StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



It's March: Watch As The GOP Plays The Baseline Game Yet Again

20 Mar 2012
Posted by Stan Collender

It's March, the month when Spring, the NCAA tournament, and "Dancing with the Stars" all begin.

It's also when Republican shameful misuse (to the point of malpractice) of the budget baseline typically reaches its annual high/low point.

That's when, in response to the Congressional Budget Office's release of its updated deficit projections and estimates of the president's budget, Republicans carefully pick the comparison that supposedly proves what they want to say even when there is ample and readily available evidence that show what they're saying isn't true.

Two examples from last week.

The first via Paul Krugman, is when House Republican Policy Committee Chairman Tom Price (GA) said that the cost of health care reform had risen dramatically. The only problem was that to be able to say that Price had to use a different 10-year period than the one used when the law was passed. As Krugman notes, CBO said ON THE FIRST PAGE of its update that just the opposite was true because it and the Joint Committee on Taxation "now estimate that the insurance coverage provisions of the ACA will have a net cost of just under $1.1 trillion over the 2012–2021 period—about $50 billion less than the agencies’ March 2011 estimate for that 10-year period." (The italics are mine.)

The second is from my column published this morning in Roll Call that shows how the GOP picked the one baseline that allowed it to say the deficit would increase substanially under Obama administration policies. Using CBO's own "alternative" baseline, that is, the one that shows what's most likely to actually happen, the Obama 2013 budget actually reduces the deficit.

Here's the column.

When Warmer Weather Meets the Federal Budget

By Stan Collender
Roll Call Contributing Writer
March 20, 2012, Midnight

With the temperature in the high 70s and even low 80s last week, what few wanted to admit out loud lest they tempt Mother Nature became just too obvious to ignore: Winter in and around Washington, D.C., is going to end this year without any significant snowfall. To say that we got one or two dustings overstates the amount we actually received.

It was, therefore, a terrible winter for the salt, sand and snowblower sellers.

But it’s really good news for the local and state governments that have primary responsibility for plowing because the full amount budgeted to clear the streets and highways wasn’t spent. Little snow-removal-related overtime was paid. No additional chemicals to pretreat the roads were needed. The plowing equipment barely broke down, so repair costs were limited. Payments to the contractors that would have supplemented government workers were kept to a minimum. As a result, governments’ surpluses were higher or deficits lower than would have been the case had we had just an average amount of snow.

In other words, compared with what had been assumed — the snow removal baseline — less was spent. This raises three not-so-easy budget-related questions.

First: Should the local and state governments that benefited from the lower-than-expected snow removal expenses get credit for cutting spending below what was spent the year before?

Second: Should those same governments be criticized next year if we get a normal snowfall and spending in 2013 is much higher than in 2012?

Third: Because 2012 is an election year in many jurisdictions, should whoever is elected mayor, county manager or governor be blamed for the very likely higher spending for snow removal in 2013?

The answers to all three of these questions are examples of the use, or misuse, of a budget baseline — the amount projected to be spent or revenues expected to be paid next year based on certain assumptions.

The federal budget equivalent of all three was on display yet again last week when the warm temperatures coincided with the Congressional Budget Office releasing its updated baseline and analysis of President Barack Obama’s 2013 budget.

As some rushed to say last week, the CBO’s analysis does indeed indicate that the Obama budget increases the federal deficit. But that conclusion relies on the use of a baseline that, while required by the Congressional Budget Act, is anything but a realistic assessment of what’s actually going to happen. For example, that baseline assumes that all of the Bush/Obama tax cuts will be allowed to expire at the end of 2012 and won’t be in effect starting January 2013.
That is roughly analogous to the CBO being required to assume that the very limited snow-removal-related spending in 2012 will continue every year thereafter and that anything more is a requested increase and growth in the size of government.

The more relevant baseline, the equivalent of assuming that snowfall will return to average levels next year, is the CBO’s “alternative fiscal scenario.” That’s based on the assumption that politically popular current policies will continue. When that’s taken into account, the Obama budget actually reduces the deficit.
The irony is that both conclusions are correct in some sense. The deficit would indeed be higher compared to the assumption that the tax cuts will continue. Compared to the assumption that they will expire, the deficit is lower.

So, for political purposes, you get to say what you want, use numbers that back up what you’re saying and ignore the comparison that says you’re absolutely wrong.

The annual misuse of the baseline has been a perennial feature of the federal budget debate at least since the Congressional Budget Act created the CBO and the baseline in 1974. In the 48 38 years since, there has been an almost yearly fight about whether spending and revenues should be compared to the actual amount that was spent or paid the previous year or to a projection of what will be spent under current law or policies. The first means that more spending will always look like an increase; the second means that increased spending can be characterized as a reduction, if it’s less than what was assumed.

The snow removal baseline is not as far removed from what the CBO does with the federal government as it might seem. Compared to what was spent treating the roads and plowing in 2012, almost anything spent in 2013 will appear to be an increase. Compared to the average amount from previous years, the amount spent in 2013 could be either a decrease or an increase. And compared to a baseline that assumes a larger-than-average snowfall because that has happened once every decade and it’s time, an increase in 2013 could still look like a decrease even though the amount spent is more than the previous year.

This is why what many said last week about the meaning of what the CBO analyses show about the Obama budget needs to be taken with more than just a grain of that salt that wasn’t needed for the roads around Washington this winter.

Basically, it was all just the federal budget equivalent of a snow job.

Political football

One of the big disappointments is how both parties have engaged in the deficit political football. Instead of talking about a MAJOR recession that caused revenues to tank and large temporary deficit increases, we have both sides engaging a debate over the deficit instead of talking about economic recovery.

Under Clinton, we found that as the economy improved and we returned to full employment, the budget deficit kept coming in lower than projected until it eventually returned to surplus. Clinton allowed the bloated defense budgets to decline and protected the spending that supported the safety net. The conversation is not focused on economic recovery and closing the GDP output gap as a way to reduce the deficit. This is the fault of both the politicians and the pundits that help drive the debate. This is bad policy and bad economics. The same tax rate will bring more revenue if GDP is higher. Instead of policies to close the output gap, we have proposals for short term austerity that would make our output gap worse, threaten to reduce economic growth and make the budget picture worse. These policies benefit a few elites who donate large sums to politicians but are bad for the rest of the population.

It is disappointing that a pro-growth, "fix unemployment first" argument is not being made.

The long term budget issue is health care costs, end of story. If the US can control health care spending and implement a system that is in line with the costs incurred by the rest of the world, then our long term budget picture improves markedly. If health care spending is not controlled, then long term budget is a problem.

The primary budget issue, health care costs has become a partisan political football with Republicans looking for gotcha points rather than solutions that are acceptable for a modern developed country.

I appreciate that you bring a rational perspective to the debate. However, the debate is so far out of touch with reality, solutions are made more difficult.


1974 makes 38 years

If the CBO was created in 1974, then it would be 38 years old. It would be 48 years old if it was created in 1964.


Cherry picking anyone?

The comparison should be the Obama vs. Ryan budget not some baseline. Now lets see if they use the same baseline comparison when they talk about the Ryan budget.




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