative Davidson, what would then happen 

at the end of the day because you would obviously have a number 

of people say, ‘‘I think it is more the way Brookings, or I think it 

is more this one, or that one, whichever one you choose.’’ But at 

the end of the day would we still use CBO as what we would use 

as in Congress? 

Mr. DAVIDSON. Thank you. And so, my bill does not say whether 

we should or should not have CBO. I think it would be hard to 

imagine not operating with some kind of accounting department, so 

I think we should have someone. Exactly what the org chart should 

look like, I will leave that to those of you who have been spending 

a lot of time working with them. 

I am just looking at it and saying: even if we had the debate as 

Mr. Yarmuth laid out, at the end of the day we would make a decision whether it was based off of qualitative data or quantitative 

data, or this person’s model or that one; we would decide. 

And then, as Mr. Ferguson pointed out over time we would see 

the results, and we would know who was accurate. I mean we are 

in the early stages of that experiment today. It was, you know, a 

five-alarm fire, Armageddon, crumbs on the tax plan. And over the 

course of the next year or 2, or 5, we will see whether it really is 

going to have a simulative effect on the economy. 

And people are really going to get more take home pay as has 

been the case, or whether it is really just a rip-off of the middle 

class. People are already starting to see that in their paychecks. 

We made the decision based off of something, but time will tell. 

And I think that is going to continue to be the case even if we do 

have the back and forth between a higher level of data. 

Mrs. BLACK. Thank you. I just think the ranking member 

brought up something I had not thought about. I appreciate that. 

Mr. DAVIDSON. Thank you. 

Chairman WOMACK. Good healthy discussion. Thank you, Representative Davidson for your comments, and your desire to seek 

improvement in our process, and your willingness to take questions 

today. Thank you. 

Mr. DAVIDSON. Thank you, Chairman. 

Chairman WOMACK. I would like to now recognize our next witness, Representative General Scott Perry from the Keystone State. 

Representative Perry, you have 5 minutes. 

STATEMENT OF HON. SCOTT PERRY, A REPRESENTATIVE IN 

CONGRESS FROM THE STATE OF PENNSYLVANIA 

Mr. PERRY. Thank you. Let me begin by offering my appreciation 

to you, Chairman Womack and Ranking Member Yarmuth, for this. 

This is a grand opportunity for any citizen to speak before the 

Budget Committee. 

BU00-A363290 with DISTILLER

18 

Members of Congress and the American people should be able to 

rely on the fiscal analysis of all legislation as accurate. However, 

the fiscal analysis provided by the Congressional Budget Office, or 

the CBO, is consistently incorrect and has numerous detrimental 

policy implications on a variety of policy over the years. Most recently, the CBO came under renewed criticism as Congress continued its push to repeal and replace the Affordable Care Act, or the 

ACA, in 2017. 

In 2010, the CBO projected that 21 million people would enroll 

in the exchange plans by 2016. The actual 2016 enrollment was 

10.4 million. They missed the mark by over 50 percent. And I 

would just encourage you if that was your mutual fund manager, 

I suspect you would have some questions about accountability 

there. 

Additionally, in 2016 the CBO projected 22 million Americans 

would lose health insurance under the House Republican replacement proposal for the Affordable Care Act while ignoring the fact, 

the fact, that 19 million people either paid the penalty or claimed 

an exemption from the individual mandate. 

Now I just wonder, and it is not to impugn the organization, or 

any of the individuals in it. I am sure that they are working hard 

and diligently and believe in their mission, as they should. But I 

wonder, and I do not know, nor do any of us if that was formulaic, 

or if they literally disregard what is happening in reality, as opposed to some formula that says at this point we should be at this 

number, and so that is our starting point. 

And you say, ‘‘But yeah, I understand that is the formula maybe. 

But the reality is that never happened, so you should base your assessment on reality,’’ yet they do not. 

Another example that comes to mind is from 2015 when Congress authorized the Federal Communications Commission to auction off portions of the electromagnetic spectrum by voluntarily 

asking public broadcasters to surrender unused space to mobile 

data providers, including cell phone companies. This auction generated over $40 billion in revenue for the Federal Government, yet 

the CBO score indicated that this would yield no revenues to the 

Federal Government. 

Ladies and gentlemen, nations go to war on imperfect information, and the decisions that we make here impact people’s lives 

very closely, very intimately. And my interest is seeking the most 

accurate, the most correct, information so that we can proceed that. 

That is my only motivation here. 

But even worse than incorrect outcomes themselves is the lack 

of transparency of the process that Mr. Davidson discussed. We 

have no idea why these projections were so inaccurate, and if you 

do not have any idea why they are wrong, you have no way of correcting this course. 

And so, we continue to score legislation and make decisions 

based on what we do not have any confidence in. I just think that 

is foolish. We do not live our lives that way. Why would we, as a 

representative of the American people, make decisions for them on 

that behalf the same way? 

To me, we face four critical problems with CBO scoring, which 

much be addressed to ensure the accuracy of projections in the fuBU00-A363290 with DISTILLER

19 

ture. Number one, Keynesian assumptions; since its inception 

CBO’s economic models have been based on assumptions that more 

government spending nearly always yields faster economic growth; 

the so-called Keynesian multiplier. 

