The private sector chimes in

I've been on vacation, so I'm just now catching up with some of the stories about the OPBO.

An interesting one in today's Hill Times. Douglas Porter of BMO says that the OPBO is important because of the lack of credibility of numbers that come through the political filter.

The government's economic reports and forecasts have become too politicized and there should be a source of impartial numbers on the economy and country's finances, says Douglas Porter, Deputy Chief Economist at BMO Capital Markets.

Mr. Porter said the economic numbers put out by the Congressional Budget Office in the United States are more detailed and trustworthy than what is typically available in Canada. The CBO, which was founded 35 years ago, is well established in the U.S. political landscape and has a solid reputation for "high-quality, low-profile work." Its numbers provide a solid basis for debate on economic matters.

"The whole process in Canada has just become so political," Mr. Porter said. "Every budget number, even when we had a surplus, is used as a target by the opposition or a bragging point for the government. And unfortunately that just made the whole process a little less useful to analysts in general, because we don't know for a fact that the latest estimate is a true estimate, and how much of it is a political message."

Mr. Porter is not entirely uncritical of the OPBO, though:

Mr. Porter said that although the Parliamentary Budget Officer—a new, smaller entity which was created to serve a similar purpose to the CBO—is doing a "solid job" as far of the analysis it has provided, it hasn't had a long enough track record to tell whether it is truly reliable. He said he would prefer the PBO, which since its inception last year has been a constant source of headlines because of its provocative reports and ongoing disputes with the government over its mandate, "turned down the volume a bit" and maintained a lower profile like its American counterpart.

That's fine. I didn't sign the open letter to defend every operational decision that has been made at the OPBO. I signed it because I think the changes proposed by the committee would leave the OPBO unable to fulfill its potential.

Why independence matters

Here is a quote from a story in the Hill Times from May 25, 2009 (sorry no link; it's a pay site).

But even with such a formalized process, the PBO would still have to deal with an innovation that the rest of the world has taken for granted for the better part of two decades: a website.

"You know," says Page, "we fought hard to get that website. They didn't want us to have a website. They thought it was breaking with tradition."

This is precisely why the OPBO needs to be independent. If the OPBO has to devote resources and time for internal fights with the Library of Parliament over the existence of a website--without which it cannot effectively communicate to the public--then it needs to be independent of the Library.

Here is what UWO Professor Emeritus Michael Parkin said about the CBO in the United States in an email to me:

One of the strengths of the CBO is its email service. I receive a daily (almost) email with links to the latest CBO web postings. This service is extremely valuable and leads me to data and analysis that I would otherwise miss. Perhaps OPBO already provides such a service. If it does, it should be better advertised. If it doesn't, it should start such a service. Researchers, teachers, and journalists -- not to mention MPs -- would all benefit from it.

The OPBO is pretty new and small-scale, so it doesn't generate enough output right now to justify a daily email. But Prof. Parkin's point that communication directly with the public is of great service and enhances the value of a budget office is one that I endorse.

Parsing Language

Kady O'Malley parses the language in the open letter and my opening post.

. . . the site’s creator, UBC economist Kevin Milligan, consistently uses “OPBO”, which stands for “Office of the Parliamentary Budget Officer” . Now, this could be just a semantic quirk, but it may reflect a subtle attempt to move the debate away from the individual who currently holds the job — the embattled but unbowing Kevin Page — to the office itself, focusing on policy, rather than the personalities involved.

My intention is not to be subtle. I simply wanted the broadest group of signatories possible. There is certainly a group of economists who like the Office and think the current Officer is doing a great job. However, perhaps there is also a group who like the Office but have some questions about the current Officer. I have no idea which group is bigger, and if there are even any people in the second group. But, I wanted both sets of economists to feel comfortable signing the letter.

Some have also questioned the use of the word 'Office' because it does not appear in the enabling legislation. I don't think it is unprecedented to have a different 'trade name' than legal name for a public institution--legal names can be cumbersome or lack descriptive character. In this case, I am quite sure that the PBO sits in an O, so why not call that shop the OPBO. Moreover, the official website--presumably vetted by the Library of Parliament--calls it the OPBO. I simply borrowed what was on the official website.

