Congress Watch: Baseline Budgeting and Phony Spending Cuts

Joe Jansen

April 7, 2014

If your take home pay were the same today as it was one year ago, would you complain to your boss about your cut in pay?  If you were a federal program you could.

Federal law requires the Office of Management and Budget (OMB) and the Congressional Budget Office (CBO) to annually prepare forecasts of federal revenues and spending over a ten year budget window.  These forecasts are guided by a series of assumptions set forth in the law.  One of the assumptions is that spending on discretionary programs – those programs that Congress chooses to fund – automatically will increase by the amount of inflation from year to year.  So, if a program was funded at $100 in fiscal year 2013 and the rate of inflation was 3%, the program’s baseline budget for 2014 would by $100 plus 3%, or $103.

Both the President and Congress start the budget process using OMB’s and CBO’s baseline budget projections.  This means that from the very beginning of the process, the federal budget assumes increased spending.  Every single discretionary line item begins with a higher budget than it had the year before.  According to Republicans on the House Budget Committee this bias toward increased spending added, over 10 years, $1.2 trillion to the discretionary budget baseline in 2013.

While these assumptions lead to increased spending, they also have a pernicious effect on the way Congress discusses the budget.  When program spending increases from one year to the next at rates smaller than those projected by CBO, it allows members of Congress to take credit for spending “reductions.”  Alternatively, when members propose to fund more popular programs at levels below CBO’s projections, they are often accused of “cutting” or “gutting” the program.

This week, the House of Representatives will consider the “Baseline Reform Act.”  One of seven budget reform bills that will be taken up, it ends the assumption of increased spending and forces Congress to determine spending amounts on each program based on merit and need, not inflation.  Opponents argue that the bill is an attempt to “wish away inflation.”  Our national debt now exceeds $17 trillion.  Isn’t it time to start assuming spending cuts rather than increases