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Fiscal Policy, Data, and Democracy: Insights from Former CBO Director Doug Elmendorf
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Welcome back to the show! In this week's episode, I sit down with Doug Elmendorf, former director of the Congressional Budget Office, to talk about the impact of government shutdowns, the challenges of fiscal sustainability, and the importance of independent statistical agencies. We discuss how shutdowns ripple through the economy and people’s lives, the tough choices facing policymakers on entitlements and deficits, and why compromise is vital to our democracy. Doug also shares his perspective on the independence of federal statistical agencies, the role of private sector data, and the optimism he sees in today’s policy students. It’s a wide-ranging conversation about economics, governance, and the future of public service.
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Transcript
Introduction and Podcast History
00:00:12
Speaker
Welcome back to the Policy Biz Podcast. I'm your host once again, John Schwabisch. You're thinking to yourself, whoa, whoa, whoa, there's a lot of podcasts coming out from this guy. What's going on? It's true. If you've stuck with me over the last 12 years, that's right, 12 years of this podcast,
00:00:29
Speaker
You know that I was going every week for a while, then I had to slow down. It's just a lot of work to do these every week. So I was doing every other week for a while. And I'd say over the last month or so, I've been going twice a week and getting a lot of content out there.
00:00:42
Speaker
There's a lot to talk about. There's a lot to talk about with the data that we use, the data that we visualize, the independence of federal statistical agencies, how the data gets produced, how the data are visualized.
00:00:54
Speaker
So there's lots to talk about, and I've had a great number of guests come on the show and join me. Former BLS commissioners, Bill Beach and Erica Groshen, David Wessel from the Brookings Institution, formerly
Guest Introduction and Topics Overview
00:01:06
Speaker
of the Wall Street Journal. And this week, I'm fortunate enough to talk with my former boss at the Congreational Budget Office, Doug Elmendorf, currently at the Harvard School. And Doug and I talk about a lot of stuff.
00:01:17
Speaker
We start with the conversation about the potential federal government shutdown. ah Right now I'm recording. It's Monday evening and we are about 24 hours away from a potential government shutdown. So we talk about that and what are the implications of a government shutdown on the economy and on everyday people? Like, what does it mean for you if the government shuts down?
00:01:40
Speaker
Then we also talk about federal budget deficits and what that means for you and why the federal government really should think about reining in these big deficits that we're running every year. And again, we talk about how that impacts you as an individual, as a business owner, as a homeowner, as a worker.
00:01:59
Speaker
What does it mean to have these huge amounts of debt and deficits out into the future?
Role of Federal Statistical Agencies
00:02:06
Speaker
And then we turn our attention to talking about the importance of an objective and independent federal statistical agency ecosystem.
00:02:13
Speaker
We talk about lots of different types of data. So if you are primarily here to listen the show about data visualization, you can't do that without good objective data. So we need to be thinking about what changes in the federal data ecosystem mean for our work, because without the data and without the analysis,
00:02:31
Speaker
the visualization, the data communication really doesn't mean as much as it could with good data. So let's get over to the interview. Here's my conversation with Doug Elmendorf only this week on the PolicyViz podcast.
00:02:46
Speaker
Hi, Doug. Good to see you. Hi, John. Good to be with you. Not in the halls of CBO. It's been a while. I know. It's been a few years. um So let's just get right into it. So it's Monday the 29th. We're coming up into the good old CBO end of fiscal new year party, which will occur tomorrow night regardless.
00:03:09
Speaker
Of course, this thread about shutting the government down and, um you know, we don't need to talk about the politics really.
Economic Impacts of Government Shutdowns
00:03:15
Speaker
What I'm curious is to get your take on how a shutdown can impact the economy and and really how it affects people's lives day to day.
00:03:25
Speaker
Yeah. So I, find shutdowns to be about the most frustrating thing that the government can do. It's bad for the economy to have a bunch of people not working.
00:03:39
Speaker
And that includes both people who are direct employees of the government and also in many cases, contractors working in government contracts where it's often not clear if they should be working or not. That's bad for the economy.
