Head of CBO: America’s Financial Counselor in Fiscal Cliff Talks

Doug Elmendorf takes pride in offending both parties—and chooses his words very carefully.

By: Paul Quinlan

Elmendorf keeps a stuffed skunk in his office—a reminder of CBO’s reputation for being the skunk at the picnic. Photograph by Stephen Voss.

Most people haven’t heard of him. But it doesn’t take long after a bill gets written for everyone on Capitol Hill to ask: What does Doug Elmendorf have to say about it?

Like his predecessors, the 50-year-old economist toils in obscurity, despite the power he wields as head of the Congressional Budget Office. The nonpartisan agency is Congress’s fiscal referee, responsible for estimating the cost of every major policy proposal or piece of legislation. Today these estimates—“scores,” as they’re known on the Hill—carry more weight than ever. Few things doom a bill faster than word that it would add to the nation’s $16-trillion debt.

But that’s just the half of it.

Congress also looks to this bearded, bespectacled technocrat for straight talk about where our fiscal policies are taking us, and the outlook isn’t good.

Elmendorf described the problem in 2009 as “a fundamental disconnect between the services the people expect the government to provide . . . and the tax revenues that people are willing to send to the government to finance those services.” Translation: Americans expect more from the government than they’re willing to finance.

“I don’t usually get frustrated,” Elmendorf says on the way back to his office from a recent House Budget Committee hearing. He has just delivered his direst estimate yet of the nation’s long-term economic outlook. Judging by the Q&A that followed, the committee registered little, but he doesn’t seem bothered: “I don’t expect them to be experts in budgets.”

That’s Elmendorf’s job, and he says he wouldn’t trade it for anything. He seems to relish the challenge of being the nation’s financial counselor in chief at a time of rising fear that the US is cruising toward fiscal calamity.

In the coming weeks, Elmendorf and his staff will be sprinting to analyze proposals and counterproposals as Congress attempts to address a two-part problem.

First is the so-called fiscal cliff that looms at the end of this year. Barring a change in law, the George W. Bush-era tax cuts will expire and an immediate $100-billion across-the-board reduction in federal spending will take effect, to be followed later by $1 trillion more. The spending cut—known as the sequester—was part of a deal President Obama cut with Congress last year to raise the nation’s debt limit. Many fear that the sequester and the expiring tax cuts will put the country in a European-style economic lurch.

To the extent Congress succeeds in extending tax cuts and delaying budget cuts, odds are that the second part of the problem—a long-term swell in the national debt—will trigger something far worse: a loss of confidence in the US economy.

In short, fiscal crisis.

When—or if—that will happen remains a matter of debate, and Elmendorf is one of very few people in a position to help Congress and the White House do something to stop it, preventing the global economic catastrophe that would follow.

• • •

Elmendorf is an economist with a Harvard PhD who introduces himself as Doug and rides the Metro to work. He answers to Congress but is about as close to being his own boss as anybody in Washington. Appointed in 2009 by then-speaker of the House Nancy Pelosi, Elmendorf, a Democrat, doesn’t play political favorites. His economic judgments regularly offend and draw praise from both parties.

He was born in Mount Kisco, New York, in 1962 to a father who was a programmer for IBM and a mother who was a math teacher. He went to Princeton, where he found himself in orbit with economists who made up the nation’s financial brain trust.

“I loved my freshman-year courses in economics,” Elmendorf recalls. His professors Alan Blinder and Harvey Rosen would go on to serve as top US economic advisers. “They were both fired up about the ability of economic analysis to make the world a better place.”

During grad school at Harvard, his dissertation committee included Greg Mankiw, Martin Feldstein, and Lawrence Summers, who served as advisers to Presidents George W. Bush, Ronald Reagan, and Barack Obama, respectively.

He also met fellow grad student Karen Dynan, who became his wife. An expert in macroeconomics and household finance, Dynan is codirector of the Brookings Institution’s economic-studies program.

The couple live in Bethesda with their two daughters, both in high school. They have coauthored several papers, and Mankiw once hired Elmendorf and Dynan to help write a textbook—it answers questions about monetary policy in the imaginary economy of Elmendyn.