National Post Opinion Piece

Here is a link to an opinion piece I wrote in Saturday's National Post to introduce the open letter and to respond to Bill Watson's piece. The open letter also appears on their website--so we can guess that it will appear in the print version too.

Globe Letter to Editor by Senator Carstairs

Senator Sharon Carstairs had a letter to the editor in the Globe and Mail today in defence of the Joint Committee of the Library of Parliament, of which she is a co-chair.

Let me pick on two of the points she makes.

The second type of report is that requested by a committee or individual parliamentarian. They are therefore not released by the PBO, but by the requesting party. The report on the cost of the Afghanistan war was requested by Paul Dewar, and it would have been immediately released by the MP.

I wonder how the Senator knows what Mr. Dewar would have done with the report? In the future, should we rely on the conjecture that MPs 'would' release reports? I don't find that satisfying--but perhaps I don't fully understand what the obligations are here.

We also believe he should respect the law and job description under which he was hired.

This point has been made on many blog posts as well--the claim is that the Officer has 'over-reached' his mandate. I am not a lawyer or an expert on public administration, so I have no opinion on whether these claims are true.

However, I think the more important and larger issue that is raised by the open letter is what the OPBO should look like--if the current law doesn't allow for independence from the Library of Parliament Committee and public reporting of analyses, then perhaps the current law should be improved so that Canadians can benefit from an effective OPBO.

Links to media stories on OPBO

There has been lots of coverage of our open letter so far. Here are a few articles / posts I have seen.

Canada.com: Economists seek independence for parliamentary budget officer.
David Akin: Free Kevin!
Kady O'Malley: 134 (and counting) economists agree.
Worthwhile Canadian Initiative: An open letter in support of the OPBO.
Inkless Wells: That wasn't so hard
Kelly McParland: The Economists are Revolting!

National Post Op-Ed on Friday ?Saturday?

According to the Editor, we should have an Op-Ed piece in the National Post on Friday Saturday. (update: I received notice on Thursday it would appear 'tomorrow'--perhaps it was pushed to Saturday.)

Signatories

The list of signatories to the open letter as of July 15th can be found (pdf) here. The 134 names on the list include 15 Past-Presidents of the Canadian Economics Association and 7 Canada Research Chairs.

If you would like to add your name to the letter, please post your name, city, and affiliation (if any) in the comments. The comments are moderated, so it may take a day or two for your name to appear.

Lettre ouverte à l'appui de BDPB

English version available here.

La liste complète des signataires de la 15e Juillet est disponible (pdf) ici. Ajoutez votre nom ici.
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Le Bureau du Directeur Parlementaire du Budget (BDPB) a été créé en 2006 avec pour fournir un avis indépendant sur les finances de la nation, ainsi que pour soumettre au gouvernement des prévisions fiscales trimestrielles. Le BDPB fait maintenant l'objet d'une attaque bipartisane, ayant comme but de limiter sa capacité à communiquer avec les Canadiens et à fonctionner efficacement. Nous signons cette lettre en appui à cette nouvelle institution innovatrice et nécessaires. Notre appui découle des trois raisons suivantes.

Tout d'abord, le BDPB est en mesure de produire des projections financières indépendantes, détaillées et crédibles. Le ministère des Finances dispose d'un personnel d'economistes très talentueux, mais dans le cadre de notre système parlementaire, ils sont restreints par les prises de la position politique du ministre des Finances. D'autres groupes d'économistes, tant à l'intérieur qu'à l'extérieur du gouvernement n'ont ni le mandat ni les ressources suffisantes pour produire efficacement des projections financières et des évaluations du coût des initiatives gouvernementales. Sans le BDPB, des informations importantes et indispensables sur la situation financière du Canada seraient perdues.

Deuxièmement, le BDPB contribue à élever le débat démocratique au Canada. Suffisamment appuyé, le BDPB pourrait produire des estimations crédibles sur les recettes fiscales ainsi que sur les dépenses gouvernementales au Canada, à la manière de ce qui se fait aux États-Unis avec le Congressional Budget Office. Idéalement, cela permettrait aux parlementaires de se concentrer davantage sur le mérite des initiatives économiques du gouvernement, plutôt que de laisser le débat se réduire à des disputes sur le merite d'hypothèses économiques différentes. Au moment où beaucoup s'interrogent sur le niveau du débat politique au Canada, il est utile de profiter de l'appui d'une institution démocratique qui améliore les discussions.