Unfortunately, these Keynesian economic policies, in many people’s opinion—and I know some others—but in my opinion, have 

failed in reality, in real life. On the other side of the same coin, 

the CBO underestimates the benefits of market forces in reforming 

government programs. 

Number two, lack of transparency. To add to this difficulty, the 

formulas the CBO uses are not public, and they cannot even be 

evaluated independently. Maybe Congress should not evaluate 

them. I am not an economist, but my goodness somebody should 

evaluate them. And after 40 years, I have no idea if they have modernized. This seems archaic to me. 

Baseline budgeting. The use of baseline budgeting is flawed, and 

often construes government spending increases as a given prior to 

the appropriations process. This results in a distorted view of what 

is or is not a funding cut. If the funding is off base on the assumed 

but not authorized or appropriated funding level, any reduction 

from the assumption becomes a cut. This is a misnomer and unfairly strikes fear in the hearts of vulnerable populations or seniors 

and our military while simultaneously encouraging more underfunded spending. And that only happens in Washington, D.C. 

You know if I go to the store and I say to my wife, ‘‘I am going 

to spend $100,’’ and that is my plan, but I come home and I say, 

‘‘Well, I only spent $85.’’ She is not going to be mad at me and say, 

‘‘Well, you cut the grocery spending.’’ She is going to say, ‘‘Well, 

good for you. You did not spend as much.’’ That is not necessarily 

a cut, you know, if it is the same $100 that you spent the week 

before. 

With your indulgence, Mr. Chair, one more point. Even worse, we 

do not have a metric to determine the efficacy of the CBO. There 

is no empirical data to show congressional decisions making has 

improved as a result of the CBO. However, it is safe to say fiscal 

responsibility has significantly decreased in the time since its establishment. 

While I completely respect the impartiality of the office, I have 

deep concerns that this process has flaws as demonstrated by the 

examples I have listed. This has directly limited our ability to address the pressing issues facing the American people, and we need 

transparency in the process. And again, I thank you for your indulgence. 

[The prepared statement of Scott Perry follows:] 

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20 

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Insert offset folio 7 here 30541.007

The Honorable Scott Perry 

Member of Congress 

4th District, Pennsylvania 

CBO Oversight: Member Day 

House Budget Committee 

March 7, 2018 

Thank you for allowing me time to speak before the Budget committee today. Members 

of Congress and the American people should be able to rely on the fiscal analysis of all 

legislation as accurate. However, the fiscal analysis provided by the Congressional Budget 

Office (CBO) is consistently incorrect and has had numerous detrimental policy implications on 

a variety of policies over the years. 

Most recently, the CBO came under renewed criticism as Congress continued its push to 

repeal and replace the Affordable Care Act/Obamacare (ACA) in 2017. In 2010, the CBO 

projected that 21 million people would enroll in exchange plans by 2016. The actual2016 

enrollment was 10.4 million. They missed the mark by over 50 percent. 

Additionally, in 2016, the CBO projected 22 million Americans would lose health 

insurance under the House Republican replacement proposal for the Affordable Care Act, while 

ignoring the fact that 19 million people either paid the penalty or claimed an exemption from the 

individual mandate. Even the Speaker called the accuracy of the CBO projections into question. 

Another example that comes to mind is from 2015, when Congress authorized the Federal 

Communications Commission (FCC) to auction off portions of the electromagnetic spectrum by 

voluntarily asking public broadcasters to surrender unused space to mobile data providers, 

including cell phone companies. This auction generated over $40 billion in revenue for the 

federal government. The CBO score indicated that this would yield no revenues to the federal 

government. 

Even worse than the incorrect outcomes themselves, is the lack of transparency of the 

process that gets these results- we have no idea why these projections were so inaccurate. 

We face 4 critical problems with the CBO scoring, which must be addressed to ensure the 

accuracy of projections in the future: 

o 1. Keynesian Assumptions 

Since its inception, CBO's economic models have been based on 

assumptions that more government spending nearly always yields faster 

economic growth (the so-called Keynesian "multiplier"). 

Unfortunately, these Keynesian economic policies have failed in real life. 

On the other side of this same coin, the CBO underestimates the benefits of 

market forces in reforming government programs. 

o 2. Lack of Transparency 

To add to this difficulty, the formulas the CBO uses are not public and they 

can't even be evaluated independently. 

o 3. Baseline Budgeting: 
21 

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Insert offset folio 8 here 30541.008

The use of"baseline" budgeting is flawed and often construes government 

spending increases as a given prior to the appropriations process. This results 

in a distorted view of what is or isn't a funding a cut. If the funding is off 

base on the assumed, but not authorized or appropriated, funding level, any 

reduction from the assumption becomes a cut. This is a misnomer and 

unfairly strikes fear into the hearts of vulnerable populations, our seniors and 

our military, while simultaneously encouraging more unfunded spending. 

o 4. Ensuring Efficacy 

Even worse, we don't have a metric to determine the efficacy of the CBO. 

There is no empirical data to show Congressional decision making has 

improved as a result of the CBO. However, it is safe to say, fiscal 

responsibility has significantly decreased in the time since its establishment. 

