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The Federal Budget: Spending, Taxes, and Debt

No Bias in The Baseline Act Removes Distortions that Push Higher Spending and Taxes

The Federal Budget: Spending, Taxes, and Debt Policy Rapid Response BlogJuly 11, 2024 By Matthew Dickerson
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Introduction

Senator Mike Braun and Congressman Ben Cline have introduced the No Bias in the Baseline Act. This important legislation would reverse distortions in the Congressional Budget Office’s baseline that bias the budget process in favor of higher spending and higher taxes.

Myth of The “Current Law” CBO Baseline

The CBO baseline is often described as reflecting current law, but this is a myth.

There are four deviations from current law in the baseline that CBO is required by statute to incorporate: three that make spending look much higher and one that makes revenues look slightly higher than they would actually be if Congress made no further changes in law:

  1. Discretionary appropriations are assumed to be continued and grow with inflation each year.
  2. Direct spending programs larger than $50 million are assumed to be extended beyond their statutory expiration.
  3. Entitlement programs are assumed to make all scheduled benefit payments, even if a program’s trust fund and financing is inadequate to do so.
  4. Excise taxes dedicated to a trust fund are assumed to be continued beyond their statutory expiration.

In fact, nearly 30 percent of the $85 trillion of spending included in CBO’s fiscal year 2025-2034 baseline are only assumed, not actually provided for under current law.

The No Bias in the Baseline Act Removes Distortions that Push Higher Spending and Taxes

The distortions in the CBO baseline bias the entire budget process towards higher spending and higher revenues.

These harmful distortions are contrary to the underlying purpose of a budget baseline. 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.”

However, the baseline that CBO is required to prepare is not a neutral benchmark. The biases in the baseline allow the true costs of legislation to be hidden from the public and Members of Congress.

Budgeting is about making tradeoffs, so the rules governing the process should provide clarity about the ramifications of different policy proposals.

The No Bias in the Baseline Act would remove distortions from the baseline. This would provide more consistent, transparent, and realistic cost estimates for legislative proposals.

Additional Background

Author

Matthew D. Dickerson

Matthew D. Dickerson

Director of Budget Policy

Matthew D. Dickerson is Director of Budget Policy at the Economic Policy Innovation Center (EPIC). Dickerson is recognized as an expert on fiscal policy issues, including the budget, appropriations, and entitlement reform. His articles have been featured in the Wall Street Journal , the Miami Herald , National Review , the Sacramento Bee , the Washington Times , the Baltimore Sun , The Hill , the Washington Examiner , and other outlets. Prior to joining EPIC, Dickerson served as Senior Policy Advisor on the staff of the House Budget Committee, where he helped lead development of the fiscal year 2024 budget resolution. He has a dozen years of experience on Capitol Hill, including as a senior staffer with the Republican Study Committee (RSC), the caucus of conservatives in the House of Representatives. Under four different RSC chairmen, Dickerson held senior level roles including Policy Director and Senior Policy Staff. Additionally, he served as Legislative Director and other policy positions for the late Congressman C.W. Bill Young (R-FL), a former Chairman of the powerful House Appropriations Committee. During his tenure at The Heritage Foundation, Dickerson was Director of the Grover M. Hermann Center for the Federal Budget. In this capacity, he oversaw a team of budget analysts and economists researching diverse subjects including spending, entitlements, budget process, tax, labor, pensions, and infrastructure issues. He has also been a Policy Manager at Americans for Prosperity, where he supervised a team of fellows and analysts covering a variety of federal and state policy issues. Dickerson is a graduate of the College of William and Mary in Virginia and holds a Bachelor of Arts in Government and History.

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