Troisièmement, le BDPB a afiché dans sa courte existence des succès enviables. Par exemple, les prédictions du BDPB sur les conséquences fiscales de la présente récession semblent fiables. Cette crédibilité a été durement gagnée, et serait encore plus difficiles à recréer. Nous devons donner au BDPB l'occasion de bâtir sur ses succès.

Nous appelons les parlementaires de tous les partis à mettre en application les actions suivantes et à appuyer le Bureau du Directeur Parlementaire du Budget:

* Assurer un financement suffisant pour s'acquitter de son mandat
* Garantir l'indépendance du BDPB en faisant un Haut Fonctionnaire du Parlement
* Effectuer la publication de tous les rapports d'analyse.

(Merci à Benoit Dostie, Jean-Yves Duclos, et Steeve Mongrain pour l'aide avec la traduction.)

Open Letter in Support of OPBO

Ce texte est également disponible en français ici.

A full list of signatories (as of July 15th) is available (pdf) here. Go here if you wish to add your name.

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The Office of the Parliamentary Budget Officer (OPBO) was established in 2006 with a mandate to provide an independent authority on the finances of the nation and to submit the Government's quarterly fiscal forecasts to analysis. The OPBO has recently come under bi-partisan attack, with proposals to limit the ability of the OPBO to communicate to Canadians and to operate effectively. We write in support of this nascent, innovative, and necessary institution. Our support stems from three underlying reasons.

First, the OPBO can produce independent, detailed, and credible fiscal projections. The Department of Finance has a very talented economic staff, but under our Parliamentary system these economists are restrained by the political stance of the Finance Minister. Other groups of economists both inside and outside government lack either the mandate or the resources to effectively produce detailed fiscal projections and costing of government initiatives. Without the OPBO, important and vital information about Canada's fiscal position would be lost.

Second, the OPBO contributes to elevating democratic debate in Canada. A properly supported OPBO could put out credible estimates of fiscal revenues and expenses, as happens in its older sibling institution in the United States, the Congressional Budget Office. Ideally, this allows Parliamentarians to focus more on the merits of government economic initiatives, rather than allowing the debate to degrade into quibbling over differing economic assumptions. In a time when many are questioning the prevailing standard of political debate in Canada, we must support an institution that improves democratic discussions.

Third, the OPBO in its short existence has a commendable record of success. For example, the OPBO's predictions of the fiscal consequences of the current recession appear prescient. Such credibility is hard-earned and harder-still to recreate if discarded. We should allow the OPBO the opportunity to build on its success.

We call on Parliamentarians of every party to pursue the following actions in support of the Office of the Parliamentary Budget Officer:

• Ensure adequate funding to carry out its mandate
• Independence by making the PBO a full Officer of Parliament
• Public reporting of all analysis.

Independence

One of the important aspects of the current debate about the OPBO is the degree to which it should be independent.

The Netherlands Bureau for Economic Policy Analysis, which is similar in many ways to the OPBO, has an interesting FAQ about independence:

CPB is a research institute that is independent with respect to content, but at the same time is formally part of the central government. This ambiguous position, which we share with the other planning offices, often raises questions.

CPB does not find this position to be constraining. Succeeding Ministers of Economic Affairs have respected and, if necessary, defended CPB's independence, even at times when they could not agree with the conclusions drawn by CPB. Most politicians accept and appreciate CPB's independence. This enables us to work for the Cabinet and for the opposition at the same time. After all, politics takes decisions regarding the chosen policy, whereas CPB - on demand or on its own initiative- seeks to clarify the economic effects of specific policy proposals.

I think the last sentence is key. It is up to our politicians to make the decisions, but they can make better decisions if they have solid numbers on which to base their decisions. And that is what an effective OPBO can do.

About the CBO

The Congressional Budget Office in the United States was established in 1974. Here are some interesting things from its factsheet.