00:03:51
Speaker
It's bad for the people who are affected by this both the people who are working for the government or for contractors and the people who are expecting government services, like going to a national park or something else.
00:04:03
Speaker
um But the most of all, it bothers me because it destroys the operations of the government. It actually matters. The government's open every day and yeah and that work can normally continue.
00:04:16
Speaker
And pretending that doesn't matter, which I think is what happens sometimes shutdowns, a view that it's no big deal if the government is closed. I think is dismissive, inappropriately, wrongly dismissive of the value of the work that's being done for the government in terms of the services and benefits being received by all Americans.
00:04:38
Speaker
So if I'm living in you know Des Moines or Omaha or Dallas or wherever, the government shuts down Tuesday night, what should I be preparing myself for?
00:04:50
Speaker
Well, it's not totally clear because since a decision back in the Reagan administration, the view of people running the government has been that only essential services can continue.
00:05:02
Speaker
But what constitutes essential is really left up to an administration to decide. even in normal times and this particular administration has been has taken a very expansive view of its authorities and so it really is up to the administration to the decide what will happen and what won't happen for example i read there was a letter from a number of retired national park administrators urging the government if it sends home the workers for national parks to actually close the parks without the people there to protect the park protect the people in the park
00:05:37
Speaker
Bad things can happen and have happened before. right So we don't know if a national park will be open on Wednesday. We don't know if those workers will be there. ah People can have confidence that the military will remain at its posts, that the air traffic control system will work.
00:05:53
Speaker
So there are some things that are pretty clearly viewed as essential. Beyond that, it's a it's a judgment call. But the point is that for all Americans, the government is providing services and providing benefits that should be provided well.
00:06:08
Speaker
And we can disagree, and people do, of course, about how big the government should be, what all it should be taking on. But to just arbitrarily cut off activities without discussion um is not the way to resolve that. We should also want ah an effective government.
00:06:23
Speaker
Some of us will want it bigger than others. We also want it to work well and to just close it as just an interruption in its ability to work well for all of us. So you were CBO director during at least one very long shutdown, as I recall.
00:06:40
Speaker
There might've been another shorter one as well. ah How, in that role, How do you manage the folks who are working at the organization? Like how how do you prepare people for, at least I remember the, maybe the first one, which I think was 2012, 2013, something like that was like 21 days or something like that. Like, how do you prepare the staff to be like, you you literally cannot work. You cannot check your email. People who are doing all sorts of projects who want to work.
00:07:09
Speaker
How do you, as a manager sort of prepare people for that? I found it very hard. ah One thing I did was I checked around because I was concerned that some people wouldn't be able to make their rent payments.
00:07:20
Speaker
Yeah. And or buy food, do things they needed to do. And I checked in an informal way to make sure people, particularly that the younger people who I thought might be living more paycheck to paycheck, actually had plans for keeping themselves afloat.
00:07:36
Speaker
um But then you can't communicate with people. It's particularly tricky at the Congressional Budget Office because reopening the government required some budget oriented legislation. yeah Some people at CBO were clearly essential or you would never been able to open the government at all.
00:07:51
Speaker
yeah um Others were less essential. That was complicated itself, but they were all important people working on budget issues. But some were essential at that moment. And the others we had to say, we'll miss you.
00:08:02
Speaker
And then when when people could come back, we brought donuts and things and met people at the elevators and said, Welcome back. We've missed you. Right. Yeah. I remember that essential, that word essential being sort of triggering for many of us who are like, well, I'm i'm important too. It's that it's that word that that really, I think, means something to people.
00:08:22
Speaker
Right. Well, I think it has to do with time sensitivity is how you should think about it. um Lots of things are very important to do over the next month. They may not be important to do at this moment.
00:08:34
Speaker
Right. Air traffic control, that's important to do at every moment. So you can't wait with that. And so essential in this sense is not a measure of underlying importance over time.
00:08:45
Speaker
yeah It's more a matter of are you at the post at every moment of the day?
Federal Budget Deficits and Policy Compromise
00:08:50
Speaker
Yeah. And some of us were more in that category than others. It wasn't clear the director of CBO was actually so essential.