While I respect the impartiality of the Office, I have deep concerns that this process is 

flawed, as demonstrated by the examples above. This is directly limiting our ability to address 

the pressing issues facing the American people and we need transparency in the process. Thank 

you for letting me address this committee today. 
22 

Chairman WOMACK. You bet. Thank you, Representative Perry. 

Mr. Yarmuth. 

Mr. YARMUTH. Thank you, Mr. Chairman. Thank you, Congressman Perry, for your testimony. I am curious have you ever met 

with CBO? 

Mr. PERRY. Well, as a rank and file Member, every time that I 

seek to get something from the CBO it has to go through a Chairman, and the CBO is always happy to tell me that. So, unfortunately, no I do not have many opportunities to meet with the CBO 

staff. 

Mr. YARMUTH. Well, when they were here over these last three 

hearings, they stressed that they are more than happy to meet 

with Members to talk about how they analyze data and issues and 

so forth. So, I would recommend that you avail yourself of that opportunity. And also, I suspect that maybe if they see your testimony, they would be interested in responding to it which, you 

know, I think is probably a good idea. 

Mr. PERRY. I am happy to have the dialogue. 

Mr. YARMUTH. What is interesting to me is, and clearly when we 

passed the ACA, when CBO scored the ACA, we were talking about 

something that it affects somewhere around 16 to 18 percent of the 

economy, 300-plus million people. And it was going to be an exercise that was fraught with complexity and with so many variables 

that any kind of analysis of either economic or otherwise was going 

to be fairly difficult to make. 

So, you mentioned that. And you mentioned the auction—and I 

do not know if there are any other examples that you want to provide—but when the CBO has been here for three hearings basically 

all that has come up is the ACA. And if, you know, granted that 

was a major, major piece of legislation, but if those are the only 

examples that somebody can pull out of 40 years of CBO performance when they got something significantly wrong, that is a pretty 

good track record, I would think. 

And when you are talking about the auction, you are talking 

about trying to predict something that probably the fastest moving 

segment of civilization was going to be difficult, to say the least. 

But also, if I am not mistaken, CBO’s projection of the auction impact was no different than anybody else’s. Virtually everyone 

thought that it was not going to be as successful as it turned out 

to be. 

So, I just raised those points. I would love to hear more because, 

again, the CBO is constantly reviewing its record. And, as I said, 

they have gotten it right far more than they have gotten it wrong. 

And I just raised those points. 

With regard to the ACA, one of the things that I think is important to remember is that there were a lot of things that happened 

that were not part of the original legislation. So, when you had 

under the original legislation every State had to opt into the Medicaid expansion Supreme Court changed that in 2012, which 

changed a lot in terms of the impact. And CBO continually changed 

their forecasts because of that. 

The other point I would mention, and I have raised this in hearings before with CBO, I would ask them ‘‘Well, since everything 

you are doing is somewhat imprecise by nature what about giving 

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23 

a range that would maybe be more helpful?’’ And, unfortunately, 

Congress prescribes to them that they have to come up with an 

exact number. And so, maybe that is something that we would 

want to consider changing, because the CBO is subject to the rules 

that we set up for them. 

So, anyway with all that, I did not really have a question except 

the first one. And I would, again, recommend that you take the opportunity to go meet with CBO and discuss some of your concerns 

with them. Because you may not be satisfied, and when I discuss 

some of my concerns I am not always satisfied either. But that is 

how I—— 

Mr. PERRY. If I may respond. 

Mr. YARMUTH. Sure. 

Mr. PERRY. Like I said, I am happy to have the dialogue. We limited the examples to two in the interest of time, which I still failed 

to be successful at, but we will endeavor to get you more information. 

I would just offer this even though I have not put it into legislative language, I have offered in public that I thought maybe a new 

model, or at least a competing model—and I offered something like 

where we pick the Democrat side because it is inherently partisan 

like everything else would pick a firm to do their modeling, and the 

assessments, and the estimates. 

And the Republicans pick one and then we both agree on some 

independent one. We would do an RFP for 10 years or something 

like that. And whoever is least accurate drops off and we rebid that 

and continue a drive towards more and more accuracy, so that we 

can go forward in these decisions with more complete information. 

And like I said, I have not put that into legislative language, but 

in my opinion what we have now is not working adequately. 

Mr. YARMUTH. Thank you for your comments and your testimony. I appreciate that. I yield back. 

Chairman WOMACK. I thank the ranking member. Mr. 

Grothman. 

Mr. GROTHMAN. You bring up something that I, quite frankly, 

was not aware of. But in all their estimates they abide to this 

Keynesian Holcombe, is that true? 

Mr. PERRY. That is the information that I have that was as originally established that is where it is weighted. And I am a person 

who does not believe wholly, or even marginally, in Keynesian economic theory. And I know that there are always arguments among 

economists and would be economists, and just your average citizen. 

But I think that to get an accurate assessment we ought to look 

at both sides of that equation, not have it tilted towards the 

Keynesian economic model. 

Mr. GROTHMAN. I think it is largely discredited. I mean, I 

thought it was kind of embarrassing that I was given Keynesian 

economics when I went to the University of Wisconsin 40 years 

ago. I always thought it was a stain on UW. Do you think there 

is any way we can make sure we hire some more open-minded people? Do you ever talk to them? Do they acknowledge that they buy 

into this Keynesian stuff? 

