JUANA SUMMERS, HOST:
The Congressional Budget Office, or CBO, has been busy lately trying to estimate when exactly the U.S. will run out of money, and that's on top of the agency's usual job of estimating the costs of bills that lawmakers want to pass. Our Planet Money team wanted to know more about how this nonpartisan arm of Congress worked, so reporter Sarah Gonzalez dug in.
SARAH GONZALEZ, BYLINE: A lot of the time, the CBO has to estimate the costs of some pretty basic stuff, like how much it would cost to rename a post office - kind of boring.
DOUG HOLTZ-EAKIN: It can be very boring.
GONZALEZ: Yeah.
HOLTZ-EAKIN: It can be very boring.
GONZALEZ: But Doug Holtz-Eakin, a former head of the CBO, says sometimes the CBO is asked to estimate some really complicated stuff.
HOLTZ-EAKIN: What is the cost of doing this thing that has never before been done and does not exist in nature? But you can go into your fantasyland and figure it out.
GONZALEZ: Fantasyland is the best place to be at the CBO.
HOLTZ-EAKIN: Yes, absolutely (laughter).
GONZALEZ: So we're going to go into this fantasyland with Doug - specifically, a fantasyland project around prescription drugs in the early 2000s. Senior citizens were paying a lot for prescription drugs out of pocket. There was basically no private insurance company offering drug coverage for seniors because it is a remarkably risky insurance to offer. Republicans wanted to pass a bill that would, among other things, subsidize prescription drug insurance enough that private insurers would start to offer it, and they wanted to spend $400 billion on this bill to help seniors.
HOLTZ-EAKIN: Billion.
GONZALEZ: Yeah.
HOLTZ-EAKIN: Billion.
GONZALEZ: OK.
HOLTZ-EAKIN: Yes. Billions means love (laughter).
GONZALEZ: Billions means love?
HOLTZ-EAKIN: That's how that works (laughter).
GONZALEZ: Now, the CBO's job here is to say OK, Congress, we'll tell you if $400 billion will achieve the thing you want it to achieve. So the CBO creates its little imaginary prescription drug insurance fantasyland with imaginary seniors, imaginary drugmakers, imaginary drug insurers, and they kind of try to predict how everyone would behave in this imaginary world. Will insurers feel like this is a good business to be in? How much will drugs even cost in the future? There's a lot of shooting in the dark. And after a year and a half of tinkering, the CBO says, great news, Congress. It won't even cost $400 billion to do this thing you want. It'll only cost taxpayers $340 billion. That's when the phone rang.
HOLTZ-EAKIN: Ways and Means Chairman Bill Thomas, who was the lead on this, called me at my home. And he goes, we got a problem. 'Cause that's too little. We got to spend more.
GONZALEZ: Like, we need to spend...
HOLTZ-EAKIN: It's too cheap. Billions is love. We were 55 billion short on love (laughter).
GONZALEZ: Do you remember this?
BILL THOMAS: Well, yes, but (laughter)...
GONZALEZ: This is the now-retired congressman who called Doug.
THOMAS: Hey, I'm Bill Thomas.
GONZALEZ: And this is the weird thing with the CBO. When they bring their number to Congress, Congress can just be like, yeah, we don't like that number. We like our number. Bill says, yeah. He told Doug to get the math closer to $400 billion.
THOMAS: But because we didn't do enough.
GONZALEZ: The CBO figured out how to get the bill to cost nearly what Congress wanted - $395 billion. Doug says they probably just increased the subsidy a little bit, which he says is fine - you know, Congress gets to decide what subsidy they want - but Doug says their asks can get pretty specific for something that is pretty not real.
HOLTZ-EAKIN: We're tweaking, down to the decimal point, something that doesn't exist, as if we really know what's going to happen.
GONZALEZ: The CBO's estimate ended up being off by a hundred billion dollars. Prescription drug coverage was way cheaper than anyone expected. Doug says putting a price tag on the future is never going to be super accurate.
Sarah Gonzalez, NPR News.
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