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Basing budget baselines.

D. Expectations Baseline

An expectations baseline reflects what is expected to occur in the future. The object here is the law as it is expected to be. The future is not some undifferentiated mass of possibilities. There are more and less likely outcomes. In short, there is an expected path, even if it may be an uncertain one.

When expectations are invoked, this immediately raises the question of whose expectations. Here, I mean to refer to what is objectively the best central estimate of the future path of the budget. That is, some predictions should be better than others--with smaller errors and less bias relative to what actually occurs. Admittedly, identifying the "best" projection is no small feat. Perhaps it would be delivered by some combination of nonpartisan budget experts, whether at official government agencies like CBO or at independent think tanks, that closely watch budget developments and on which policymakers, the press, and the public rely. But the point is that I do not mean expectations to refer to anyone's subjective expectations of the course of the budget irrespective of the likely accuracy of the guess.

This expectations baseline has the potential to offer considerable information. As suggested earlier, the expected effects of policies should matter to both policy making and private sector planning. (123) The 2001 and 2003 tax cuts were expected to have a very different effect than the one actually stated in law. (124) At the time, they were expected to be continued at least in significant part. (125) Thus, that expectation should have informed the decision to enact them.

Perhaps less obviously, the expectations baseline can prove useful in setting the policy agenda, establishing political accountability, and enforcing budget rules. (126) In terms of agenda setting, the most relevant information is the question of what would happen if an issue is not brought onto the agenda as of now--information provided by what I call the "low priority" baseline. And the "low priority" baseline can actually be conceptualized as a particular type of expectations baseline. It is what is expected to occur, contingent on policymakers not paying much attention to an area. In terms of political accountability, it seems particularly relevant to look at the expected course on which policymakers have set us (what I described earlier as the post-policy baseline) and to compare that with the expected course before policymakers took over (the pre-policy baseline). Finally, in terms of budget enforcement, using a baseline that better reflects expectations can potentially avoid certain kinds of gamesmanship. Whereas a pure current law baseline can lead policymakers to enact temporary legislation and claim that it costs less than its actual expected effect, (127) an expectations baseline avoids this gaming. Furthermore, the baseline can be used to enforce targets in terms of overall projected budgetary outcomes (deficit and debt levels), (128) unlike a current law baseline, which is useless for such purposes.

To be clear, setting an expectations baseline involves its own share of speculation. There is the actual technical question of how to estimate the expected policies in the face of uncertainty. The best method would likely be some probabilistically weighted average of various policies, interacted with economic factors. In practice, that may prove complicated across the full range of the budget. Another possibility is a projection of the most likely set of policy outcomes, which is not necessarily the same thing but may still provide similarly useful information.

The long-term fiscal challenge generally, and the 2001 and 2003 tax cuts specifically, highlight the issue of uncertainty. The strong expectation of experts and markets is that the government will finance itself without defaulting on its debt. (129) By this I mean the expectation is that taxes will eventually be raised and spending cut in some combination that is sufficient to balance the government's books--or, more technically, sufficient so that the federal government fits within its long-term budget constraint. (130) In the case of the 2001 and 2003 tax cuts, this means that, as a matter of budgetary arithmetic, their enactment will eventually lead to offsetting tax increases and spending cuts of equivalent magnitude to finance these tax cuts. (131) To be clear, the long-term fiscal challenge may not be resolved with some combination of policies that people consider optimal--that part is by no means necessary--and the same is true specifically of the policies needed to finance the 2001 and 2003 tax cuts. Nonetheless, an expectations baseline should, over the long-term, reflect whatever combination of policies is expected to close the long-term gap and finance deficit-increasing policies.

In previous work, I made an effort to identify what policies might be employed to close the long-term fiscal gap, noting that a combination of policies already proposed, though not enacted, by policymakers could do so. (132) My approach of projecting "least common denominator" deficit reduction--that is, the least each side had proposed in any given area--was one way to try to identify the expected course of policy. (133) There are certainly other ways, but efforts like these are needed to guess the future course of budget policy over the long-term and then assess whether that course is a good or bad one.

E. Policy Uncertainty Baseline

Some might say, though, that an expectations baseline showing no fiscal shortfall--and the 2001 and 2003 tax cuts, and other deficit increasing policies, as financed--assumes away a rather large problem. Perhaps we expect that policymakers will eventually figure out a way to deal with the deficit, but that does not mean they have done so already. It is a rather curious chicken-and-egg problem. Should an expectations baseline show the long-term fiscal problem as solved when we remain uncertain as to how that will actually occur? Should we sit back and relax, secure in the relative certainty of future action?