Mr. PERRY. Like I said, as a rank and file Member every time 

that we try and get something scored from the CBO, or what have 

BU00-A363290 with DISTILLER

24 

you it has to go through your Committee Chairman, and so on and 

so forth, and you are frustrated. 

And so, I have not had that conversation about how they hire, 

or if you have to have a Keynesian economic belief in your education and your assessments. I do not know that to be true, and 

I suspect actually that it is not. But if that is how the modeling 

is skewed I think that is important for all of us to know. Because 

we make our decisions oftentimes based on these estimates and the 

budget window, and so on and so forth. 

And I think it really hampers our ability to come up with good 

policy that is long lasting and visionary. And our adversaries, 

whether they be China or even someone like Russia, they are not 

hampered by these decisions. They have a different governing 

model, and I accept that. But I think that we are limiting ourselves 

willingly and willfully, and it is unnecessary. And so, that again 

would be my position. 

Mr. GROTHMAN. That will be enough. 

Chairman WOMACK. Any other questions? Mr. Woodall. 

Mr. WOODALL. Mr. Perry, I think sometimes we think we treat 

the CBO like we treat the IRS, we do not like what it is doing, but 

the truth is it is doing what we told it to do. I carry the baseline 

Budgeting Bill with Louie Gohmert and Congress told you. I told 

CBO you have got to do it this way. It is very strange to me. 

CBO was created to be an adjunct of Budget Committee staff. We 

are not going to have an appropriations hearing where the appropriation staff director dictates to the Chairman how it is going to 

be. We are not going to have an Energy and Commerce hearing 

where the Energy and Commerce staff director dictates to the 

members how it is going to be. 

But in the absence of us setting it up in statute, you know, while 

Mr. Yarmuth would be a very capable Chairman next cycle, I hope 

Mr. Womack is the very capable Chairman next cycle. The alternative to us setting it in statute is to leave it in the discretion of 

Committee Chairman to direct the CBO. Knowing that you speak 

for the frustrations of a lot of Members, would you be more comfortable if it was not statutory guidance, if it was Committee leadership guidance, or which do you believe protects your interests 

more? 

Mr. PERRY. Well, of course, the caveat is as leadership changes 

and viewpoints change, if it is left up to Committee leadership, so 

goes the assessment. But I think that as a small government guy 

I feel like legislation becomes overwhelming to change, and ultimately limiting as this has over the span of 40 or so years, and 

does not keep up with the times. 

So, I think I would be willing, if that were my options, to roll the 

dice, and we are all accountable at some point. And if the chair 

chooses a course that is ineffective, I think that there would be 

some level of accountability based on the failure or success of that 

policy decision. I could live with that. That is how our government 

is supposed to work. 

Mr. WOODALL. That is valuable to hear. Thank you, Mr. Perry. 

Thank you, Mr. Chairman. 

BU00-A363290 with DISTILLER

25 

Chairman WOMACK. Any other questions? Mr. Perry, we thank 

you for your comments, and your willingness to take questions. 

Thank you for your appearance here. 

Mr. PERRY. And I thank you so much for the opportunity. 

Chairman WOMACK. All right. See Dr. Burgess, it is good to have 

you here today. I would like to recognize our next witness, Representative Dr. Michael Burgess from Texas. You will have 5 minutes and then we will give each side an opportunity to engage in 

Q-and-A with you. The floor is yours, sir. 

STATEMENT OF HON. MICHAEL C. BURGESS, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. BURGESS. In our Committee on Energy and Commerce, we 

sometimes swear witnesses in; you are not going to do that today? 

Chairman WOMACK. No, we only swear at them. 

Mr. BURGESS. All right. Well, I appreciate you letting me be here 

today, and talk about what I think is an important—— 

Chairman WOMACK. Mike, talk right into that mic, if you would, 

please. 

Mr. BURGESS. So, the Congressional Budget Office—— 

Chairman WOMACK. Back away from that mic just a little bit. 

Mr. BURGESS. You know, as we are all aware the Congressional 

Budget Office does dictate to us, but really, they should be our 

partner in things, at least that is my approach. And I will submit 

my entire testimony for the record, but let me just summarize. In 

healthcare, we are moving to an era where management of chronic 

disease becomes as important, or perhaps even more important, 

than the management of an acute episode of an illness. And we can 

all think of examples of that. 

And here is the problem: within the budgetary guidelines within 

the structure that the Congressional Budget Office works it works 

off a 10-year budget window. Now, if you have something that is 

likely to improve population health over a longer term, the 10-year 

budget window will reflect only the cost of doing that intervention, 

whatever it is, but will not account for any of the savings delivered. 

So, this approach is a way to expand the 10-year budget window 

to perhaps one or two additional 10-year cycles in order to capture 

the savings that are available. And the bill is really pretty simple 

and straightforward in that approach. You do have to have a determination by the director of the Congressional Budget Office that a 

proposal will result in reductions in budget outlays. That seems 

pretty simple. 

If the CBO determines that a measure would result in reductions, then the CBO shall include a description, an estimation of 

the reductions in the budget outlays that it provides to Members 

of Congress. And secondly, it will include the projected savings in 

the appropriate budgetary out-years. 

