Baseline Budget Projections Under Alternative Assumptions (CRS Report for Congress)
| Release Date |
Revised Feb. 24, 2006 |
| Report Number |
RS22045 |
| Report Type |
Report |
| Authors |
Gregg Esenwein and Marc Labonte, Government and Finance Division |
| Source Agency |
Congressional Research Service |
| Older Revisions |
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Summary:
The Congressional Budget Office (CBO) estimates a baseline budget based onsimple rules prescribed by law. Statute requires CBO to project a baseline of revenuesand outlays under current law over the next 10 years. Arguably, a "better guess" of theprobable path of the federal budget under current policy might be achieved by modifyingthree assumptions in the CBO baseline. First, that discretionary spending will remainconstant as a share of GDP rather than growing at the rate of inflation. Second, thatrecent tax reductions will be extended rather than allowed to expire. Third, that thealternative minimum tax (AMT) relief will be extended rather than allowing the AMTto "take back" the reductions in regular income tax. Modifying these baselineassumptions and accounting for the additional debt service required to finance thesepolicies yield an estimate that the federal budget deficit is likely to be $5 trillion moreover the FY2007 through FY2016 period than that shown by the baseline projection.The effects of the alternative assumptions grow over time: by 2016, the alternativebaseline deficit is $861 billion, compared to an official baseline surplus of $67 billion.
