Distortions in the baseline bias the budget process in favor of higher spending and higher taxes. There are four deviations from actual current law in the baseline that CBO is required to incorporate:
- Discretionary appropriations are assumed to be continued and grow with inflation each year.
- Direct spending programs larger than $50 million are assumed to be extended beyond their statutory expiration.
- Entitlement programs are assumed to make all scheduled benefit payments, even if a program’s trust fund and financing is inadequate to do so.
- Excise taxes dedicated to a trust fund are assumed to be continued beyond their statutory expiration.
About 30 percent of spending in CBO’s official baseline is only assumed, and not actually provided for under current laws.
Congress should eliminate these distortions by using a neutral current law baseline for scoring legislative proposals.
This Myth vs. Fact analysis addresses potential arguments against this proposal.
MYTH: This proposal means you want fiscal policy to actually follow the current law baseline.
This claim does not hold water.
Would it be fair to claim that supporters of using the Congressional Budget Office (CBO) baseline (and opponents of using a current law baseline) want policy to only follow the official baseline?
No Member of Congress runs for office to enshrine the status quo. In all likelihood, budgets proposing that fiscal policy follow the CBO baseline, a current law baseline, or a current policy baseline would all receive zero votes from Members of Congress.
The baseline is not meant to be a forecast nor a proposal for what Congress will or should do.
Instead, the baseline is supposed to be the neutral benchmark against which new policy proposals are measured. Unfortunately, the official CBO baseline is flawed.
The proposal to use a current law baseline simply would apply a consistent methodology to remove the biases for higher spending and higher taxes from the official baseline.
MYTH: A current law baseline is unrealistic about what Congress will actually do and would show a misleading picture of our government’s finances.
We know that the official baseline is also an unrealistic forecast of future policy decisions.
As CBO itself has stated, “CBO’s baseline is not intended to be a forecast of budgetary outcomes; rather, it is meant to provide a neutral benchmark that policymakers can use to assess the potential effects of policy decisions.”
While proposed legislation should be measured against a current law baseline, CBO should also produce informational alternative fiscal scenarios to show what the fiscal outlook could be under a variety of fiscal paths.
In fact, CBO already produces informational alternative baselines. In May 2024, CBO published Budgetary Outcomes Under Alternative Assumptions About Spending and Revenues as well as The Long-Term Budget Outlook Under Alternative Scenarios for the Economy and the Budget.
Both the current law baseline and these alternative fiscal scenarios could be used to sound the alarm for the American people about the need for fiscal responsibility. Even under a true current law baseline, the largest programs are projected to grow faster than the economy, putting the budget on an unsustainable trajectory.
MYTH: A current policy baseline would be better than a current law baseline.
Adopting a current policy baseline would at least ensure similar treatment for spending and revenue policy.
The official baseline incorporates current policy principles for most spending programs but follows strict current law rules for 99 percent of revenues.
However, a current policy baseline would require CBO to make a number of highly speculative, and potentially unrealistic assumptions that Congress will enact several new laws affecting most of the budget:
- Taxes: The Joint Committee on Taxation (JCT) documents 94 different tax provisions that will expire over the 2022-2034 period. A current policy baseline would assume that Congress enacts legislation to extend each of these provisions with no other changes. Furthermore, this baseline would require CBO to make assumptions about which versions of tax policy get extended. For example, certain provisions of the tax code phase down over time – which version of such a policy should CBO extend as “current”? What about recently expired tax provisions, should CBO assume they are “current” policy as well?
- Appropriations: A current policy baseline would assume that appropriations bills are enacted on time each year, increasing each spending account, program, project, and activity exactly equal to inflation.
- Direct Spending: A current policy baseline would assume that Congress passes more than a dozen different laws to extend expiring direct spending programs, while making no other modifications to these programs.
- Trust Funds: A current policy baseline would assume that Congress passes complex new laws to authorize significant amounts of new debt and transfer money from the Treasury General Fund to various trust funds allowing certain scheduled benefit payments to be made.