The answer to this is "no." We should probably differentiate the fiscal policies that are highly uncertain from those that are less so. At the least, we can try to measure the degree to which policymakers have generated more uncertainty than they would have if they had better specified a sustainable long-term fiscal path.

This brings us to the "policy uncertainty" baseline. While the name might seem exotic, it is a baseline that should be familiar to anyone who follows federal budget debates, even from afar. When you see a projection of the federal budget on an unsustainable trend--as in deficits or debt rising perpetually into the future--you are probably looking at a policy uncertainty baseline, or at least a baseline that is akin to this. And, of course, this is familiar. The many warnings of the unsustainability of the federal budget often come with just such graphs, with lines ascending into the heavens. (134)

Given how often such baselines get rolled out, it might come as a bit of a surprise that it is rarely (if ever) specified what those baselines are in fact projecting. (135) Yes--the technical assumptions underlying the projections are given. (136) But the theoretical framework--as in what all of those assumptions are meant to capture--is not actually specified. (137) It certainly is not a current law baseline, as it does not reflect the debt limit in place and much of the federal government disappearing as appropriations expire, among other items in current law. It probably is not a low attention baseline or, if it is, it is not a particularly meaningful one--since, even if deficits do not get placed at the top of the agenda today, they seem very likely to be on the agenda if debt rocketed up. Even debt at current levels has sparked negotiation after negotiation. (138) Further, it probably is not a status quo baseline, as these baselines often incorporate changes in services (like spending cuts or tax increases) that people expect to occur but have not yet happened. (139) Additionally, as I discussed, status quo baselines tend to lose coherence as they look further and further into the future. (140) And, finally, it is not an expectations baseline, at least as defined above, because few expect that the United States will actually have a debt load equivalent to several hundred percent of GDP (and rising) at some point in the future.

This brings me to what I am calling the "policy uncertainty" baseline. Based on policymakers' legislative actions and proposals, we may project a certain minimum level of taxes--a level below which it is unlikely taxes will fall--and a certain maximum level of spending--a level above which spending is unlikely to rise. The gap between these two levels will be closed, but there is substantial uncertainty about the composition of the policies that will fill that gap and the timing. This uncertainty is the focus of the policy uncertainty baseline. To put this in Samaha's terminology, the "object" in this case is the amount of uncertainty that policymakers generate due to their failure to better specify a path to a fiscally sustainable future. (141)

This can be conceptualized in terms of the fiscal gap--a metric of the fiscal shortfall popularized by Alan Auerbach. (142) This gauges the size of the tax increases or spending cuts needed to stabilize the debt-to-GDP ratio over given periods of time, which is one metric of fiscal sustainability. (143) The fiscal gap essentially quantifies the amount of policy uncertainty that exists. Compared to the baseline, spending will have to be cut by a certain amount and taxes raised by a certain amount, and there is confidence that such actions will occur; (144) what is uncertain is the timing and composition of that deficit reduction. (145)

There are costs to such uncertainty, making the uncertainty worthy of quantifying. (146) For instance, this fiscal gap generates uncertainty about the future structure of the Medicare and Social Security programs, and that makes it difficult for people to plan for retirement. (147) There is also uncertainty about future tax rates, making it more difficult for businesses to make investment decisions. (148) In addition to making people and businesses more uncertain about how government fiscal policies will affect them in the future, the unresolved fiscal gap also increases uncertainty for holders of government debt, and raises the probability that financial markets might change their expectations about the probability of some share of the fiscal gap being resolved through direct default or inflation. In short, because of uncertainty, there is some risk of a fiscal crisis, with costly, sharp changes in market expectations. (149)

The policy uncertainty baseline can serve many of the same purposes as the expectations baseline. It can help set the agenda by showing the degree of uncertainty if policymakers do not put deficit reduction on the agenda now; it can help hold policymakers accountable for increasing that uncertainty or reward them for reducing it; and it might even be used to enforce budget targets by not allowing policymakers to increase future uncertainty by enacting unpaid-for policies, for instance. (150) However, it probably provides little information for private sector planning because planners must actually take a best guess at how uncertainty could be resolved.