00:08:56
Speaker
What we needed was the analysts who actually understood the numbers of the various government accounts to be there. But i my own reasoning was, well, they were there, then I, as the manager, ought to be there too. Someone needs to steer the ship, right? Yeah.
00:09:11
Speaker
um So you've mentioned this debate that we could have about the size of government and the spending of government. And and one of the things you've done the last, you well, this year has published several papers and several chapters on federal budget deficits, sustainable federal fiscal policy.
00:09:29
Speaker
And I'm curious, from your perspective, in our current era, hyper- politics Do you think there is a path forward for policymakers to come together and resolve the long, well, short-term and long-term fiscal unsustainability of the federal budget?
00:09:47
Speaker
I think a path is there. And I'm an optimist that our leaders will ultimately take that path. But it's uphill from here.
00:09:58
Speaker
yeah um I think we have gotten as a country so dug in in opposing positions that it's harder for people to compromise.
00:10:09
Speaker
But compromise is essential in a democracy. We're not all going to agree. We have pledged to live together and build a society together and govern together. So compromise is essential.
00:10:22
Speaker
And I think we can get back to that. And one reason I think we can get back to that is when you look at groups of people at think tanks, um they semi-regularly will have some paper.
00:10:35
Speaker
So they will say, here are the principles we can agree on. And here's how we would carry that out in terms of putting the budget on a sustainable path. And I've seen a number of those over time and not everybody agrees with every particular outcome, but they all are a lot better than just having our economy just slide down some endless slope.
00:10:58
Speaker
And I think people will ultimately recognize that it will require ah leadership. Meaning people who are in key positions will have to stand up and say, I'm not going to get everything I want out of this agreement, but it's worth trying to forge an agreement.
00:11:16
Speaker
this conversation to date, especially over the last you know four or five months with the with the Big Beautiful Act, right, seemed to focus on discretionary spending, relatively speaking, small numbers. And do you think to date that that conversation about the long-term health of the budget has just failed to focus on our entitlement programs that are the big drivers?
00:11:39
Speaker
Yes, mostly. I mean, the one Big Beautiful Bill Act so-called did cut Medicaid significantly. So as our former colleagues at CBO have estimated, millions of Americans will lose health insurance because of that bill.
00:11:54
Speaker
But it's still only a small approach to the big issue of entitlements. If you look back to when I was born in 1962, which happens to be the first year that the budget data are broken out in the way they are today.
00:12:08
Speaker
So Medicare and Medicaid did not exist. and Social Security cost about 2.5% of GDP. Then we established Medicare and Medicaid and and expanded them over time. Healthcare costs have grown.
00:12:23
Speaker
Most importantly, many more Americans are now over the age of 65 and collecting benefits. So the Social Security, Medicare, Medicaid bundle now costs, instead of that 2.5% of 10.5% GDP.
00:12:34
Speaker
ten and a half percent of gdp So 8% of GDP extra spending. Yeah. But defense spending has fallen by 6% of GDP over that time.
00:12:46
Speaker
So in some ways we've freed up most of the budget room to pay for those benefits through the evolution of our foreign policy. And we haven't really had to face up to how to support spending for an aging population.
00:13:03
Speaker
um without raising taxes or cutting something else. And we've been able to duck that much more than we deserved in some sense over the last 60 years yeah because of defense spending going down.
00:13:15
Speaker
We think about the peace dividend as being a big deal in the late 1990s, but there's a longer peace dividend from the end of the Vietnam War period, really. yeah we've We've been able to duck this.
00:13:26
Speaker
And lots of individual Americans feel that they are only going to collect the benefits that they deserve and have paid into, but there are way more of them.
00:13:37
Speaker
And the cost of healthcare per person is way higher. That's got to be borne by taxpayers paying more or each of us as older Americans, a group I'm entering, getting a little less per person.
00:13:49
Speaker
yeah And we just haven't, those are hard choices and we haven't faced them. So I think there's a few pieces of this that, You know, regular Americans who are not, you know, looking at CBO and OMB budget, you know, spreadsheets ah don't quite fully grasp. I think there's parts of different programs that people don't fully grasp. But let me ask you this.