• Funding of USD 44.1 million in Fiscal Year 2009.
• Staffed by 235 people.
• Mission to provide "Objective, nonpartisan, and timely analyses to aid in economic and budgetary decisions on the wide array of programs covered by the federal budget"

In contrast, Canada's OPBO has only a handful of employees and funding of just over $2million per year.

There are surely important differences between the needs of a congressional and parliamentary system, so direct comparisons might not be appropriate. However, the need remains for independent analyses of budget proposals from either the Government or the Opposition side of the House and the OPBO is a great way to do so effectively.

Leaks about PBO report

A story in The Hill Times on Monday discusses who leaked last week's OPBO Economic and Fiscal Statement (pdf). I don't really follow the subtleties of the politics involved here, but you can read more about it here by Paul Wells and here by the National Post.

What does seem clear to me is that the idea of passing everything through the MPs and committee members rather than directly to the public is not a trouble-free way to proceed. This episode seems like a good advertisement for OPBO independence.

Open letter update

We now have 129 signatories to the open letter. The text of the letter will be 'launched' here (and also in a media outlet, if we can find an interested one) over the next few days.

Criticism of the OPBO

William Watson (an economics professor from McGill) argued against the OPBO in the Post last week. He makes two main arguments. First, that any Finance Minister who 'fudged' the numbers would pay a political price from voters. Second, that the OPBO likely doesn't have any particular advantage in making macro forecasts.

It's good to have a public discussion on the role of the office and I'm glad that Bill has contributed.

On the first point, I agree that discipline from voters is the ultimate check on bad behaviour by politicians. However, I wouldn't want to rely on it as the only one. Myself, I think well-designed institutions (such as the OPBO) can also contribute to improving the incentives and ultimately behaviour of politicians.

On the second point, I agree that the OPBO likely has little advantage over others in making (or re-weighting as Bill suggests) macro forecasts. However, that is not the only thing that the OPBO does or could do. Taking macro forecasts and making fiscal projections from those forecasts seems like something that would pay low private returns--I don't see a large incentive for private institutions to put a lot of effort into it. Moreover, beyond fiscal forecasts, the OPBO is charged with pricing policy initiatives. (See, for example, this pdf released today from the CBO in the US.) I don't see non-government groups of economists having the expertise, the data access, or the incentives to do this kind of work.

Myself, I think it's always an interesting and useful question to ask whether the private sector could replace a particular public sector role, and to think carefully about why or why not. In this case, however, I think that the 'public good' aspects of providing credible, unbiased fiscal information make the laissez-faire argument difficult.

Quick update

We already have 110 signatories, including 12 previous CEA presidents and at least 6 Canada Research Chairs.

I will be on vacation for a few days, but will move to publicize the open letter next week.

Thanks to everyone who has supported this initiative so far.

Some more news items

Here is Don Martin in today's National Post:

[Kevin Page] was appointed last year to provide the government with transparent, honest, fiscal insight. The reward for delivering on that with such embarrassing effectiveness is to be choke-chained.

His office budget remains crimped far below what was promised and is required. When his performance was put to a committee last month, MPs from both major parties scolded him for issuing his reports publicly without giving them time to study the details in private first. Evidently transparency has its limits.

That’s why a contrite Mr. Page scheduled his report’s release for Wednesday, two days after MPs on the finance committee were given the copies they promptly leaked to journalists.

[...]

His baseline conclusion is that the Canadian economy has hit bottom hard, with a modest, slow-moving recovery beginning right about now and culminating in 2014 when it again reaches its maximum potential.

That would indeed be an ugly reality, but Kevin Page was not appointed to spin or sugarcoat.
The government, supported by all parties, should give this unassuming parliamentary officer the tools to do his thankless work properly. Given his current forecasting, we can only hope he ends up being wrong.

As well, here is an article about the projections in the Globe and Mail.

Support the Office of the Parliamentary Budget Officer

This blog has been established to build support for the Office of the Parliamentary Budget Officer of Canada.

The purpose of this blog is support of the Office of the Parliamentary Budget Officer. The current Officer is Kevin Page. He may or may not be doing a great job--people may disagree. The point here is to support the institution of the Office itself.

