Douglas Elmendorf: The Numbers Man Whom D.C. Trusts — and Loathes

Douglas Elmendorf doesn’t look like the kind of guy who could intimidate those at the pinnacles of power. A soft-spoken academic who coaches his daughters’ soccer team, he is described by virtually everyone who knows him as a genuinely nice guy. But consider some of the things that have been said about the director of the Congressional Budget Office (CBO) and his ideas during the past year. “Off the wall,” fumed Dave Obey, the famously volatile chairman of the House Appropriations Committee. Senate majority leader Harry Reid has suggested–and not in a nice way–that Elmendorf’s presumption is such that “maybe what he should do is run for Congress.” And Senate Finance Committee chairman Max Baucus has felt the need to inform him, “You might be Moses but not God.”

Maybe not, but what comes out of Elmendorf’s office is just about the closest thing there is to Holy Writ in Washington these days. In a nondescript building across a freeway from the Capitol, on a floor where J. Edgar Hoover once housed the Federal Bureau of Investigation’s fingerprint files, the CBO has for decades been regarded as the unbiased scorekeeper in the capital’s never ending budget battles, which alone gets to judge whether legislation will add to or lighten the national debt. A bumper sticker posted on a billboard in the hallway gives you an idea of what passes for humor in a place as wonky as this: I BRAKE FOR UNFUNDED MANDATES.

The latest dose of reality from Elmendorf’s CBO: a forecast that the federal deficit will reach $1.35 trillion this year–$4,400 for every American. All that red ink means the overall debt will rise to $8.8 trillion by the end of 2010, or about 60% of gross domestic product–the highest level of public debt since 1952. “There’s a fundamental disconnect between the level of benefits that people want the government to provide, particularly for older Americans, and the amount of resources that people want to send to Washington to pay for those benefits,” Elmendorf says. “To make the fiscal policies sustainable will require some resolution of that fundamental disconnect.”

President Obama’s limited spending freeze won’t in itself do much to address that disconnect, Elmendorf suggests. The CBO director projects that even if such a spending cap were to extend to all discretionary government outlays (Obama would exempt national security), it would save only $10 billion in the next fiscal year, less than 1% of the budget. Nor is it likely that Congress will make much of a dent in the problem, at least not in the short term.

Delivering the grim budgetary news is the job of Elmendorf’s little agency (250 employees). Over the past year, the CBO took on particular importance in determining the shape and even the fate of Obama’s signature domestic initiative, health care reform. It is the CBO that will decide the politically loaded question of whether reform actually saves the Treasury money or instead adds to the deficit. (So far, the CBO has given it a thumbs-up.) The President has focused even more attention on the CBO’s numbers by insisting that any bill reaching his desk not add to the deficit over the next 10 years. Obama has even set a target–an overall price tag of $900 billion or less–that has put lawmakers in the position of tweaking and twisting every line of the health care bill so that it comes in under that amount.

In a job that is subject to enormous political pressure, seen and unseen, from both parties, Elmendorf is nobody’s pushover. In July, he rocked Capitol Hill when he testified that instead of bringing the government’s health care costs down, earlier versions of legislation under consideration in both the House and the Senate would drive them up faster. “I can think of 30 ways to say that, that would have been honest but would have gotten less in the way of headlines,” says Urban Institute president Robert Reischauer, one of Elmendorf’s predecessors as the head of the CBO. “I fired off a congratulatory e-mail.”

Elmendorf’s pronouncement led the White House to regroup. A few days later, Obama summoned Elmendorf, former CBO director Alice Rivlin, Massachusetts Institute of Technology economist Jonathan Gruber and Harvard University’s David Cutler to the Oval Office to go over the bills and find other ways to wring out savings.

The major complaint about Elmendorf has been that he is being too cautious in crediting the health care legislation for the savings it could achieve. One of his critics is Peter Orszag, his immediate predecessor at the CBO and the current head of the White House Office of Management and Budget. At one point, Orszag–who devoted much of his tenure at the CBO to laying the groundwork for health care reform–went so far as to accuse his former agency of having “overstepped” its mission by displaying a tendency toward “exaggerating costs and underestimating savings.” Among economists, those are fighting words. They may also reflect the difference between one who works for the President and one who does not. (Orszag declined to be interviewed for this article.)

Though Elmendorf, 47, hasn’t always told lawmakers what they wanted to hear in his year on the job, he has won wide praise for his independence. A native of upstate New York, he taught at Harvard before joining the CBO as an analyst in 1993. Since then, he has done stints at the Federal Reserve, the Council of Economic Advisers and the Treasury Department. “I have enormous respect for him,” says Senate Budget Committee chairman Kent Conrad. “He plays it straight, and he’s enormously serious about getting it right.”

While Elmendorf’s career has moved on the same track as Orszag’s–before arriving at the CBO, for instance, Elmendorf, like Orszag, had served as head of the Brookings Institution’s Hamilton Project, an economic-research program–the two men’s styles could hardly be more different. Orszag sought a high profile for a bureaucrat, lecturing frequently and spending so much time in television studios that he carried his own makeup. Elmendorf rarely gives a television interview and says he is still startled when someone recognizes him as he is commuting home on the subway. (Orszag, who was recently discovered to have fathered a child with a former girlfriend, now enjoys a different kind of notoriety.)

But Elmendorf acknowledges that he has benefited enormously from the work Orszag did before he left for the Obama White House. Orszag expanded the CBO staff, particularly the number who specialize in health care, and produced volumes of research on the subject. Nonetheless, Elmendorf says, the workload this year has been such that his staff has been working six to seven days a week, with computer traffic often continuing until 3 a.m.

Now, with the health care plan in deep political trouble, the focus for both Congress and the White House is shifting from expanding government to shrinking it. Lawmakers will again turn to the CBO for an honest assessment of what actually cuts the deficit and what merely pretends to. Elmendorf is the first to concede that even the most sophisticated CBO microsimulation model is not the same thing as a crystal ball. “We tell people all the time that our results are very uncertain,” he says. “Every number that we give needs to be viewed as the middle of a fairly wide distribution of possible actual outcomes.”

Translation: The CBO may not always be accurate, but it’s as close as Washington is ever likely to get.