00:14:15
Speaker
Why should people care? Like, yeah, I mean, at its core, like, why should people care? I mean, to date, like, what are the impacts of having of of that additional eight, 10 percentage points going to these programs? What's the impact on a a homeowner? Like, what are they thinking? Like, how does this really matter to me?
00:14:35
Speaker
The government seems to just borrow whatever they want and it doesn't really matter. Well, so as you say, if if you or I in our families, try to keep borrowing money, right um the lenders are going to say, wait a second, we just don't believe that Elmendorf and Schwab is really going to pay this back. right Now, the US government's in a better position um because the country is fundamentally so strong economically and because it will last forever and the government will last forever, um lenders have had a lot of confidence that the US government will ultimately ah pay back what they owe.
00:15:08
Speaker
And in fact, today, interest rates paid by the government um are about the same as they were before the financial crisis, so 20 years ago, say, um even though our debt is three times as large relative to the size of the economy.
00:15:23
Speaker
So lenders are still pretty comfortable lending money to the US government. um But that can't go on forever. Eventually, as debt rises and it keeps rising relative to the size of the economy, lenders will get more spooked and will start paying higher and higher rates.
00:15:38
Speaker
but also you don't want it to go on forever, even if it could, because that's money that could be used to pay for the programs and services that we care about today. So ultimately we do have to make choices about this and people care. I know they care about the choice. They care about the benefits they receive and they care about the taxes they pay.
00:15:59
Speaker
I think the biggest single misunderstanding is the view that all this money goes into Washington and gets kind of consumed in Washington by bureaucrats um and doesn't find its way back out there and as we you and i know from looking at the cpo data and in fact most of the money just comes into a government bank account and is paid out in checks yeah the beneficiaries for contractors all around the country um and so we may have a government that is too big for some purposes that's what we can debate that's not where the money lies and so that's a
00:16:33
Speaker
But it's a natural thing, though, for people who should read CBO reports. I mean, people have have their lives to lead. right For a few of us, it sort of counts almost as recreation. But for most people, like, why would they take this on? They shouldn't have to.
00:16:46
Speaker
Yeah. but I don't blame people for not knowing they shouldn't study economics. They're doing what they do. um but that But that does mean that our leaders are important, that people need to have members of Congress, um presidents, vice presidents,
00:17:03
Speaker
And at the state level and local level, governors, mayors, legislatures, city councils, communicating with them honestly about the the choices and and the trade-offs. Yeah. You mentioned reading CBO reports for fund, which I admit I may have done a couple of times in the past. And so want to switch gears for a moment and talk about federal data statistical
Independence of Federal Agencies
00:17:24
Speaker
agencies. So you've you're now at Harvard, obviously, just for folks who aren't aware, you were at Treasury Department, Council of Economic Advisers, Federal Reserve Board, led the CBO for eight years? Six.
00:17:36
Speaker
Six years. Six years. um So I wanted to ask to give folks a sense, you know, how important is the independence of these, of particular agencies? You know, some of them have obviously roles supporting certain parties or the president, but for the agencies that you've worked at, how important is the independence of the agencies? And, you know, do you have, ah you know, any thoughts that you have on some of the attacks that, you know, CBO, OMB census have been getting over the last, well, not just nine months, but, you know, years.
00:18:07
Speaker
Yeah, thank you, John. This is a great topic. I think there's an inevitable tension in the way the government works. So on one hand, if you ask people, when we elect a president, should that president be able to tell people in the executive branch what to do?
00:18:21
Speaker
And the answer seems like it ought to be yes. That's what it means to have elected the person to lead the executive branch. They get to lead it. But at the same time, it turns out as a practical matter is very important for a country that the president not be able to dictate everything that the government does.
00:18:40
Speaker
The way to have a rule of law in a country is that the president also has to follow the law. And that means then that the people who are bringing lawsuits on behalf of the government, who are representing the U.S. government in court, ought to be somewhat independent and bringing their own legal judgments.