With that said, this policy uncertainty baseline is not an expectations baseline, and does not convey some of the important information that would be incorporated in such a baseline. It does not show the actual expected effect of policies. In particular, one effect of federal fiscal policy is to shift resources between one generation and another, (151) and we do not know the degree to which fiscal policy will do so unless we look at an actual expectations baseline--not an uncertainty baseline. (152) Or, returning to the 2001 and 2003 tax cuts again, we do not know the actual incidence of those tax cuts unless we utilize an expectations baseline to speculate who will end up financing them with either lower spending or higher taxes. (153) The uncertainty baseline should not be confused with an expectations baseline that conveys such important information.

F. Where Does the Official Baseline Fit?

Finally, there is the official baseline. This is what I am calling the baseline that CBO uses in some of its budget projections and in estimating the cost of legislation. As described in Part I, many of the assumptions underlying this official baseline were written into law in 1985 and then significantly amended in 1990. (154) While that baseline was mandated for only certain budget enforcement purposes, CBO and, to some degree, OMB also adopted it for purposes of baseline budget projections--with both sometimes emphasizing alternative baselines where the "official" one was unrealistic. (155) This baseline is unlike the others I have described here in that there is not a single motivating concept behind it. Rather, it is a mixture of concepts. That is not a problem per se, especially to the extent the baseline is used primarily for budget enforcement. However, this official baseline could be improved, especially when it comes to the treatment of temporary policies. (156)

Table 1 summarizes assumptions underlying the official baseline. First, it is important to observe that it is not a true current law baseline. While sometimes described as such, (157) it deviates from current law in a number of key ways. These include assuming: (1) continuation of annually appropriated funding; (2) that the federal government will continue to issue debt above the debt limit; (3) continuation of a number of major mandatory programs, like TANF and farm price supports, that are scheduled to eventually expire; (4) continuation of a number of excise taxes devoted to trust funds (the major one being the gas tax) that are also scheduled to expire. (158) The point is that whatever logic underlies the official baseline, it is not strictly adhering to current law.

Rather, it is an assortment of baseline concepts. In some cases, the official baseline does follow current law (and none of the other baseline concepts). This was the case with the 2001 and 2003 tax cuts. The baseline assumed that the tax cuts would expire as scheduled. However, in other cases, the official baseline adopts something closer to an expectations or status quo concept. For instance, take the baseline's continuation of major mandatory programs that are scheduled to expire; their continuation is almost certain to occur, and the baseline thus also reflects continuation of the state of the world today. Or, take annual appropriations. Here, CBO largely follows the discretionary caps now in place, reflecting something probably closer to an expectations concept. The assumed funding level is below the status quo--adjusted for measures like inflation--but certainly above current law, in which appropriations are not continued at all. (159) And, in some respects, the baseline measures policy uncertainty to the extent it shows the government on an unsustainable trajectory.

Although the official baseline reflects a mixture of concepts, it still has the potential to be used effectively for budget enforcement. As described in Part IV. C, consistency and clarity are more important than intellectual coherence when a baseline is used for budget enforcement. With that said, the official baseline could certainly be improved for such purposes. As I explain later, the official baseline has been undermined as an enforcement device by the games policymakers have played with temporary tax policies. This gives reason to try to amend the official baseline to make it more consistent with the actual expected effects of those temporary measures. Not only could that improve budget enforcement, but it also would have the ancillary benefits of making this official baseline more useful for other purposes, such as evaluating the effects of policies and establishing political accountability.

G. Summing Up: A Focus on Clarity and Expectations

There may be other types of baselines that can be imagined, but the categories above should capture the main candidates. From this taxonomy, I take away three main lessons. First, there needs to be a focus on clarity for those building and using baselines. To say that a baseline is "realistic" or some other brief summary phrase is entirely inadequate. There are different ways to define a starting point and, depending on how it is defined, a baseline will be useful in very different ways. Second, "current law" might seem like an obvious and easy way of defining the baseline, but it is inappropriate for most of the purposes for which baselines are used. Finally, other baselines--and perhaps, especially, the expectations baseline--are of greater use for many more purposes. In particular, the expectations baseline is useful for setting the agenda, assessing the expected effects of policies, establishing political accountability, enforcing budget targets, and aiding private sector planning. It is, in other words, the baseline most likely to be useful for a set of important purposes. Table 2 below roughly summarizes the different types of baselines and the purposes for which they are most appropriate.


The prior Part attempted to rigorously consider the kinds of baselines we can use and what information they provide. This Part applies this thinking to a number of ongoing debates about federal budget baselines.

