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CBO Lacks Conflict of Interest Policy for Advisers

UPDATE: Following the publication of this story, the Congressional Budget Office said they are in the process of developing a formal conflict-of-interest policy. An updated story can be found here

Unlike most federal and congressional agencies, Congress’ nonpartisan budget scorekeeper appears to have no policy on conflicts of interest for their outside advisers.

The Congressional Budget Office has two groups of external consultants–the Panel of Health Advisers and the Panel of Economic Advisers—made up of more than three dozen people, most PhD economists, who operate as a sounding board for CBO. While their functions and purpose differ, both are influential in their own right. And it appears that neither panel is required to let CBO know about other projects they may be working on, either on behalf of private industries that could have a financial interest in how CBO views federal spending, or the executive branch, which CBO was set up to act as a counterweight against.

When asked if the agency has ethics requirements for advisers related to potential conflicts of interest, a CBO spokesperson said she was unable to comment on the record. She was also unable to comment on whether CBO’s counsel reviews the activities of panel members to determine if any conflicts of interest exist, or if there are any policies that require members to notify CBO should conflicts arise during their time on the panels.

Several panel members told Morning Consult they do not recall filling out any conflict-of-interest paperwork in their roles as advisers to CBO.

Senate Judiciary Committee Chairman Chuck Grassley (R-Iowa) said he would look into the matter. Grassley has a long history of successfully pushing for increased transparency, most recently with a federal database collecting information on the money physicians receive from pharmaceutical companies.

“CBO, Congress and the public should have the benefit of knowing whether panelists are independent,” Grassley said in a statement to Morning Consult. “It’s not clear why CBO can’t comment on whether it has a conflict of interest policy for advisory panelists.  That seems like a matter of basic transparency.  If there is no conflict of interest policy, that would be troubling.  I intend to look into this matter further.”

One example where a formal conflict of interest policy might have been beneficial involves MIT Prof. Jonathan Gruber. Gruber served on the CBO health advisory panel in 2009 and 2010, at the same time he had a contract with the executive branch to analyze how much certain health reform proposals might cost the federal government. In 2012, a New York Times profile of Gruber said his position as “an adviser to the influential Congressional Budget Office” also meant he was “perfectly positioned to advise the White House on health reform.” But that connection also raises a conflict of interest between the executive and legislative branches. The CBO was established by the 1974 Budget Act to serve Congress, in large part as a counterbalance to the White House Office of Management and Budget.

For an office that is highly committed to transparency and objectivity, the lack of a conflict of interest process for advisers is at odds with those promises. There is no evidence of CBO scores being swayed due to the relationships of external advisers to the executive branch or outside industry, though it is difficult to evaluate without CBO participation or an existing conflict-of-interest process. Based on publicly available information, current CBO advisers have connections to or work for pharmaceutical companies, consulting firms, health insurers, think tanks, trade associations, and national banks.

Doug Holtz-Eakin, CBO director from 2003-2005 and a senior adviser to the 2008 McCain presidential campaign, said there should be a formal conflict of interest process.

“I think those are the key things, to be honest,” Holtz-Eakin said in an interview. “Everybody has conflict of interest policies. Corporate boards do, everyone does. That’s just the mechanics of business in this day and age.”

Holtz-Eakin also said Congress should increase its oversight of the CBO, but added that he would not have welcomed that when he was director.

“It is a fair request of an agency, and Congress doesn’t do real oversight,” Holtz-Eakin said. “This oversight stuff is never fun. I wouldn’t have welcomed an oversight hearing as director. It’s going to be prickly and hard, but it’s fair.”

The two panels of outside advisers serve two different purposes. The health panel is more recent and exists to advise CBO on larger trends in health economics. The economics panel is consulted to critique scoring and budget baseline assumptions.

“The health panel is more advisory and less involved in scoring legislation or making assumptions that directly affect the baseline” like the economic panel is, Dan Crippen, a CBO Director from 1999-2000, said in an interview. “They are not critiquing specific numbers the way economic panel is, more opining on things they are seeing in real world.”

Alice Rivlin, the founding director of the CBO, said it was important not to exclude people as advisers merely because they work with the executive branch or private industry contracts.

“If CBO were restricted to not ask any health analyst who had a contract with a company and government, they wouldn’t have an advisory panel,” Rivlin said in an interview.

When the CBO was formed nearly 40 years ago, it was in large part a result of battles between the Nixon White House and Congress over which branch of government had more control over the federal budget.

Another former CBO director, June O’Neill, who served from 1995 through 1999, said congressional leadership was so sensitive to the perception that CBO might be swayed by the executive branch that they insisted a meeting between CBO and OMB staff to discuss a disagreement over estimates happen at CBO’s offices, so CBO staff would not have to go to the White House.

O’Neill also said she was shocked when current CBO Director Doug Elmendorf went to the White House in July 2009 to discuss the scoring of the Affordable Care Act. There was so much reaction to the meeting that Elmendorf published two blog posts in three days maintaining CBO’s independence. However, Elmendorf’s CBO did not make scoring for the Affordable Care Act easy for Democrats. He was criticized by lawmakers and economists on the left who thought he was not giving enough credit to cost reduction efforts in the legislation.

As CBO approaches its 40th anniversary in February, the office finds itself at a crossroads. The Republican-controlled 114th Congress has already nudged the agency and the Joint Committee on Taxation to use “dynamic scoring” on major pieces of legislation, which takes larger economic effects of legislation into account. There is also the question of who will run the office. Elmendorf’s term expired on Jan. 3, and it is up to House and Senate leadership, as well as the chairman of the Budget Committees, to select a new leader or keep Elmendorf on.

Who will run the office is still unclear, particularly with Sen. Mike Enzi (R-Wyo.) ascending to chairman of the Senate Budget Committee late last year over former ranking member, Sen. Jeff Sessions (R-Ala.).

Republicans publicly criticized the agency frequently over the scoring of the Affordable Care Act, but Philip Joyce, a public policy professor at the University of Maryland and former CBO analyst who wrote a book chronicling the history of the office, said that was not unusual.

“I would not expect anything to change,” in the current Congress, Joyce said in an interview. “Go back to the Clinton health plan, you’ll see every bit as much screaming when CBO’s analysis…had a major political impact.”

Joyce said the House and Senate Budget committees have not held an oversight hearing for CBO since 1977, a few years after the office was created. He doesn’t expect that to change much in the 114th Congress.

“If it was going to happen, it is almost invariably true that it would be the House and Senate Budget committees that would hold these hearings,” Joyce said. But after the oversight hearings in CBO’s early years, “the assumption was that if anybody wanted to have conversations about how [CBO was] doing their work, there were plenty of avenues with which to do that informally, and they didn’t need to air that dirty laundry in public.”

The CBO director does regularly testify at the Budget Committees, the Senate Finance Committee and the House Ways and Means Committees on budget estimates, and at the Appropriations Committee to justify office expenditures.