CBO's Got a Brand New Baseline

Although CBO's analysis of the President's budget is the newsmaker in March in the budget world, CBO also updates its current law baseline, which shows slightly lower deficits from 2013-2022 than it projected in January. Compared to January, ten-year deficits have shrunk by $186 billion from $3.1 trillion to $2.9 trillion. Also, debt as a percent of GDP is slightly lower in 2022 compared to January's projection, declining from 62 percent to 61.3 percent. The 2012 deficit, however, has increased by more than $90 billion to nearly $1.2 trillion.

Even though it has only been two months since their last baseline, a number of factors have resulted in changes to the budget projections. Legislative changes -- namely the payroll tax cut and unemployment insurance extension--have increased the deficit by $7 billion from 2013-2022, although most of the unoffset costs of that deal occur in 2012 (an additional $100 billion of deficits).

Comparison of January and March Baselines (Percent of GDP)
  2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013-2022
Deficit (March) 3.8% 2.3% 1.5% 1.4% 1.0% 0.8% 1.0% 1.0% 1.0% 1.2% 1.4%
Deficit (Jan) 3.7% 2.1% 1.5% 1.6% 1.1% 0.9% 1.2% 1.2% 1.2% 1.4% 1.5%
Debt (March) 75.8% 75.8% 73.3% 70.9% 68.8% 66.9% 65.3% 63.9% 62.4% 61.3% N/A
Debt (Jan) 75.1% 74.8% 72.6% 70.5% 68.5% 66.8% 65.5% 64.2% 63.0% 62.0% N/A

In addition, CBO has made a few technical revisions. As a result of these revisions, they have pushed their estimate of total revenue up by $226 billion over ten years. Also, mandatory spending has been revised up by $116 billion, netting a $143 billion increase in Medicaid spending against a $26 billion decrease in Social Security costs. They also revised interest projections downward by $90 billion due to both a projected Treasury shift towards issuing more short-term debt and the lower deficits resulting from the other revisions. 

Reasons for Changes in Baseline (billions)
  2012 2013-2022
January Baseline Deficits $1,079 $3,072
Legislative Changes
Extenders Deal $100 $7
Technical Changes 
Mandatory Outlays $2 $116
Discretionary Outlays -$5 -$7
Revenue -$3 -$226
Interest -$1 -$49
Net Interest $0 -$26
Total Changes $93 -$186
March Baseline Deficits $1,171 $2,887

As you can see, the baseline has changed, but only slightly. As CBO said in its report on the baseline:

The fundamental story about the federal budget has not changed: Although the deficit is starting to shrink, it remains very large by historical standards. How much and how quickly it declines will depend in part on how well the economy performs over the next few years. Probably more critical, though, will be the fiscal policy choices made by lawmakers as they face the substantial changes to tax and spending policies that are slated to take effect within the next year under current law.