As I’ve watched Congress debate health care reform over these past who-knows-how-many months, I’ve been amazed at the unshakable, nearly childlike faith both Republicans and Democrats seem to have in the accuracy of those Congressional Budget Office estimates of what the whole thing will cost. Our elected representatives seem convinced the CBO is made up of equal parts rocket scientists and psychics.
Are you kidding me? I’m sure the CBO has more than its share of serious, well-meaning bureaucrats, but the fact is that even for the most serious, well-meaning bureaucrat in the world (and even rocket scentists and most psychics, for that matter), predicting the future is next to impossible. And trying to predict how much a proposed transformation of one-sixth of the economy will cost over the next ten years is insane.
Don’t believe me? Take a look at the numbers the CBO has come up with regarding a program infinitely simpler than health care: the TARP bailout. It’s a $700 billion program, signed into law in October, 2008, that essentially involved the government buying bank preferreds and warrants. The program couldn’t be more straightforward. The CBO knows the terms and coupons of the preferred. Valuing warrants isn’t especially difficult. All the CBO needs to do is estimate who will repay, and when, and who will default.
As I say, simple. And yet have you seen the numbers the CBO has come up with? Last week the agency provided at least its third update on what it thinks TARP will cost. In just less than 18 months, the CBO’s estimate has gone from as high as $356 billion to as low as $99 billion. The most recent guesstimate: $109 billion. Not exactly confidence-inspiring! If the CBO can’t cost out the TARP in the near term, why should anyone think the agency can come up with a remotely accurate ten-year forecast of how a project as large and complex as health care reform will play out?