Congressional Budget Office Director Douglas W. Elmendorf held a news conference early in February for the release of the annual “Budget and Economic Outlook” report. Some budget observers take issue with the CBO’s projections, calling them “bookends of two unrealistic scenarios.”
Last year, when lawmakers wanted to plot the possible future course of government spending and taxation, they could look at the Congressional Budget Office’s regular baseline or its alternative fiscal scenario.
And what a difference it would make which one they consulted.
The CBO’s “current law” baseline then showed deficits growing by a projected $2.3 trillion over the next decade. But if lawmakers instead viewed the agency’s alternative scenario, which projects the effects of current policy rather than current law, they would see deficits soaring by almost $10 trillion over the same period, more than four times the amount in the baseline.
In the words of Maya MacGuineas, president of the Committee for a Responsible Federal Budget, the separate projections were “like bookends of two unrealistic scenarios — one the best case, one the worst case.”
But for budget planners, one important consequence of the fiscal-cliff law that passed in January was that the $8 trillion gap in deficit projections in the two scenarios narrowed considerably. There is now just a $2.5 trillion difference between deficits estimated under the new CBO baseline and alternative scenario, issued by the agency earlier this month.
The gap that was closed is a kind of measure of the certainty that the fiscal-cliff law created by taking temporary tax measures that were sharply contested over the past decade and setting them into stone, or at least as much permanence as tax law carries in Washington. The alternative scenario is less important as an optional measure of projected deficits and debt than it was in the last decade, according to some, and so lawmakers have a firmer foundation for projecting the effects of tax and spending measures. There’s common ground in where to start, in other words, even if there’s not much common ground on where to go.
In the past, many viewed the alternative scenario as a more accurate projection than the baseline, since the baseline assumed the wholesale expiration of trillions of dollars in temporary tax cuts enacted in 2001 and 2003 — something few believed would occur.
But in the CBO’s latest budget and economic outlook, the alternative scenario assumes less prominence than in previous reports