“I love her because she’s smart, beautiful, charming, and warm,” Elmendorf says of Dynan. “But it turns out she teaches me a lot about economics.”

• • •

Elmendorf’s years in Washington have included roles in nearly every arm of the nation’s economic establishment. He arrived in 1993 to work at the Congressional Budget Office and later moved to the Federal Reserve and the White House Council of Economic Advisers. In 1999, he became deputy assistant secretary of the Treasury for economic policy. He returned to the Fed in 2001, then moved to the Brookings Institution and later back to CBO as director.

Such hopscotching would ordinarily be discouraged. “Smart people mostly focus on something and become an expert on it,” Elmendorf says. But he had planned to return to CBO, and his broad experience was in some ways ideal, given the galaxy of legislative issues the agency is asked to analyze. “It would have been terrible preparation for almost any job but this one.”

Congress keeps Elmendorf and his staff of 235—mostly economists and public-policy analysts—running. CBO will pump out 600 written cost estimates this year and thousands more informal estimates.

On nights when Congress stays up late, CBO stays up later. When congressional leaders struck a late-night deal on a highway bill in June, CBO didn’t receive the final version of the 600-page plan until 4 am on a Thursday morning—less than three days before highway programs were set to expire and one day before most of Congress was to leave town. CBO returned its analysis in time for leadership to hammer out an agreement and vote 36 hours later.

Most of the bills that CBO analyzes never become law. Many more bills are never even analyzed because there isn’t time. Not getting a CBO estimate can ruin a bill’s chances—even more than being given a hefty price tag.

It can also get Elmendorf’s phone ringing—with calls from lawmakers who hope to nudge a bill up CBO’s list of priorities.

Elmendorf says it’s a misconception that he spends his days getting yelled at on the phone: “There are people who call who are very angry—that does happen—but there are also people who call and say thank you.”

Nevertheless, some of CBO’s answers have sparked epic fights. The Clinton administration railed against CBO in 1994, when the agency toppled the President’s signature health-care initiative with estimates that it would increase the size of government and cost far more than expected. Elmendorf was part of the team of analysts that rendered the lethal verdict under then-CBO director Robert Reischauer.

Says Reischauer, who was appointed by Democrats: “If the folks who invited you to the dance want to drive you home at the end of it, you haven’t done your job.”

Elmendorf would soon come to know the feeling.

In the spring of 2009, shortly after Elmendorf was appointed CBO director, a group of former directors took him to lunch. It’s a tradition at CBO, an opportunity to pass on institutional wisdom and advice.

“I’m not sure they so much offered advice as just shared scary stories,” Elmendorf recalls. His takeaway: Should he come under fire or fail to make his views clear, it wouldn’t be the first time that has happened to someone in his job.

But what followed a month later was a first for any CBO director.

The issue—again—was health care. President Obama had begun the reform effort promised during his campaign. Rather than write a giant bill and hand it to Congress, as the Clintons had done, Obama put Congress in charge of drafting the legislation. Early versions of what would become known as Obamacare began to wend their way through congressional committees in June of 2009.

On July 16, Elmendorf appeared before the Senate Budget Committee to testify about the nation’s long-term budget outlook. But Democratic chairman Kent Conrad wasted no time with his first question.

“Dr. Elmendorf,” Conrad said. “I am going to really put you on the spot because we are in the middle of this health-care debate, but it is critically important that we get this right.”

He asked whether the current versions of the legislation would reduce the cost of health care over time.

“No, Mr. Chairman,” Elmendorf said. “On the contrary, the legislation significantly expands the federal responsibility for health-care costs.”

The answer reverberated across the Hill. With a few sentences, Elmendorf had upended one of the central premises of the Democrats’ arguments: that overhauling health care would save money.

Some Democrats, who had hoped to have a bill done by the August recess, fumed. Senate majority leader Harry Reid snapped: “What [Elmendorf] should do is maybe run for Congress.” House Republican leader John Boehner said Elmendorf had made clear “that one of the Democrats’ chief talking points is pure fiction.”

Peter Orszag, the former CBO director Obama tapped to lead the White House Office of Management and Budget, used his blog to say that his former agency had “overstepped.”