So, the bill also goes on to define preventive health, because, as 

you might imagine, any time in the budgetary process when you 

are changing things, there is perhaps still the ability to open the 

door to unintended consequences. 

So preventive health is defined in the bill, and that means an action that focuses on the health of the public individuals and defined 

populations in order to protect, promote, and maintain health and 

BU00-A363290 with DISTILLER

26 

wellness. And the budgetary out-years phrase is defined as meaning two consecutive 10-year periods following the initial 10-year 

scoring window for a total scoring period of up to 30 years. 

This bill would in no way remove the authority of this Committee, or the authority of the authorizing Committees, either the 

House or Senate. This type of activity would have to be brought to 

the CBO by one of the relevant Committees. It is not just something that they can undertake. 

And, Mr. Chairman, I do not know if there is anyone here who 

was here the night that Medicare part D passed. That was 2003, 

and there was a budgetary projection with Medicare part D. And 

over the next 10 years, I cannot recall the Congressional Budget 

Office ever coming back and saying ‘‘Well, this is what we told you 

it was going to cost? Here is what it actually did cost.’’ 

So, in 2013 or 2014, perhaps 2015 at the latest, we should have, 

I think, received that information. And if we had, this is what we 

might have found if they did take into account preventive scoring. 

We all talked when the part D of the Medicare Modernization Act 

was passed, that if we treat the diabetes we will have to pay less 

for amputations, and end-stage renal disease. It is well-known clinical fact that tighter glucose control and better management leads 

to fewer complications. And it is the complications which are so expensive. 

So, I just submit this for your consideration. I see that Ms. Schakowsky is part of your Committee here. She is also on the Energy 

and Commerce Committee. When the Democrats were in the majority and the Affordable Care Act was considered, I can recall very 

clearly an afternoon where she was incredulous that Mr. Doug Elmendorf, who was then the Director of the CBO, would not give our 

Committee credit for any savings that were going to be manifested, 

and all of the great things that were going to happen in the Affordable Care Act. 

So, I will credit Ms. Schakowsky. It was her and Diane DeGette 

who actually brought this to my attention, and the bill is bipartisan it has bipartisan cosponsors. 

So, thank you for allowing me to testify, and I will be happy to 

take your questions. 

[The prepared statement of Michael C. Burgess follows:] 

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The Honorable Michael C. Burgess, M.D. 

Member of Congress 

261

h District, Texas 

CBO Oversight: Member Day 

House Budget Committee 

March 7, 2018 

Thank you, Chairman Womack, Ranking Member Yarmutb, and members of the Budget 

Committee, for holding this hearing today. l appreciate the opportunity to come before all of you 

today and be part of the conversation to improve the important mission and work of the 

Congressional Budget Office (CBO). 

As all of you may be aware, chronic disease, such as diabetes, accounts for over 70 percent of all 

health spending, and by improving wellness and disease prevention, we can improve our 

healthcare system. A healthier society is something we can all support. However, Congress' 

ability to enact meaningful prevention policies is hampered by how legislation is scored for its 

budget impact by CBO. 

Today, CBO reports budgetary implications of preventive health legislation in a ten-year 

timeframe. So, it is unable to recognize savings from those initiatives in budgetary out-years, 

denying Congress a complete picture. In our current financial environment, it is critical that we 

have all infonnation about the budgetary ramifications of our policy proposals, particularly 

related to health care. 

With health costs rising and utilization continuing to grow, I believe it is time to highlight the 

enormous health benefits and long-term cost savings of preventive health measures. To move 

forward, we must modemize the way CBO scores preventive health legislation. 

Last year, I along with Reps. Diana DeGctte and Todd Rokita, the Vice Chaitman of the Budget 

Committee, introduced H.R. 2953, the Preventive Health Savings Act of 2017. This bill is a 

narrowly tailored and responsible approach to updating the existing budget law. This bill would 

direct CBO to analyze scientific medical data to provide information on the savings of preventive 

health initiatives in the two 1 0-year periods beyond the existing 1 0-year window. 

It defines preventive care nan-owly and requires that preventive care treatments be credible and 

proven through publicly available epidemiological projection models incorporating clinical trials 

or observational studies in humans. This approach prevents the legislation from being misused 

and emphasizes the importance of using evidence-based practices, strong metrics, and data to 

design and implement prevention and wellness initiatives. 
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Bending the cost of a significant and complex problem as chronic disease is not an easy or quick 

endeavor. Even though many businesses have seen results in fewer than ten years, legislation 

like this is necessary because it will allow CBO to more accurately project the true implications 

of programs affecting children and other populations or disease states with longer development 

periods that require an extended view. 

I look forward to continuing the discussion on how this legislation can enhance the work CBO 

performs for Congress and assist all of us in gaining a stronger insight on the true impact 

preventive health policies could have on our nation's health care system and populace. 

I welcome your thoughts and suggestions. Again, thank you. 
29 

Chairman WOMACK. Dr. Burgess, we really appreciate your testimony. Mr. Yarmuth. 

Mr. YARMUTH. Thank you, Mr. Chairman. Thank you, Dr. Burgess. You and I, back when we were debating the Affordable Care 

Act, had some spirited discussions and arguments. And I think it 

is accurate to say we do not agree on much, but I totally agree with 

you. 