In contrast, a true current law baseline makes no assumptions about future policy. It simply would reflect laws already on the books. Thus, a current law baseline would be a strictly neutral starting point to evaluate legislative proposals.
Budgeting is about making tradeoffs, so the rules governing the process should provide transparency about the ramifications of different policy proposals. A current policy baseline masks the actual effects of proposed changes in law.
A current law baseline would provide the clearest picture of the choices facing policy makers if they decide to maintain the de jure status quo or make changes in law.
MYTH: Using a current law baseline would make it more difficult to prevent tax increases.
This claim is not true. Consideration of tax legislation, such as extending the Tax Cuts and Jobs Act, using a current law baseline would operate much the same as it presently does under the official CBO baseline.
The official baseline incorporates current policy principles for most spending programs but already follows strict current law rules for 99 percent of revenues.
MYTH: Using a current law baseline would make it more difficult to pass appropriations bills.
Consideration of appropriations bills using a current law baseline would operate much the same as it presently does under the official CBO baseline.
Enforcement of discretionary spending levels is done relative to the 302(a) allocations determined by the budget resolution and statutory caps, not the CBO baseline levels.
(PAYGO (“pay as you go”) and CUTGO (“cut spending as you go”) rules for revenues and direct spending are measured against the baseline. However, discretionary appropriations are not subject to PAYGO or CUTGO.)
Due to a loophole in the Budget Act, CBO does not even publicly produce official cost estimates for appropriations bills. The tables used in the Appropriations Committee reports never show the CBO baseline assumptions for spending accounts; the comparison tables show the amount provided in the bill, the president’s requested level, and the appropriation for the prior year.
MYTH: Following current law would cut Social Security and Medicare benefits.
As CBO has sad, the baseline is not meant to be a forecast nor a proposal for what Congress will or should do. Instead, the baseline is supposed to be the neutral benchmark against which new policy proposals are measured.
Unfortunately, CBO’s official baseline provides a misleading picture of what would happen when the Social Security Trust Fund and the Medicare Hospital Insurance Trust Fund are depleted within the next decade. The American people and Congress deserve to understand the truth, so we can instead achieve better results for seniors and taxpayers.
MYTH: Using a current law baseline means Congress would have to pay to reauthorize spending programs.
It is the American taxpayers who are forced to pay for government spending programs.
This point is true today under the official baseline. Using a current law baseline would simply force lawmakers to acknowledge that higher government spending does in fact add to the national debt.
There are, of course, only two ways to pay for government debt: taxes or monetization through inflation. Both options hurt American families.
Congress has established rules meant to control deficits, such as PAYGO (“pay as you go”) and CUTGO (“cut spending as you go”). However, because the official baseline is distorted in favor of higher taxes and higher spending, trillions of dollars of spending are exempted from these rules. Moving to a current law baseline would close these gaping loopholes.
The federal government spent $6.1 trillion in FY 2023, equal to nearly 23 percent of the economy. If expiring programs are worth reauthorizing, surely lawmakers will be able to prioritize spending from elsewhere in the budget.
Furthermore, using a current law baseline would provide equal treatment for spending and tax policy. The official baseline incorporates current policy principles for most spending programs but follows strict current law rules for 99 percent of revenues.
MYTH: Moving to a current law baseline would change the rules in the middle of the game.
If the current rules irresponsibly bias the budget process towards higher spending and higher taxes, shouldn’t we fix those rules?
It is widely acknowledged that the budget process is broken. These rules have allowed the national debt to grow larger than the entire economy.
MYTH: Using a current law baseline would be complex and confusing.
Moving towards the use of a current law baseline for scoring legislation would be much simpler than the status quo.
The current law baseline would simply reflect the laws already on the books.
In contrast, the official CBO baseline requires a complex mix of current policy assumptions for many spending programs, while some spending and revenues reflect current law. This is so confusing that most lawmakers do not even know all of the distortions that are built into the system.
Read the EPIC Report: The Myth of the Current Law Baseline: Keeping Spending High is a Policy Choice.
