The GOP’s hidden budget advantage

December 5, 2012

Here's an easy rule of thumb for scoring budget negotiations: Whichever side is complaining about "baselines" is losing. Cue the Wall Street Journal's editorial page:

If the fiscal cliff talks make Lindsay Lohan look like a productive member of society, perhaps it's because President Obama and John Boehner are playing by the dysfunctional Beltway rules. The rules work if you like bigger government, but Republicans need a new strategy, which starts by exposing the rigged game of "baseline budgeting."

The rules in question come from the Congressional Budget and Impoundment Control Act of 1974:

Since 1974, Capitol Hill's "baseline" has automatically increased spending every year according to Congressional Budget Office projections, which means before anyone has submitted a budget or cast a single vote. Tax and spending changes are then measured off that inflated baseline, not in absolute terms.

The Journal says "Democrats designed this system," conveniently forgetting that President Richard Nixon signed it into law.

This sort of complaining won't do Republicans much good, and it's laughable to suggest that they could somehow turn these negotiations around by fanning out across the country to argue about baseline budgeting. But the Journal has a point worth taking seriously. In this town, budget baselines decide everything and they're not always accurate. 

What's odd about the Journal's point is that the baseline is, at the moment, hugely tilted in the GOP's favor. In fact, Washington is using a made-up baseline that completely ignores the procedures set out in the 1974 Budget Act and that mainly serves to make it harder to increase taxes.

What you need to know here is that there are two baselines competing for the hearts and minds of legislators. The normal baseline -- the one that stems from the 1974 legislation -- is called the current law baseline, and its key feature, at the moment, is that it shows the tax cuts expiring, the sequester beginning, and Medicare taking big cuts. The reason it shows all this is that that's what's written into law. And so, under this baseline, deficits are projected to drop dramatically and taxes are projected to rise sharply -- which means that any effort to keep taxes at or near current levels is scored, under the budget rules, as a huge, deficit-busting tax cut.

But more recently, the Congressional Budget Office began calculating something called the "alternative fiscal scenario." The AFS is an alternate budget baseline that ignores current law and assumes that Washington will keep most current policies in place. Under this baseline, the Bush tax cuts are assumed to go on and on forever, amen. Under this baseline, the sequester doesn't happen, the cost controls in the Affordable Care Act never go into effect, and deficits, as you'd expect, explode.

This is the baseline that most all of Washington uses these days. It's a baseline that was invented just a few years ago, and its primary features are that it makes it harder to increase taxes and it makes deficits look far larger than the laws we've passed actually say that they'll be. It's a situation that hugely advantages the Republican agenda, and so it's not a situation conservatives should be complaining about, or trying to make the public more aware of. That the WSJ is trying to blame the baseline just shows how badly the negotiations are going for them.

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Dylan Matthews · December 5, 2012