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?

Keeping Secrets Hurts Democracy

. . . says the Globe and Mail in an editorial today.

Accountability in politics is possible only when the governed obtain fair, unbiased information about the government's track record and future plans. The federal government preaches accountability, but is being only selectively transparent about its own spending activities. In addition to being bad public policy, this opacity does a disservice to democracy.

Editorial in the Star

Today in Canada's largest circulation daily paper there is a big editorial in support of the PBO. Read it in the Star here.

One interesting nugget--the Committee is meeting today, apparently. (At 1pm-3pm EDT--so it is happening right now! They are 'in camera' though, so no webcast.)

I wonder whether the committee unanimity will continue? As the Star notes, the opposition members are actually a majority on the committee. If Mr. Ignatieff really wants to 'unshackle the watchdog', he should simply chat with the Liberal committee members, for it is this committee that is doing the shackling, not the Prime Minister directly.

I like the Star's line of reasoning here:

Unfortunately, however, funding of the PBO could be derailed by an arcane dispute. Page has been lobbying to make all his reports public – not only those he undertakes on his own but also those done at the request of individual legislators. Senators and MPs believe they are entitled to ask that research be done on a confidential basis. While that's true, they shouldn't hold the PBO hostage over it. Surely protocols can be negotiated to let Page do his sums and release the findings with minimal delay, if not instantly. It's all public money.

Even better is the point that--no matter who is right about what the current legislation allows the PBO to do--we ought to stay focused on what the legislation should say:

At root, PBO independence and transparency is in the public interest. Prime Minister Stephen Harper should have given the PBO more authority from the start. Unless this mess is resolved, Parliament should revisit the law establishing the office.

The goal here is to have a transparent, adequately funded, and free-to-have-its-own-unmolested-website PBO. Let's get that done.

The Economist likes Independent Budget Officers

In September, the Economist magazine published an editorial arguing in favour of independent budget officers. They draw a parallel to central banking, which has benefited over the past 20 years from a move toward greater independence.

Here is the core of their argument:

Hence the importance of the other approach: appointing independent budget monitors. Politicians will not (and should not) outsource tax and spending decisions to unelected technocrats, but all countries should have independent bean-counters to pass judgment on their fiscal plans. Even without statutory power, such bodies have an impact. New cost estimates from the CBO, for instance, recently changed the terms of America’s health-care debate. These bodies should not just assess politicians’ plans, but offer simulations of different fiscal paths. Britain’s Tories want to copy the CBO model.

They are right. No politician likes being second guessed, but the greater fiscal credibility that such rules and institutions provide actually increases a finance minister’s room for manoeuvre. It also helps central bankers, by assuaging investors’ fear that bankrupt governments will resort to printing money. Credibility will not magically remove the difficult budget choices that lie ahead. But it is an important place to start.

Hat tip to Vaughn Palmer/Vancouver Sun.

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.

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.