[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]


                       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
           

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                        COMMITTEE ON THE BUDGET

                    STEVE WOMACK, Arkansas, Chairman
TODD ROKITA, Indiana, Vice Chairman  JOHN A. YARMUTH, Kentucky,
DIANE BLACK, Tennessee                 Ranking Minority Member
MARIO DIAZ-BALART, Florida           BARBARA LEE, California
TOM COLE, Oklahoma                   MICHELLE LUJAN GRISHAM, New Mexico
TOM McCLINTOCK, California           SETH MOULTON, Massachusetts
ROB WOODALL, Georgia                 HAKEEM S. JEFFRIES, New York
MARK SANFORD, South Carolina         BRIAN HIGGINS, New York
DAVE BRAT, Virginia                  SUZAN K. DelBENE, Washington
GLENN GROTHMAN, Wisconsin            DEBBIE WASSERMAN SCHULTZ, Florida
GARY J. PALMER, Alabama              BRENDAN F. BOYLE, Pennsylvania
BRUCE WESTERMAN, Arkansas            RO KHANNA, California
JAMES B. RENACCI, Ohio               PRAMILA JAYAPAL, Washington,
BILL JOHNSON, Ohio                     Vice Ranking Minority Member
JASON SMITH, Missouri                SALUD O. CARBAJAL, California
JASON LEWIS, Minnesota               SHEILA JACKSON LEE, Texas
JACK BERGMAN, Michigan               JANICE D. SCHAKOWSKY, Illinois
JOHN J. FASO, New York
LLOYD SMUCKER, Pennsylvania
MATT GAETZ, Florida
JODEY C. ARRINGTON, Texas
A. DREW FERGUSON IV, Georgia

                           Professional Staff

                       Dan Keniry, Staff Director
                  Ellen Balis, Minority Staff Director
                                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. Raul Grijalva a Representative in Congress from the 
          state of Arizona.......................................    36

 
                       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.
    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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    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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    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 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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    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 top-level 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.''
    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 
long-term 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 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.
    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 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 mathematical 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.
    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 future. 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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    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 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 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.
    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 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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    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 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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