Big decision on the PBO this week

This week, the Joint Committee on the Library of Parliament will meet on Thursday. It will be in camera, which, in a fun linguistic twist means nearly the opposite of on camera.

The Committee will discuss the Estimates for 2010-2011. Will the PBO get the $2.8 million? The Hill Times tells us it will be 'rocky'.

Kevin Page has told us he'd rather shut down the shop than run it on a shoestring.

The Government side does not have a majority on the Committee. We have seen statements of late by all Opposition parties in support of the PBO. Who will carry the day?

What's so good about the CBO?

Anyone watching the US healthcare debates over the last 6 months should have developed a strong appreciation for the Congressional Budget Office. At different points in the summer, the two sides were each on the defensive as the CBO's costing of different initiatives either helped or hurt the case for reform.

What was interesting to me is that I read very little in the way of attacks on the credibility of the CBO during these debates. This NPR article on the credibility of the CBO suggests a lot of "screaming" on both side of the aisle, but in my view it is more whinging than strong criticism--attacking the CBO was not a central part of either party's strategy. Both sides more or less took their lumps when it came to the CBO. And remember here, this is not a polity that is averse to character assassinations and attempted credibility-destruction.

This credibility was born of legislated independence and nurtured by a history of solid research and good leadership. Clearly, the PBO isn't there yet. But I think the CBO is indeed a nice target for what an effective PBO might offer.

But don't take my word for it. Just check out what they do here. There is even a blog. (Can you imagine the reaction of the Library of Parliament and certain Parliamentarians if Kevin Page had a blog? The legislation does not mention a blog! The legislation! Sedition!)

Is the Canadian Parliamentary System blissfully perfect?

Over at Worthwhile, there is an interesting comment thread on the PBO following the Fraser Institute piece published last week. The Fraser Institute authors posted a comment here.

Even assuming the PBO is a more reliable source of policy analysis than other organizations, its efforts are of little practical value in the Canadian political context given the institutional environment. Unlike the US where the Congressional Budget Office (CBO) is more influential, Canada’s government operates in a parliamentary system. As in many parliamentary systems, the Canadian legislature has limited powers to change the submitted budget (see IMF study). Generally, parliamentarians can only approve or reject the incumbent government’s spending proposal, while the legislatures in the US government are free to change every aspect of the budget proposal. Policy analysis performed by the CBO is more likely to be used effectively by individual members of congress to adjust proposals accordingly.

This is the old 'accountability is foreign to Westminster Parliamentary Democracy' argument that I discussed previously here.

Let me extract two points of their argument:

1. The PBO would not be exactly like the CBO therefore no parallels to the CBO may be drawn.

2. Canada's Parliamentary system has the advantage that the executive is directly accountable in Parliament--The Finance Minister has to stand up and defend his/her policies.

Point #1 is an all or nothing argument. If not exactly like the CBO, then the PBO is not worthwhile. I see the PBO as adding tremendous value by pricing both government and opposition policies. The use of this information is different in Canada than the US, it is true. In the US this information might be directly incorporated in the bill through the legislative process. This wouldn't likely happen in Canada, since policies are more or less presented as done deals.
However, would pricing information influence debate in the Commons or in the public about a policy initiative? Would it improve the value of that debate? I argue yes. Parliamentary democracy does not mean that there must be no debate once the Finance Minister speaks. Having a well-informed debate in Parliament and in public is, in my view MORE important in Canada's parliamentary system since bad policy proposals can ONLY be influenced by debate rather than legislative horse-trading.

Point #2 is a non-sequitur. Yes, it is a good thing that we have direct accountability of the executive. But we're not canceling Question Period here. We can have executive accountability as well as other channels of accountability. Yes, under the current system we can vote against a government that offers bad policies, once every five years (less for minorities of course). But I like a system that has a little more democratic responsiveness than that; where there are more channels for accountability than quinquennial elections.

But introducing another channel of accountability must surely diminish the power of the direct channel through Parliament, right? Perhaps. So what? I'm willing to make that trade if it makes our democracy function better. As I said previously:

Is the point that our system is currently in a state of perfection? Really? Or that our system is so fragile that a small itsy-bitsy movement toward transparency would cause it to wither? Which is it--we're perfect as is, or fragile as glass?

My argument is that we can add some extra channels of accountability to our system without wrecking it. Our system has evolved substantially since 1867. Let's evolve some more with an effective PBO.

Defending the PBO, again

There is an anti-PBO op-ed in the National Post today. I don't agree much with it, but I will outsource the commentary to Stephen Gordon. I endorse Stephen's words.

Let me pick up on one point. The Fraser Institute authors claim the following.

In addition to the multitude of private organizations supplying economic forecasts and fiscal projections, others still go to great lengths to scrutinize the accuracy of government budget numbers and assess its fiscal policies and programs. These include think tank institutions (including our own), lobbyist groups, and professional and academic economists. In a sense, the government already has multiple “watchdogs” keeping it honest and disciplined.

Where are these watchdogs? Have you seen them? Where are the detailed, credible, timely, and transparent costings of government and opposition tax policy initiatives? I don't see them. Not at the Fraser Institute, not elsewhere. I don't mean opinion pieces. I mean solid, objective, transparent policy work.

Speaking for myself, I am one of those academics who has a great interest in matters of public finance. But, with the other demands on my time (teaching, publishing, committee work, and once in a long while some leisure) I seem barely capable of writing one blog post a week, let alone doing fully costed pricing analysis of policy initiatives. The incentives are simply not there for me to spend my time on being a fulltime watchdog.

I am not convinced that the PBO guys are going to be better macro forecasters than anyone else. On that point, I have some sympathy for the Fraser Institute argument. But that's not what we're paying the PBO to do. We're paying them to a) translate those macro forecasts into fiscal projections and b) price policy initiatives coming out of Parliament.

I just don't see anywhere else in Canada that you have 5 or 6 economists devoted full time to these tasks, with access to the data necessary to do it. Yes, banks and thinktanks do produce the occasional report. But this is far short of what can be done by even a small fulltime staff dedicated to this task.

The three million dollars that the PBO costs is a rounding error on a budget of $260 billion. In fact, let me do the math. It's 0.00154% of 260 billion. In terms of time, the federal government spends 3 million every 6 minutes. I think it is worth spending 0.00154% of our federal budget to monitor and study how the other 99.99846% is spent.

Let me leave with one more quote from the National Post piece:

Indeed, this switch has minimized the government’s ability to fudge budget numbers for political advantage.

Were these Fraser Institute guys even around in the Fall of 2008?

Upping the Ante

The Parliamentary Budget Officer has apparently said that if he doesn't get the budget increase he requested, he will recommend shutting down the office. (Note that I wrote office with a lower-case 'o', lest I transgress the legislation and enrage those who are worried about me calling the office an Office.)

Here's what's on the CBC website.

Parliamentary Budget Officer Kevin Page says he will recommend the government shut down his operation of monitoring Ottawa's financial performance if he does not get more resources to do the job.

Page told the House of Commons finance committee he still has not been told whether his annual budget will increase to $2.8 million, which he says he needs to do his work. His office had a budget of $1.8 million in the past fiscal year.

He said several of his staff members are on loan from other departments, and if he doesn't receive a critical mass of qualified personnel he will recommend closing the office.

Drama.