I now address four frequent issues that arise in baseline debates: whether we should use a baseline at all, whether the baseline should increase in nominal terms, how to handle policy cliffs, and what to do with (and how to think about) long-term projections.

A. Getting Rid of Baselines Is Not a Viable Option

The question of whether we should use baselines at all has been a long-standing issue in budget circles. At the federal level, that debate has largely been resolved by the now multiple decades of projections and cost estimates from CBO, OMB, and budget analysts that rely on baselines. With that said, there are still proposals to radically deemphasize or eliminate baselines at the federal level, (160) and having now pursued in some depth the question of what different baselines have to offer, it is informative to return to this debate. It is also necessary. This Article has so far engaged the question of the purposes of baselines and how they can be conceptualized, but it has not engaged the issue of whether baselines are necessary at all. If they could be abandoned entirely, then this analysis becomes superfluous; the right baseline is no baseline. Not surprisingly, I conclude that baselines should be used, although I do not argue that they should necessarily be the dominant decision-making tool in all situations.

There is an entire, much-debated theory pinned to the idea of living in a world without baselines called "zero-base budgeting" (ZBB). Peter Pyhrr first developed the theory in the late 1960s for budgeting at Texas Instruments. (161) ZBB was later introduced into government budgeting in 1973 by then Georgia Governor Jimmy Carter. And Carter, with considerable fanfare, brought this method to the federal budget process--although it was quickly abandoned and never again used extensively at the federal level. (162) In the broadest strokes, ZBB is meant to budget without relying on what had been done before. Spending, including the "base" (what was spent before), is supposed to be fully and regularly evaluated. This is intended to be in contrast to an "incremental" process of budgeting, which focuses evaluation on the increment, as in some percent increase or cut from the base. (163)

I will not delve into detail as to exactly how ZBB was meant to be operationalized. Suffice it to say that, for each program area (or "decision unit" in the parlance of ZBB), budget analysts are tasked with developing "decision packages," detailing exactly what can be purchased for each level of funding and justifying that particular level of services. (164) The various decision packages--across decision units--then get ranked in terms of priority, and a central unit assigns resources based on these rankings and overall resource constraints. (165)

There may be something to be gained by abandoning baselines, or at least trying to. At least some of the intuition behind ZBB was later affirmed by some of the behavioral economics literature discussed earlier. (166) To the extent that anything framed as the status quo leads to irrational decision making (and a bias towards it), then, arguably, we should force ourselves to think outside this frame. If we define nothing as the status quo, and if we abandon any idea of a baseline, then perhaps policy decision making can be improved in this way.

But there is also much information to be lost if we give up baselines entirely--and, in my view, far too much information. This Article has already discussed in some detail what baselines have to offer, but it is still useful to briefly highlight what it means to use no baseline at all, in terms of the two ways that baselines can inform policy design: by showing the expected course of policy, and by defining the status quo as a reference point.

First, in the absence of any kind of expectations baseline, we lose the ability to engage in any kind of long-term planning. Pure ZBB requires us to pretend that the future is something of a blank slate. Furthermore and relatedly, it would require ignoring the long-term implications of policy decisions--as in the degree to which decisions today affect the likely outcomes in the future.

The political scientist Aaron Wildavsky, in his classic work The Politics of the Budgetary Process, makes a similar point and vividly characterizes what it means to be without what I would call an expectations baseline. (167) He compares this to living with the type of instability seen in the developing world. (168) In his words:

   Only poor countries come close to Zero Base Budgeting, not
   because they wish to do so but because their uncertain financial
   position continually causes them to go back on old commitments.
   Because past disputes are part of present conflicts, their budgets
   lack predictive value; little stated in them is likely to occur.
   Ahistorical practices, which are a dire consequence of extreme
   instability and from which all who experience them devoutly
   desire to escape, should not be considered normative. (169)

Second, in the absence of any kind of status quo baseline, decision makers would have to shield themselves from information about what we are doing at this moment and could not use that experience as a reference point. It is enough to leave policymakers at sea. Take the Defense Department: each and every time pure ZBB is used would require determining from the ground up how much we need to spend on defense. (170) The question would not be whether we are now spending too much on a given defense system or defense in a certain region, but rather, without reference to any information about current spending levels, how much we should spend to begin with. Without reference to what we are currently doing (and how it is working out), that becomes a difficult--if not impossible--endeavor.