Mr. BURGESS. That is correct. 

Mr. YARMUTH. I totally agree with you on this. It is something 

we have raised, or I have raised, a number of times with CBO. And 

I tell you the answer they give, which is not something that I think 

is sufficient. But the answer they will give is that there are so 

many added balancing costs when people live longer that it is very 

difficult to make that kind of analysis. 

And I have asked the same question about education: under current rules and 10-year budget windows we could not have passed 

the original G.I. Bill because all of the economic benefits of those 

educational payments accrued after a 10-year budget window after 

World War II. 

So, this is something that we absolutely have to deal with if we 

are going to do any kind of long-term thinking in this body, we 

have to, in some way, figure out how to anticipate long-term implications budgetary and otherwise, so I thank you for your contribution. 

And I would hope that in our joint special Committee that Mr. 

Woodall and Chairman Womack and I are part of, we can address 

this issue as well. So, I thank you and I yield back. 

Mr. BURGESS. I thank you for pointing out. It is necessary to 

take the long view sometimes. 

Chairman WOMACK. Mr. Woodall. 

Mr. WOODALL. Thank you, Mr. Chairman. I had never considered 

as I have looked at your legislation, Dr. Burgess, the comments 

that Mr. Yarmuth just made. Would you anticipate that a multidecade analysis showing both the cost savings because you were 

improving health outcomes, as well as cost expenses because folks 

were remaining on Medicare longer, remaining on Social Security 

longer? I have always anticipated that it was going to help us provide better funding for preventative diseases, but I could certainly 

understand how it starts to value a life as opposed to value prevention. How does the legislation anticipate that? 

Mr. BURGESS. Well, I can. And I am going to go back to my discussion on the Medicare Modernization Act, and perhaps some of 

those questions could be answered by a study. What is the 10-year 

interval since the passage of the Medicare Modernization Act, or 

more correctly its implementation in January 2006? What does 

that study show us about what is the behavior of populations managed in this way over a longer period of time? Perhaps we could 

gain some insights. It is quite possible that, hey, there is no impact, but I do not believe that will be the case. 

And then in medicine, we talk about a phenomenon known as 

the compression of morbidities. So, you take the statin so you do 

not have the heart attack at age 48 or 52, but something is eventually going to happen. We all wear out at some point. The object is 

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30 

to keep that person as healthy and useful and engaged in productive activities for as long as possible. 

Then, when the inevitable end is in sight, there will be a compression of morbidities, and perhaps that timeline will be sufficiently short that it will not bankrupt the budget. Otherwise, as 

those of us who are fortunate enough to be baby boomers come 

down the pipe, we are going to cost those that come after us a lot 

of money. 

Mr. WOODALL. Well, you are as conservative a Member as we 

have in Congress. You bring a bipartisan piece of legislation today. 

It has always struck me that every time you talk about saving 

money, it is in the name of making people’s lives better by preventing bad outcomes, as opposed to making their life worse by 

taking something away. You only want to take away sickness, and 

I have always been grateful to you for that. Thank you. I yield 

back, Mr. Chairman. 

Chairman WOMACK. Any other questions for the witness? Dr. 

Burgess, we truly appreciate your appearance before the Committee today, and grateful that you have taken time out of your 

schedule to share your thoughts with us. 

Mr. BURGESS. Thank you. May I leave some materials for the 

record? Do you have a record in the Committee? 

Chairman WOMACK. We do, and as part of our opening, your prepared statement will be made a part of the official record. 

Mr. BURGESS. Right. Thank you very much. 

Chairman WOMACK. You bet. That completes the Committee’s 

business that I see for today. Is there anything left for the good of 

the order? Not hearing any, I would like to thank all the Members 

who shared their views before the Budget Committee, and this 

Committee stands adjourned. 

[Whereupon, at 11:27 a.m., the Committee was adjourned.] 

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Statement of William M. "Mac" Thornberry 

Chairman, Committee on Armed Services 

Before the Committee on the Budget 

CBO Oversight: Member Day 

March 7, 2018 

Chairman Womack and Ranking Member Yarmuth, 

Thank you for this opportunity to testify today to engage in the ongoing conversation regarding 

the Congressional Budget Office (CBO)'s mission, work product, and transparency effort. I 

appear before you today to ask for consideration by the Budget Committee to modify the 

standards of how multi-year service contracts are scored, and describe mandatory spending 

issues associated with the authorization of multi-year contracts, using commercial satellite 

communications (COM SA TCOM) as an example. 

Based on current standards provided to CBO by Congress, multi-year contracts for services is 

predominantly scored as mandatory spending for the out-year costs. CBO scores these 

provisions conservatively, and subsequently m1ticipates a mid-term cancellation of a contract 

which result in significant tenuination costs. The termination costs would be an obligation to 

the government and therefore mandatory spending. The scoring and assumption of termination 

liability has led to a general aversion to authorizing multi-year service contracts in previous 

authorization acts. 

Over the past several years, Congress, working with the Department of Defense and the 

industrial base, has attempted to provide multi-year contract authority for service contracts. 

Currently, such contracts are purchased on a one-year basis. This fixed level of contracting 

authority does not allow for future planning for both tl1e Department and private industry. 

