Friday, February 27, 2009

Moving the Goal Posts

From the Committee for a Responsible Budget:

In constructing their budget baseline – the metric against which the costs of policy changes are measured – the Administration departed from the practice of assuming a “current-law” baseline, and instead decided to use a “current-policy” baseline. A current-law baseline assumes that changes in the budget will occur as they are scheduled to under the law (i.e. provisions scheduled to expire will be allowed to do so). Instead, Obama’s baseline assumes: 1) the practice of patching the AMT on an annual basis will continue; 2) all of the 2001/2003 tax cuts will be made permanent; 3) the wars in Iraq and Afghanistan will continue to cost as much as in FY2008 (inflation adjusted); 4)Congress will continue to enact “Medicare Pay Patches;” and 5) funding will be allotted for anticipated disaster relief....

Taken together, the measures in the Obama baseline will increase this new current law baseline deficit by $482 billion (excluding interest) in FY2013 and more than $5 trillion over ten years. (Interest payments account for another $1.5 trillion over ten years, but some of this is due to already-enacted legislation such as the economic stimulus). President Obama will use this baseline, rather than a current-law baseline, to assess whether new policies meet the goal of budget neutrality, and from this metric his proposals reduce the deficit by roughly $2 trillion over ten years....

The budget includes many policies that have been omitted in recent budgets, such as the cost of patching the Alternative Minimum Tax and funds for operations in Iraq and Afghanistan. The Administration should be commended for the increase in transparency in the budget resulting from including the policies they support. This is a vast improvement on the past practice of omitting policies that would clearly be part of the budget.

However, by putting these policies not just in the budget, but in the baseline, the Administration gives itself a free pass on paying for patching the AMT, making the 2001 and 2003 tax cuts permanent, and the costs of not abiding by the slated Medicare physical payment cuts. Choosing not to offset the costs of these policies is a clear violation of the PAYGO principle, where the cost of new policies should be offset through additional savings.

Assuming that war spending will continue at FY2008 levels (adjusted for inflation) – an amount even beyond what President Bush’s policy would have required – strikes us as a gimmick to build up the spending amount in order to reduce it and claim “savings”.