To be clear, keeping baselines as part of budget decision making does not necessarily mean that they must be the focus at every stage. Even though baselines provide important information, there is potentially something to be gained by deemphasizing them at certain stages of decision making so as to destabilize an irrational bias toward the status quo, to the extent one exists. In other words, perhaps there is some way not to throw out the baby with the bathwater.

The failures of ZBB in practice, though, demonstrate how challenging it can be to deemphasize the baseline. First, in application, most versions of ZBB do not actually eliminate use of a baseline. One of the "decision packages" is often some version of the status quo, or at least defined relative to that level. (171) Second, ZBB has proved incredibly intensive in terms of administrative resources--and with perhaps little to show for it (though that is a matter of some dispute). This was the federal government's experience when it dabbled with ZBB under President Carter. It resulted in agencies devoting considerable resources to draw up budget recommendations that looked much like they did before. (172)

The bottom line is that budget baselines should be and are here to stay. Doing away with them simply gives up too much information.

B. Baselines Should Not Be Frozen in Nominal Terms

Even if they may accept the use of some budget baselines, many conservatives harken back to the time when the "base" was simply the prior year's nominal spending level. They argue that should be the point of comparison, at least when it comes to annually appropriated spending. However, a baseline in this form seems intended to misinform and, if adopted, could undermine a number of the purposes for which baselines can be employed.

In 2012, and again in 2014, House Republicans passed legislation eliminating any inflation adjustments for annually appropriated programs from the official baseline; (173) their logic appears to apply to any baseline, whether official or not. Upon the legislation's second introduction, then Budget Committee Chairman Paul Ryan declared: "Families don't get automatic raises every year. Neither should Washington." (174) The sponsor, Representative Louie Gohmert, expanded on that logic, saying that the baseline "has been a trap so when we simply slow the rate of increase, we are accused of making draconian cuts. As reckless deficit spending continues, it is paramount that we be honest about what is an increase and what is a cut." (175)

Advocacy for this is not limited to politicians. The scholar Timothy Muris similarly calls for using the previous year's nominal level as the baseline. (176) He would use this for all spending (and not just annually appropriated spending), but then would highlight the forces that automatically push up nominal spending on mandatory programs like Social Security (but not annually appropriated ones like Head Start). (177) In his words, "[a]lthough all programs should be measured against the base of the previous year's spending, for those programs that automatically increase the underlying reasons should be understood and evaluated." (178) He argues against other baselines because of the complexity involved and the possibilities for gamesmanship. (179) Muris is right to emphasize some of the challenges involved in designing useful, coherent baselines (hence, the discussion in much of this Article). However, he and others are wrong to conclude that the simplicity of a nominal freeze provides a more accurate measure of the course we are on, or the changes from it.

Returning to Samaha's conceptualization of legal change, a frozen baseline sets nominal dollar amounts as the "object." That is what it seeks to hold constant. But a baseline like this does not provide any information actually helpful for decision making. Or, put differently, a baseline of this form does not capture the starting point of the legal regime in any meaningful sense.

It is worth briefly running through the potential purposes of baselines and how this is inconsistent with them. First, to the extent a baseline's purpose is to help set the agenda, assuming a nominal freeze in the absence of attention by policymakers seems likely to provide faulty information. In particular, a nominal freeze requires cutting services over time due to the effects of inflation and growth in population. To the extent policymakers set the budget on automatic pilot and do not focus much attention to it, such cuts seem unlikely, especially over the long-term. In other words, if a policymaker's goal is to cut the budget after taking into account items like inflation, it would require raising the issue as a major agenda item--as was done by Republicans in recent years in attempts to achieve cuts. This means a low attention baseline would include growth in spending, certainly in nominal terms.

Second, if the goal is to use the status quo as a reference point, again, a nominal freeze misinforms. While the figure of $1 billion in one year has the same number of zeros as $1 billion in years later, they can buy different things because of inflation and other factors; presumably, it is the amount of services that matters in these comparisons. Long-time budget analyst Richard Kogan illustrates this in arguing against a baseline with a nominal freeze. He notes how, in 2000, defense spending ($295 billion) was slightly higher in nominal terms than in 1987, at the height of the Reagan Cold War build-up. (180) And yet, the military had been dramatically down-sized over that same period. (181) As Kogan reports:

   [T]he number of active-duty military personnel fell from 2.2
   million to 1.4 million during this period (a 36 percent reduction),
   the number of Navy ships fell from 569 to 315 (a 45 percent
   reduction), [and] the number of Air Force fighter wings (active
   and reserve) fell from 38 to 20 (a 46 percent reduction). (182)

To compare 1987 and 2000 and declare that defense spending in 2000 is higher ignores the reality of the services actually being provided.