The author of the blog is Kevin Milligan, who is an Associate Professor of Economics at UBC.

An open letter is being prepared and will be posted here shortly. Email me at supporttheopbo@gmail.com to learn about the open letter.

Watch this blog for more information in the days that come.

The Report of the Standing Joint Committee on the Library of Parliament

Here is a .pdf of the Report on the Operations of the Parliamentary Budget Officer within the Library of Parliament, by the Standing Joint Committee on the Library of Parliament.

The key recommendations are below. I have bolded particularly interesting words.

Recommendation 1
That the Speakers of the Senate and the House of Commons direct the Parliamentary Budget Officer to respect the provisions of the Act establishing his position within the Library of Parliament. The Parliamentary Budget Officer reports to the Parliamentary Librarian and, as a senior official of the Library, it is his responsibility to participate fully in management activities and to work closely with the Library’s other service areas.

Recommendation 6
That the Speakers of the Senate and the House of Commons instruct the Parliamentary Budget Officer that a response to a request made by a parliamentarian or a parliamentary committee in accordance with the legislated mandate shall remain confidential, until the confidentiality is lifted by the parliamentarian or the parliamentary committee making the request.

Recommendation 8
That, on the understanding that any increase of the budget of the Parliamentary Budget Officer is conditional on compliance with all other recommendations in this report, after due process and validation, the Speakers of the Senate and the House of Commons, in collaboration with the Parliamentary Librarian, submit to the Treasury Board a proposal to increase the budget of the Parliamentary Budget Officer for 2009–2010 to $2.8 million, without reducing the current financial resources of the rest of the Library of Parliament.

Media stories on the OPBO

There have been a lot of stories on the OPBO over the past few months. I will try to 'catch up' with some of these in order to provide some context. I don't know how long these links will remain active, but they all work as of now.

Canwest, Dec. 8th 2008: "Parliament's Budget Office has its budget frozen"

The Hill Times, Jan. 19, 2009: "Bringing truth to budgeting"

The Hill Times, Feb. 9, 2009: "Parliamentary Budget Officer should be reined in, say Liberal and Tory MPs"

Canadian Press, Jun. 16, 2009: "Give the Parliamentary Budget Officer More Money: Committee"

Ottawa Citizen, Jun. 16, 2009: "Budget Officer, Parliamentary Library urged to bury the hatchet"

Toronto Star, Jun. 17, 2009: "Put tether on budget watchdog, MPs urge"

Edmonton Sun, Jun. 17, 2009: "Committee returns Page to Library"

National Post, Jun. 18, 2009: "The muzzling of Kevin Page"

Toronto Star, Jun. 24, 2009: "Do Tories want watchdop or lapdog?"

Toronto Star, Jun. 27, 2009: "Our democracy is being eroded"

Globe and Mail, Jun. 30, 2009: "Why is Kevin Page left twisting in the wind"

Globe and Mail, Jul 2, 2009: "Misplaced confidentiality"

Winnipeg Free Press Editorial Today

Today's Winnipeg Free Press has an editorial on the OPBO situation. It is very supportive of the OPBO.

Here is their description of the problem:

His loyalties, though, have not served his office well. Conservatives and Liberals, on the committee that oversees Mr. Page's office, have lined up to squelch this outspoken analyst, whose work is to feed information requested by various parliamentary committees. The joint Senate-Commons committee responsible for the Library of Parliament, through which Mr. Page reports to the speakers of both chambers, has offered Mr. Page the $2.8 million budget he requested on the proviso he no longer immediately releases his updates and forecasts publicly, leaving that disclosure to the committee.

It seems the Liberals, who as Official Opposition should be the most rabid of watchdogs, well understand that an insider with a little bit of power has the most dangerous bite of all, and better to emasculate this one while not in government. The united front they and the Tories have formed to effectively neuter Mr. Page is a crass example of political expediency.

Here is their call to action:

[Mr. Page] should turn down the nefarious $2.8-million offer and soldier on, for however long the prime minister sees value in having a parliamentary budget officer who actually believes in transparency and accountability.