Providing multi-year authority for the Department would allow for lower costs over the life of 

the contract, and would provide a demand signal for the industrial base to move forward with 

necessary capital investments. 

For example, the amount of commercial satellite communications purchased in an average year 

is approximately $200 million. In discussions with industry and the department, a five-year 

contract for the same communications conld total $700 million over the life of the contract, or 

an average of$140 million per year. Over this five-year period, there could be a savings to the 

taxpayer of $300 million in discretionary spending. 

Not only does a CBO estimate of a multi-year contract provision not account for any potential 

savings in discretionary spending, but CBO also determines a mandatory spending cost in the 

form of a termination liability. CBO assumes a possible breach of contract for each multi-year 

agreement, and this estimated tenuination liability is scored as a mandatory obligation to the 

government. The estimated mandatory spending associated with the commercial satellite 

communication contract example above is in the range of $200-$300 million, which seemingly 

obviates the discretionary savings over the term of the contract. 

CBO's stated mission is to produce independent analyses of budgetary and economic issues to 

support the Congressional budget process. To meet that intent, the Budget Committee should 

work with CBO to review and update how they assume termination liability, how they score 
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multi-year contracts, and where appropriate risk should be tolerated. We should encourage 

legislation that projects to generate significant savings, whether that be discretionary or 

mandatory. 

Changes to CBO practices should allow for these proposals to become law. One option could 

be to provide a discount on the termination liability by offsetting the amount by any estimated 

discretionary savings over the life of the contract. Another option could be to reduce or 

eliminate tennination liability as an estimated obligation to the government. 

In closing, CBO remains a dynamic and supportive non-partisan organization that has routinely 

proved itself to be capable of adapting to new models, assumptions, analytical tools. As the 

Budget Committee considers possible changes to these standards, I would welcome further 

discussion on the scoring of multi-year service contracts. 

2 
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House Budget Committee 

CBO Oversight: Member Day 

March 7, 2018 

Statement for the Record 

Sam Johnson 

Chairman, Social Security Subcommittee 

Committee on Ways and Means 

Chainuan Womack, Ranking Member Yarmuth, and Members of the Committee: 

Thank you for the opportunity to submit a statement for the record on CBO Oversight as it 

relates to issues of importance to the Ways and Means Social Security Subcommittee. First, I 

will discuss the Social Security Subcommittee's work examining the differences between CBO's 

and the Social Security Trustees' projections of Social Security's solvency. Then, l will discuss 

CBO's scoring conventions and House rules that make it difficult to make commonsense 

changes to Social Security, followed by CBO's responsiveness to Authorizing Committee 

requests. And finally, I will discuss the limited value of certain CBO publications. 

Differences between CBO and the Social Security Trustees 

During my time as Chairman, the Social Security Subcommittee has focused on the ongoing 

differences in CBO's and the Social Security Trustees' projections of Social Security's solvency. 

Both CBO and the Social Security Trustees have been looking at Social Security's finances for 

decades. However, they paint very different pictures of just how much trouble Social Security is 

in. CBO projects that the combined Social Security Trust Funds will be exhausted in 2030, 

while the Trustees project that this will not occur until2034. CBO's projection of Social 

Security's 75-year actuarial deficit is about 1.5 times that of the Trustees'. 

With CBO and the Trustees so far apart, it's hard to know if a Social Security plan will actually 

make the program solvent. While a plan may be sustainability solvent according to the Tmstees, 

it might only get you a couple additional years of solvency according to CBO. 

In early 2016, Chainnan Brady and I asked CBO and Social Security's Chief Actuary to take a 

look at each other's projections and help us understand how they come to such different views of 

Social Security's future. 

On September 21, 2016, the Social Security Subcommittee held a hearing to discuss what they 

learned. According to Dr. Hall's testimony, about two-thirds of the difference between CBO's 

and the Trustees' projections comes from their economic and demographic assumptions, while 

the remaining one-third comes from different modeling approaches. In particular, they differ on 

assumptions about: labor force participation rates; wage growth, which affects the amount of 

earnings subject to payroll taxes; demographics, particularly fertility and mortality rates; and 

long run real interest rates. 
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The hearing restarted the conversation between CBO and the Trustees about their different 

approaches. Following the hearing, CBO made some changes to its labor force participation 

model. These steps are a good start, hut the two still remain far apart. 

In order to protect Social Security and strengthen it for generations to come, Congress needs to 

be sure the action it takes will work. Oversight of CBO's Social Security projections is a key 

role the Budget Committee can play as part of our shared commitment to strengthen Social 

Security. 

Bills with a 10-Year Cost but Long-Term Savings 

As you know, House Rules generally focus on the I 0-year scoring widow, and CBO mainly 

produces scores for this time period. However, for Social Security purposes, we're concerned 

with the program's long-term solvency and look at the effect of policy changes over the 75-year 

window. There arc a number of Social Security bills that have a cost in the I 0-year window but 

improve Social Security's solvency overall. 

