Three times each year the Congressional Budget Office releases its budget projection for the next 10 years. This "baseline" makes a variety of assumptions about taxation, spending, and the economy. Some of these assumptions are reasonable and others are not because of the peculiarities of budget law. Historically, our baseline compensated for the more unreasonable assumptions and presented a more plausible scenario. Recent CBO reports have included an "alternative scenario" following estimates similar to the ones we used in constructing our "plausible baseline". Like the official CBO baseline, neither Concord's Plausible baseline or CBO's alternative scenario are predictions, but a projection of where current trends are leading.
For the underlying chart data click here. (PDF spreadsheet download)
The Concord Baseline makes some key assumption changes to the CBO baseline. CBO is required to assume that congressional appropriations continue increasing at the rate specified in law -- following the budget caps and sequester policy enacted in the 2011 Budget Controll Act. For tax legislation, they assume current law will govern -- so if there are tax cuts that have sunsets, CBO is required to project revenues assuming the tax cuts expire as written in the legislation. They also project economic growth in a very conservative fashion -- they do not try to anticipate major changes in the economy, either recessions or accelerations.
The main assumptions in the Concord Plausible Baseline are that war spending draws down over 10 years, that the rest of discretionary spending increases to keep up with inflation, that Medicare physician payment cuts (under the Sustainable Growth Rate (SGR)) are postponed, as they have been for the last several years, and that small tax cuts often extended on an annual basis are continually extended. Finally, we add CBO's calculation for the increased debt service (interest payments) that these policies (both on the tax and spending side) would cause by their increasing the deficit. No changes are made to CBO's economic assumptions.