Third, a nominal freeze does not reflect the probable course of policy--at least over long periods of time. Because of this, it fails to provide information that is useful for a number of purposes, including policy design, holding policymakers accountable for their actions, budget enforcement, and private sector planning. All major categories of government spending have, over long periods of time, risen in nominal terms, (183) and that is certainly a reasonable expectation for the future. In fact, even the writers of the Republican House Budget Resolution have assumed that annually appropriated spending keeps up with inflation over the long-term. (184) Thus, any general assumption that spending will be frozen in nominal terms over long periods is highly unrealistic. Kogan notes how this could undermine policy planning by, among other things, resulting in fiscal projections that could wrongly justify tax cuts or entitlement increases. (185) When it comes to political accountability, it seems most reasonable to credit or blame policymakers for how much they change policy relative to the previously expected course--and not an unexpected one (like a nominal freeze). And for enforcing deficit or debt targets, Kogan's critique again rings true. The result would be an unduly rosy forecast that would undermine any such targets. Finally, the private sector should (and likely would) ignore any such baseline, recognizing it as an unlikely course for policy.

Muris offers a half-hearted attempt to justify the nominal freeze in the face of such objections. He argues that issues of realism and the effects of inflation are relevant only over longer periods of time (according to Muris, time periods such as five years). (186) From year-to-year, inflation can be ignored, Muris argues, especially if we are in a low inflation environment. (187) This retort is problematic. It is as if the sum of the parts (the effects of inflation over five years) is completely disconnected from the parts themselves (the effects of inflation from year-to-year). If Muris were to agree that it is realistic for spending to increase with inflation over a five-year period, why should it be any different over a one-year period, even if the increment is smaller? If spending did not increase with inflation from year-to-year, then it would not do so over any longer period either.

The weakness of these justifications reflects the fact that the nominal freeze is probably meant to misinform. Advocates of the frozen baseline want to lower spending. In order to achieve this, they want to shift the status quo reference point and, potentially, not be held fully accountable for the cuts they are advocating. In short, they want to hide budget cuts to the extent possible. To be sure, that is not necessarily a bad outcome. To the extent larger budget cuts would be a better policy outcome than the alternative, a skewed baseline could be justified as a means to an end that the political system would not have otherwise generated. In other words, it might be bad information in, but good or better outcomes out.

However, I am doubtful of this (unstated) justification for two reasons. First, I am skeptical of the substantive goal of reducing spending broadly, though that clearly goes to a larger policy debate. Second, and more importantly, I question whether employing budget metrics in this way--as political tools with no necessary connection to actually accurate information--will end up producing better outcomes. It relies on pulling the wool over people's eyes and being able to do so again and again. If all institutions engaged in policy making in this way, budget metrics would seem to lose any currency they have. They would not be believed, leaving policymakers and the public blind as to the country's fiscal path and the effects of fiscal decisions.

In sum, a nominal freeze seems unlikely to be the right baseline for any constructive purpose. This is not to suggest that it is easy to decide on how fast the baseline should grow. That depends on the question being answered--whether the baseline is trying to hold services constant, or the expected course of policy, or something else. And, even after deciding this, it is not necessarily obvious how the baseline should be adjusted. But the frozen baseline seems like the wrong answer in most circumstances.

C. Ignoring Policy Cliffs (Much of the Time)

1. Why We Should Ignore Policy Cliffs

Over the last two decades, perhaps the leading baseline controversy centered around how to account for what I am calling policy cliffs--and, in particular, how to account for the 2001 and 2003 tax cuts. I have already played out the example of the 2001 and 2003 tax cuts through much of this Article, and so it should come as no surprise that I believe baselines should ignore policy cliffs, much of the time, in order to reduce baseline abuse. I consider policy cliffs to be sudden changes in policy compared to what had been experienced up until that point, whether from legislative expirations or otherwise. The expiration of the 2001 and 2003 tax cuts are a quintessential example of policy cliffs. Importantly, the problem of temporary tax legislation and baseline manipulation is not limited to those tax cuts. This is a game that progressives have played as well, even if in smaller magnitude than conservative tax cutters. In recent years, progressives have successfully enacted tens of billions of dollars per year in temporary (deficit-financed) tax cuts that they intend to make permanent and certainly might, akin to the 2001 and 2003 tax cuts. (188)

