baselines

The first time I had a knockdown argument with anyone about budget baselines -- a subject that virtually defines what it means to be a budget wonk and should never be a cause for yelling -- was about 15 years ago when I was doing a briefing for the newly elected members of Congress at the Kennedy School of Government at Harvard.  I was just explaining several basic budget concepts when former Senator Alan Simpson (R-WY) and Representative Mark Kirk (R-IL) repeatedly interrupted me to say how baselines were how congressional Democrats got their way on spending.  They both insisted that baselines were only something that existed inside the beltway and, according to Kirk, only in Washington could baselines be used to make a spending increase look like a cut.

Except that they're both completely wrong.

One of the biggest budget questions last week was how much spending did the agreement on the continuing resolution actually cut.  The top line number -- $31 billion, $38 billion, whatever billion -- was the first big story because it was one of the ways the media determined who was doing better during the negotiations.  Then the bottom line gave House Speaker John Boehner (R-OH) fits and made him scramble for votes to pass the CR when the Congressional Budget Office reported that spending would only be reduced by millions in 2011 rather than the billions he had proudly announced.  And then the top line was questioned again when CBO reported that the total would be between $20 billion and $25 billion over 10 years instead of the $38 billion total that seemed to seal the deal.

The truth is that every one one of these numbers is correct in some way.  It's also correct to say that everyone always seems to be fooled every year when different people involved in the budget debate use the number that best suits their purposes instead of agreeing upfront on how things should and will be measured.

Visitors to House and Senate Budget Committee mark-ups are often surprised by how debates over baselines consume more time than debates over policy.  That's because agreeing to a baseline forces certain policy decisions.  If you assume tax cuts will be extended in the baseline, it doesn't cost anything to extend them.  If you assume the President's spending proposals in the baseline, you can show large spending cuts when you remove them, even if they had little chance of enactment anyway.  That's the game being played now.  This morning, the Congressional Budget Office will release its baseline as required by the Budget Act in its annual Analysis of the President's Budget.  CBO is constrained to take into account "present law," except that any expiring trust fund taxes are assumed to continue.  That means that last December's tax cuts will be assumed to expire at the end of 2012, even though most, if not all, of them will be extended at a 10-year cost of $3.2 tr.  President Obama wants to allow the tax cu

My column from today's Roll Call tells you everything you need to know about how much an be learned about the U.S. budget from the Iceland volcano.

Federal Budget Lessons From the Iceland Volcano

April 27, 2010

No, this is not a column about the airlines and travel industries requesting some type of emergency federal aid because of the volcano in Iceland that wreaked havoc over the past few weeks on flights to and from Europe. Instead, the volcano may have erupted just in time to help settle one of the longest-running annual budget fights in Washington: the use of a baseline.

At some point in the coming weeks as the Senate continues to consider a budget resolution for fiscal 2011 and the House ponders whether to consider one at all, someone on Capitol Hill is going to say something to the effect that only in Washington could a spending increase be considered a cut.

As everyone who tried to travel on or to the east coast this weekend knows, the snow that hit the Mid-Atlantic and Northeast states Friday night and all day Saturday wreaked havoc with the airlines schedules as airports closed and flights were cancelled. 

So it won't be surprising if, as markets reopen tomorrow, one or more analysts and perhaps even the airlines themselves talk about how much they lost because of the cancelled flights.  There may even be some call for federal support for the airlines given the impact of the storm.

But this is not a post about the possibility of some type of government financial assistance for airlines.  Instead, it's a post about how, if this discussions occurs, the airlines and analysts may well be doing something that the private sector likes to say only happens in Washington on the budget: the use, or misuse, of the baseline.