00:18:58
Speaker
If you want to have good data about how the economy is performing, Whether that's good or bad for the people currently in power, you have statistical agencies that are generating data without being told what it should show.
00:19:16
Speaker
you want to have good decision making, you need to have objective analysis like that done at CBO about the possible effects of different choices without that analysis being actually dictated by whoever has the majority in the House or the Senate at that point in time.
00:19:34
Speaker
So I'm not a constitutional lawyer, and I can't tell you what the Constitution says, but the evidence is very clear, and I think the intuition is clear, that we need to have important parts of the government that can be influenced in their overall direction over time by our duly elected leaders, but can't be controlled on a day-to-day basis that way.
00:19:58
Speaker
And the evidence comes from looking at countries over time, the countries is where the data are under the influence of the person in charge, Data tend to look pretty good, but people were trying to make actual business decisions or household decisions or government decisions need to find some other private secret sources of data.
00:20:19
Speaker
That's not an efficient way to organize the country. yeah And the people who are trying to make contracts, sign contracts or make investments, need to trust that those investments will stand up unless they really are against the law and not just against the wishes of whoever is in political power at the moment.
00:20:39
Speaker
And that means that they need to believe that the government won't just take their investments away. And if you start knocking that down, that will over time have a much bigger negative effect on our economy than many of the more ah individual policies that get a lot of attention.
00:20:56
Speaker
Can you give us a little kind of behind the scenes, a taste of the behind the scenes of you're in any of those roles, treasury, where you know ah lots lots of places you've worked, what are the discussions or conversations like between heads of different agencies?
00:21:16
Speaker
Like as as director of CBO, would you talk to OMB and talk to CRS and BLS? And how would you have those conversations specifically about you know data and and getting things out the door that people could understand, especially, obviously, you know folks on the Hill?
00:21:31
Speaker
I was very careful not to call the leaders of other agencies if I could help it. So I never called the director of the Office of Management Budget.
00:21:46
Speaker
And I think I was only called once or twice. And I did that precisely because of a worry that people would perceive that kind of call even if it was on a very technical accounting matter, as some sort of political collaboration.
00:22:04
Speaker
And the striking thing for me when I was being interviewed to be director of CBO in late 2008, I had friends who were going into the um new Obama administration.
00:22:15
Speaker
And the people interviewing me from the Congress wanted to be sure that I was not going to be talking, working with those people, but instead understood the jobs that worked for the Congress.
00:22:25
Speaker
And that question came as hard from the Democratic staff members That's from the Republican staff members. The Democratic staff members expected to work in some ways with the administration, but they viewed themselves as working for an independent branch of government.
00:22:41
Speaker
Article one of the Constitution, as people often said. yeah they wanted to be sure that I was going to take that seriously, which I did, of course. So I was very careful not to reach out. Now, I think analysts at CBO would talk with their counterparts at OMB or at the various executive agencies to learn what was happening in the government. um You may remember Bob Sunshine, the longtime person at CBO, the deputy director when I was there, used to say the most important tool analysts had was the telephone.
00:23:09
Speaker
because you could call somebody who actually was watching what was happening on the ground in some program in something other part of the budget and learn about it. But that was deliberately kept at a very sort analyst to analyst level, very technical, not involving the director in any way.
00:23:26
Speaker
Right. So with these challenges to data, um you had mentioned that investors, homeowners, businesses,
00:23:37
Speaker
They might need to, and they have in other countries turned to other sources. Do you see a future where, let's assume we get back to a kind of ah a steady state um where we have, you know, BLS administrators not fired for...
00:23:53
Speaker
we'll we'll call it cause, but we'll we'll put that in quotes. Do you see a future where there's more private sector data being brought to bear and sort of processed through the federal government and then you know kind of released in that more government objective companion to the public data that they collect?
00:24:13
Speaker
Well, I think that private data should be used more in constructing government statistics than is the case so far. um There's a lot of private data collection going on, a lot more than was a few decades or a decade even ago.
00:24:27
Speaker
i think the government agencies have not taken up that much. We need to fund the agencies. If we're serious about this business, it's independence for the agencies, but also enough funding to do the hard technical work.