Some commentators have expressed skepticism about doing anything other than following current law or perhaps the official baseline in the case of such expirations. Ezra Klein, the influential blogger and reporter, wrote in favor of using what he describes as a current law baseline going forward. (189) He argued that adjusted baselines--ones that had assumed extension of the 2001 and 2003 tax cuts--had resulted in fiscal irresponsibility. (190) In his words:

   Because everyone was used to a fake baseline that assumed their
   full extension, a supposedly deficit-obsessed Congress managed to
   resolve the so-called fiscal cliff in January by passing a huge tax
   cut that added trillions to deficits while calling it, amazingly, a
   fiscally responsible tax increase. Now that the fiscal cliff and
   its attendant uncertainty have been resolved, it's time to retire
   the irresponsibility scenario and rely simply on the current-law
   scenario. (191)

Legal scholar Rebecca Kysar makes something of a similar point--although perhaps with more fatalism--that baselines will end up being manipulated irrespective of their underlying assumptions. (192) After noting that "[t]ypically, the [official] baseline accepts current law as fixed," she describes critically how baselines used by OMB (under both Presidents Bush and Obama) and others assumed extension of the 2001 and 2003 tax cuts. (193) From her perspective (and similar to Klein's argument), this made it easier to extend temporary legislation without facing up to the cost of doing so. Kysar used this to help build her argument against enacting temporary legislation to begin with, but the point about baselines seems to be roughly the same.

While I have a certain amount of sympathy for arguments like those of Klein and Kysar, they ignore the possibility of adjusting the way baselines deal with the initial enactment of temporary legislation in order to address this kind of gamesmanship. In particular, if done from the start, ignoring expirations could be used to reduce gamesmanship and improve baselines--rather than the opposite. Not only could adjusting the baseline reduce such gamesmanship, but it could change how we perceive the wisdom of temporary legislation. One of Kysar's key arguments against temporary tax legislation is that policymakers never face the full costs of their policies because the baseline later gets manipulated. (194) To the extent that changing baseline assumptions could address this fiscal gamesmanship, then the case against using temporary tax legislation--for instance, to force reconsideration of a set of policies at regular intervals--is weakened.

As I mention above, I would give priority to the expectations baseline, and this provides a rule that is simple to state, if not implement: whether to respect a policy cliff should depend on the expected outcome. This certainly requires more judgment than simply cracking open the code, but, unlike current law, it is a viable and meaningful baseline. It would tend to show enactment of temporary tax cuts as more expensive than a current law baseline, and it would show further extension as less expensive--which appropriately aligns with the expected effects of these policy actions.

To be sure, Klein and Kysar are right to be skeptical of how baselines were used in the debate about the 2001 and 2003 tax cuts; it is just that they ignore the misleading baseline treatment at the time of enactment. In particular, the error then was to assume that the country would follow current law. In making that assumption, supporters were able to minimize the actual expected cost of the tax cuts. (195) Many of those same supporters, including the Bush Administration, later flipped over to baselines that assumed the extension of the temporary tax cuts. (196) This harnessed the power of expectations. No one expected most of the tax cuts to go away, and so it was intuitive to use a baseline that came closer to representing the likely course of policy. But because these supporters did not use an expectations baseline from the start, it was a hypocritical maneuver that generated faulty information for decision makers and the voting public at the time the 2001 and 2003 tax cuts were enacted--and then hid the consequences by flipping baselines later. (197)

Using an expectations baseline would reduce the opportunity for such gamesmanship if it was employed consistently. This would mean that supporters of temporary tax cuts could not toggle between a current law and an expectations baseline to the degree it suited them, since expectations would consistently be the focus. Using an expectations baseline would also come with other benefits. For example, this approach would highlight the actual expected cost of the legislation, better holding supporters accountable. (198) Additionally, an expectations baseline would appropriately reflect the later cost of continuing the tax cuts as largely built into the baseline--meaning that future policymakers would not be described as adding to the deficit by continuing the tax cuts. (199) Rather, they would be described as reducing the deficit if they did not continue them.

This is not to say that all cliffs are fake--though many are. There are truly temporary policies that we expect to be temporary, such as fiscal stimulus in the face of a recession. Some degree of judgment is therefore required, with the understanding that many of these cliffs should be ignored in baselines.