The Senior Citizens' Freedom to Work Act of 2017 (H.R.3077) is a good example. H.R. 3077 

fully eliminates the penalty on seniors who choose to enter, remain in, or return to the labor force 

while also receiving Social Security retirement benefits. The bill costs $192 billion over 10 

years but actually reduces Social Security's long-term costs and improves Social Security's 

actuarial deficit. This is because individuals would be able to access their earned benefits 

regardless of earnings level, which is strictly a timing shift from a scoring perspective. 

The focus on the I 0-year window makes it difficult to move this type of practical legislation and 

just doesn't make sense for Social Security bills. Consideration should be given to whether CBO 

scores tor legislation affecting Social Security benefits should include the 75-year score, in order 

to provide an accurate view of their long-run impact. 

CBO's Responsiveness to Authorizing Committees 

Another issue I would like to raise before this Committee is CBO's responsiveness to 

Authorizing Committees' scoring requests. As you know, CBO plays an important role in 

supporting the Congress's efforts to develop and advance legislation. CBO must provide timely 

responses for this process to work like it should. However, CBO can take weeks, and sometimes 

months, to get started on a scoring request. I am interested to know how CBO decides the order 

of priority for scoring requests and how CBO balances these requests with its other work. Given 

some of what I've seen over the years, this is an issue that would benefit from further discussion. 

Due to responsiveness issues, the Subcommittee on Social Security has relied more heavily on 

the Social Security Actuary to provide scoring information for policy development decisions. 

Policy development would benefit from more ongoing dialogue with the staff at CBO. 

Value of Certain CBO Publications 

The final issue I would like to raise concerns the value of certain CBO publications. As you 

know, CBO produces a number of reports in addition to scoring legislation. Some of these 

reports, such as the Budget and Economic Outlook, provide important information to the 
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Congress and the public, and are directly related to CBO's other work. However, other reports, 

such as the Budget Options books, often provide little value to the Congress. 

The Budget Options books often include proposals that are unworkable as scored. Social 

Security changes typically include a phase-in to give people time to plan. For example, in my 

solvency plan I phased in benefit changes over 10 years. However, the options in the Budget 

Options books typically don't include phase-ins, meaning they show higher savings than could 

actually be achieved in practice. Despite their limited value, the Budget Options books- and 

specifically the resources invested in developing those books - are often cited as a reason why 

CBO can't be more responsive to the Subcommittee's scoring requests, even though this 

workload is not required by statute. 

The Committee may want to consider the value of all CBO publications in the context of the 

usefulness for policy development purposes. Like all agencies, CBO does not have indefinite 

resources and direction on how to better usc those resources may be merited. 

Thank you for the opportunity to submit a statement for the record on these issues of importance 

to the Committee on Ways and Means Social Security Subcommittee. !look forward to 

continuing to work with my colleagues to make sure the Congress has the best, most accurate 

infonnation available when it comes to Social Security. 
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Honorable Steve Womack 

Chairman 

House Committee on the Budget 

March 6, 2018 

Dear Chainnan Womack and Ranking Member Yarmuth: 

Honorable John Yannuth 

Ranking Member 

House Committee on the Budget 

I write to provide testimony to the House Committee on the Budget regarding a much-needed 

change in the scorekeeping rules that control the Congressional Budget Office's ("CBO") cost 

estimates for legislation authorizing or mandating the sale, exchange, or transfer of federal lands. 

CBO cost estimates should provide Congress all relevant information regarding the budget 

consequences of enacting proposed legislation and the scoring rules for federal land transfers fail 

to do so. 

Current CBO scoring rules consider proposed transfers of federal land to have no cost to the federal 

government, as long as the parcel is not expected to generate receipts over the next ten years. This 

scoring prevents CBO from providing accurate infonnation to the American people regarding the 

inherent real estate or natural resource value of public land. 

In failing to account for the value of land beyond what it generates in receipts, CBO is working 

under the assumption that land owned by the American tax-payers is worthless, except for its 

mining or timber or grazing value. As a result, legislation to give Grand Canyon National Park or 

Yellowstone to a private developer would only score as a loss of entry fee receipts. 

I implore you to address this scoring failure. 

The Office of Valuation Services within the Department of the Interior and the Forest Service 

conduct appraisals whenever there is a legislative proposal for a land conveyance, sale, or transfer. 

Appraisers determine the market value of the parcel and that information is provided to the CBO. 

CBO may take market value into consideration but, per their cmrent scorekeeping rules, the 

estimates provided to Congress only calculate lost receipts. Expanding current rules to require 

consideration of the appraised market value of federal parcels will significantly increase the 

validity ofCBO scores for public land sales. 

This failure to value land beyond its ability to generate fee receipts must be considered with the 

fiscally-irresponsible change to the rules of the House of Representatives authored by House 

Natural Resources Chairman Rob Bishop ofUtah at the beginning of this Congress. The mle states 

that transferring ownership of public lands belonging to all Americans "shall not be considered as 

providing new budget authority, decreasing revenues, increasing mandatory spending or 

increasing outlays." This rule change aligns with the House Republican's plan to give away 

America's public lands for free as it would allow Congress to ignore the minimal cost CBO does 

consider and pretend that the American taxpayer has lost nothing of value. 
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I appreciate the opportunity to testify on this important topic, and I hope we can work together to 

better value our public lands. 

Sincerely, 

Raul M. Grijalva 

Ranking Member 

House Committee on Natural Resources