The President's Budget Against Different Baselines
In our paper on CBO's analysis of the President's budget, we compared how CBO and OMB estimated the budget's policies relative to CBO's baseline. Of course, as those in the budget world know all too well, there are many different baselines against which to measure. In this blog, we will show you how we estimate that CBO and OMB scored the budget against three other baselines: a "PAYGO" baseline, a "No Offset" baseline, and OMB's baseline.
The first two baselines will be familiar to readers of the blog. The PAYGO baseline is the same as CBO's baseline except that it includes a drawdown of war spending (in contrast to CBO's assumption that it will grow with inflation). For the purpose of this comparison, we assumed the budget's drawdown in the baseline, even though it is slightly larger than the one in CBO's policy alternatives. The No Offset baseline also has the war drawdown but includes a permanent "doc fix," an extension of the 2009 refundable tax credit expansions, an extension of the tax extenders, and a repeal of the sequester (starting in 2016 for discretionary spending).
The OMB baseline also assumes a permanent doc fix and the refundable credit expansions, but it does not include the extenders. For the sequester, OMB assumes that it is in effect only for the years it is technically required. This means that the sequester only cuts discretionary spending through 2021; after that, it reverts to pre-sequester levels, whereas CBO assumes that the discretionary category grows with inflation after 2021. Another minor difference is that OMB's baseline did not incorporate the debt limit suspension or the one-year doc fix, which extended the sequester through 2024 and shifted Medicare savings from 2025 to 2024.
The 2014-2024 estimates of the policies in the President's budget vary widely based on which baseline and which agency's estimate one uses. Excluding the war drawdown, the savings relative to the CBO and PAYGO baselines are about $260 billion and $735 billlion by CBO and OMB estimates, respectively. The savings relative to the OMB baseline are $870 billion and $1.34 trillion. Compared to the No Offset baseline, the net savings jump to $2.23 trillion and $2.8 trillion.
You can click here or on the image below to see the full table with the different estimates.
The table makes clear that while the President does a good job of paying for deficit-increasing policies, it doesn't include all that much savings beyond that. Just adhering to PAYGO will not be enough to make the debt sustainable.