Budget Concepts Do Matter

Budgeteers have long argued that baselines matter.  You have to know where you are going before you decide where you should be. We use baselines as benchmarks to assess the costs (or savings) of various changes in the law, and we use them to enforce certain budget rules (such as PAYGO) designed to ensure new mandatory spending and tax cuts are fully offset.  Usually, though, what the baseline should look like is a budget geek discussion. 

However, as our colleague at Higher Ed Watch, Jason Delisle, pointed out in his blog post last week, what baseline you use can have a huge affect on a policy proposal’s success in getting adopted:
“On January 26th the Congressional Budget Office (CBO) will update its “baseline” estimate of federal program costs, including those for student loan programs and Pell grants…The student aid bill, however, hinges on a favorable estimate from CBO. The March 2009 baseline showed some $87 billion in savings would be achieved over 10 years by eliminating FFEL and making all federal student loans through the Direct Loan program -- savings that can be redirected in a budget neutral manner to other education programs, including Pell Grants….The alternative estimate done with CBO’s January baseline will certainly be less favorable to the bill’s supporters and, unfortunately, hand a legitimate argument to the legislation’s opponents. Specifically, the new spending programs will cost more and proposed savings will be less.”
And while here at the Bottom Line, we are not advocating in favor or against the student loan bill, we are always in favor of using the most-accurate estimates that allow policymakers to make meaningful trade-offs between competing priorities.