Elmendorf and other experts were asked to come to the Oval Office to explain their analysis to the President. No CBO director had ever been called to a meeting with the President at the White House, as Philip G. Joyce notes in his history of the agency, The Congressional Budget Office: Honest Numbers, Power, and Policymaking.

Some feared that the summons was an effort to compromise CBO’s independence and to take Elmendorf to the woodshed. But evidence suggests it was CBO that forced the President to change course, not the other way around. As the New Yorker’s Ryan Lizza reported earlier this year, it was the threat of a costly analysis from CBO that pushed Obama to backtrack on his campaign’s opposition to the so-called individual mandate, the legal requirement that people purchase health insurance.

Obama first publicly flipped on the issue during an interview with CBS News on July 17, shortly after House Democrats embraced the individual mandate in their version of the legislation and exactly one day after Elmendorf gave his explosive testimony.

In fact, Lizza reported, Obama became so frustrated with CBO during the health-care debate that he banned aides from uttering the agency’s three-letter name. Instead, the President referred to the agency as “banana.”

Like his predecessors, Elmendorf seems to take pride in such episodes. He keeps a plastic banana on the bookshelf in his office—next to the stuffed skunk that he was given as a reminder of the agency’s reputation for being the skunk at the picnic.

• • •

Few denizens of Capitol Hill understand better than Elmendorf how words can be taken out of context—how 30-second sound bites can be snipped from hours of live testimony and uploaded to YouTube or looped into the endless cable-news cycle. He walks a verbal tightrope every time he appears before Congress.

It’s why he spends hours before each hearing in a secret location—unknown, apparently, even to top aides—with his iPhone shut off and a stack of binders for a last-minute cram session. He chooses his words. He considers his explanations. He anticipates questions.

“They never feel routine,” Elmendorf says of the hearings. “I’ve done dozens of them now, but the stakes are high. If I get something wrong, then it can create all sorts of confusion in the world.”

Former CBO director Robert Reischauer says breaking through the media and political distortion is one of Elmendorf’s toughest challenges: “I’m probably the biggest pessimist in town. I think that modern democracy, mixed with the digital revolution, might be incapable of addressing these types of issues.”

That seemed to be confirmed during Elmendorf’s June appearance before the House Budget Committee to address the nation’s fiscal outlook. There were long-winded questions about Mitt Romney’s economic plan (CBO doesn’t analyze presidential candidates’ platforms), red-faced anti-Obama rants, and partisan talking points disguised as questions.

Of particular interest to several Republicans was the 2009 federal stimulus.

According to CBO’s analysis, the $800 billion in government spending had a positive effect on the economy. Barring some offsetting spending cuts or tax increases down the road, however, the additional debt would put a drag on the economy ten years later. Democrats tend to focus on the first half of that analysis, Republicans on the second.

“So it would be inappropriate to double down in terms of a failed program?” asked Texas Republican Bill Flores in a typical exchange. “If . . . stimulus version 1.0 didn’t work, why would stimulus 2.0 work any better?”

“Well, Congressman, as you understand—and I recognize you don’t agree with us—but our position is that the Recovery Act was not a failed program,” Elmendorf said.

For all the debate that day over the 2009 stimulus, there was comparatively little discussion about the end-of-year fiscal cliff. Or of real solutions to the long-term debt problem, the “fundamental disconnect” between tax and spending policies that threatens to drive the US economy into the ground.

Fiscal-policy decisions made by Congress in the coming months could mean the difference between a decade or more of economic growth, stagnation, and decline. Those decisions will be made on Elmendorf’s watch. Who would want the pressure—or the hours?

Elmendorf estimates that he works 60 to 70 hours a week: “I’m not proud of that, but there is a lot of work to do. I’d like to see more of my kids.”

But he doesn’t seem bothered by the pressure. Quite the opposite. Before the start of the Budget Committee hearing earlier that day, Paul Ryan, committee chairman and soon-to-be Romney running mate, bounded over to Elmendorf to shake his hand and pop his usual friendly question: “Are you living the dream?”

“My answer is yes, I am,” Elmendorf says today. “For somebody of my interests, I have the best job in Washington.”

Freelance writer Paul Quinlan (paulrq@gmail.com) recently moved from DC to Charleston, South Carolina.

This article appears in the December 2012 issue of The Washingtonian.