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Deficits and Baselines: The President’s Budget and The Republican Budget

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Washington, May 24, 2011 | comments

Since last December, when the President’s Fiscal Commission proposed roughly $4 trillion in deficit reduction, the figure has become a kind of de facto standard for measuring subsequent budgets; and in the past several months, House Republicans and the President have introduced fiscal plans that claim to meet or exceed that target. To assess whether the proposals are truly comparable, it is necessary to establish a common and impartial yardstick – a “baseline” – against which to measure them. But baselines include numerous variables that can significantly alter the results of the analyses for which they are used.

With that in mind, the discussion below aims to provide a true “apples-to-apples” comparison of the House-passed budget and the President’s. It first describes several baselines currently in use, along with the various difficulties they present. It then establishes a “current policy” baseline, rooted in a realistic assessment of the existing budgetary setting and how it would unfold in the future. The discussion then evaluates the House-passed and administration budgets relative to this current policy projection.

Key Points 

  • A “baseline” is a projection of future spending, revenues, deficits, and debt. Claims of deficit reduction are measured against the underlying baseline chosen.

  • Budget savings are only comparable if measured against the same baseline. The Congressional Budget Office [CBO] uses a “current law” baseline, which assumes a $3.5- trillion tax increase across all tax brackets, and trillions of dollars in spending increases – including $1.04 trillion in war spending that no one has requested.

  • - Relative to the current law baseline, the House Republican budget reduces the deficit by $1.6 trillion, while the President’s budget– as reestimated by CBO – increases the deficit by $2.7 trillion.

  • A “current policy” baseline – one that does not assume these spending and tax increases – is a better benchmark to determine the impact of budget proposals.

  • Compared to a current policy baseline, the House Republican budget reduces the deficit by $4.8 trillion, and the President’s budget reduces the deficit by $453 billion.

View full House Budget Committee analysis here 

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