00:24:42
Speaker
And I think with sufficient funding, they would and should bring more private data. to bear. But people need to recognize that the private data we have that exist today um are often benchmarked to the official government data.
00:24:59
Speaker
And so the private data can can provide sometimes faster information, but it's not generally as systematic, as comprehensive, as statistically grounded as the government data.
00:25:10
Speaker
So if you talk to people making, putting together private sector data sets, they often say they need the government statistics to do their own work.
00:25:19
Speaker
So let me finish this up with a question about your current role where you've been since leaving CBO more or less at at Harvard.
Challenges in Public Service Education
00:25:29
Speaker
What do you see policy students doing Or what has the change been in the in the policy students? What are they talking about? What are they worried about? what are Where do they see themselves now that maybe was different a few years ago when people would come into the program?
00:25:45
Speaker
Well, I think our students are fired up to make a positive difference in the world. And they bring incredible talent and energy and dedication.
00:25:57
Speaker
And part of why I'm optimistic about the future is working with our students. um I do think they are concerned, practically speaking, about where they can get work.
00:26:09
Speaker
easy um And the fact that a whole lot of people who work with the federal government and particularly recently hired people um were thrown out of their jobs this year yeah um is disturbing to today's students who want to go into government.
00:26:28
Speaker
um And it's not that they expect that government jobs are ah birthright of theirs in any sense at all. But they want at least some confidence that if they are offered a job and accept it, that they won't be dismissed out of hand.
00:26:43
Speaker
Right. And the fact that the government's now had to rehire some of the people who've been dismissed yeah just makes the whole thing look even worse sort of chaotic mess. Now, partly that's offset by a lot of interest, growing interest, I think, in state governments, local governments.
00:27:01
Speaker
um which do incredibly important work, right? You and I have tended to be federal government focused. um And I think people tend to be in some ways, but I think maybe are too much that way.
00:27:13
Speaker
And I think our students are actually recalibrating correctly to understand how many important decisions um are being taken in Albany and Sacramento and Austin and so on.
00:27:24
Speaker
And that's great to see. um But I think we need to find a way to put our smart, energetic young people committed to public service to work in public service.
00:27:38
Speaker
for us. And the government should be actively trying to recruit, not just the students of the Kennedy School, of course, but but people young people who and older people who have decided they want to commit themselves to public purpose. It's so valuable and there's so much talent there that we need to put to work. And again, in in a big government or a small government, we're government that attracts good people and does its work effectively.
00:28:03
Speaker
Yeah. Well, on that note, on the optimistic note, the Doug Elmendorf optimism. Yeah. Thanks for coming on the show. We'll see what happens in the next 24, 48 hours.
00:28:14
Speaker
But I appreciate you taking the time to chat with me. Thank you for having me, John. It's always good to talk with you. Thanks everyone for tuning into this week's episode of the show. i Hope you enjoyed that. I hope you'll take a moment or two to rate or review the show.
00:28:27
Speaker
Wherever you get your podcasts, could be Spotify, could be iTunes, could be Zencaster, wherever you're getting it, please rate or review. If you're watching the episode on YouTube, please subscribe to the show.
00:28:38
Speaker
Also send me a note. Let me know if there are other people you want me to talk to about data analysis or data visualization. And one last request. If you've read any of my books, from Better Presentations to Better Data Visualizations to DataViz in Excel, if you wouldn't mind leaving a rating or a review on Amazon or Goodreads or wherever you get your books, it'll take you just a moment.
00:28:59
Speaker
I'd really appreciate it. Helps other people learn about the books. Also, I get a nice warm fuzzy feeling when I see people writing nice things. I'm sorry. I just like it. I appreciate it So that's all I got for you this week. I've got more podcast episodes coming up in the next few weeks.
00:29:15
Speaker
I'll probably slow down just a little bit because, well, it's lot of work to get this stuff out to you. But I hope you're appreciating. hope you're learning a lot. So until next time, this has been the PolicyViz Podcast.
00:29:26
Speaker
Thanks so much for listening.