I have emphasized how the expectations baseline would approach policy cliffs. Other than a current law baseline, the other baselines I discuss would also tend to ignore such cliffs. For instance, a low attention baseline would show whatever keeps an issue off the agenda--which, often, prevents a dramatic policy change from going into effect (like the fiscal cliff). (200) A status quo baseline would simply assume that whatever policy is in place right now would continue, even if that is not expected to be the case. (201) A policy uncertainty baseline might also assume the cliff is ignored, to the extent that this reflects some additional uncertainty for how our long-term fiscal situation will be resolved (as was certainly the case with the 2001 and 2003 tax cuts). (202) Ultimately, just because a policy cliff is written into the law does not mean that a baseline should reflect it; rather, it is often to the contrary.

2. Applying This to the Official Baseline

While the above analysis bears on what rules should be used in building the official baseline employed by CBO and OMB in budget enforcement, the recommendations need to be adjusted in this context. The preceding discussion suggests that policy cliffs should tend to be ignored in budget baselines when we do not expect them to occur--which is often. However, this recommendation requires assessing the specific cliff involved to decide whether we expect it to be respected. When it comes to an official baseline, there is no luxury of wide discretion. Rather, there are a prescribed set of rules that must be clear to both legislators and the budget offices. Still, I believe the above conclusions are relevant in setting those rules; policy cliffs should frequently be ignored there as well.

Perhaps the leading purpose of the official baseline is to act as a mechanism for budgetary enforcement--for informing policymakers and the public whether or not those policymakers have achieved budget targets. As previously noted, some have suggested doubling down on the current official baseline. (203) From their perspective, the mistake with the 2001 and 2003 tax cuts was not to consistently assume their expiration. (204) And others, like scholar George Yin, have even suggested that budget enforcement worked well in the context of the 2001 and 2003 tax cuts. (205) In simple terms, these commentators suggest that so long as new laws are fully paid for or properly taken into consideration, budget enforcement should still work using the actual laws as enacted. Although the cliffs may be unrealistic, when Congress inevitably fixes the cliff, the cost of the new legislation would then be taken into account.

To understand why this latter viewpoint is flawed, it is important to consider why we have budget enforcement devices in the first place. These devices are intended as a way for policymakers to restrain themselves or, at least, highlight when they are being irresponsible. (206) Given that policymakers can always undo the ties that bind them through later legislation, the efficacy of budget enforcement rules can be rightly questioned, but, as suggested earlier, they do appear to make some real difference in policy making. (207) To be successful, however, these rules must be designed in such a way that is not susceptible to gaming. The ties must be binding, at least to some degree. Otherwise, they are useless as commitment mechanisms. Using either a pure current law baseline or the current official baseline has proven insufficient in the context of temporary tax legislation.

As described above, the official baseline has been easily manipulated. (208) Those enacting temporary tax cuts will, initially, emphasize the cost estimate using the official baseline, which is too low relative to what is expected to occur. Despite Yin's call for consistency, supporters of temporary tax measures will often flip over to an expectations baseline to estimate the cost of continuing the tax cuts and try to ignore the official baseline for further extensions. To reduce the gamesmanship, the official baseline could simply be made into something closer to an expectations baseline to begin with. This would mean that the initial expected cost of the tax cuts would not be underestimated. There would be no opportunity to later switch (inconsistently) to an expectations baseline, and further extensions would be accounted for properly.

Table 3 suggests ways to reform that baseline. (209) In particular, I recommend that any new provisions added to the tax code or to authorizing legislation be treated as permanent in estimating the cost of that legislation if the legislation, on the whole, adds to the deficit. (210) This treatment, assuming automatic extension, could then be turned off if Congress explicitly designates the provision as temporary in the law. This approach would require Congress to take a step beyond simply writing an expiration into the law for a provision to be treated as temporary in the baseline, and would require Congress to explicitly say that the intent is for the provision to be temporary. To give this somewhat greater teeth, I recommend creating a new budget act point of order--requiring sixty votes in the Senate to override--against the extension of any provision so that it continues in effect in the year after expiration if the provision had previously been designated as temporary. (211) The reform is not as radical as it may seem. As I have described, the official baseline already deviates from true current law in a number of ways--and already assumes that a number of major mandatory programs are permanent despite being temporary in law. (212) So, this proposed reform does not break new ground in that sense. It is simply meant to better align the official baseline with actual expectations, and, thus, enhance budget enforcement. It would also improve the official baseline for other purposes, like holding policymakers accountable for the likely effect of their actions, both when temporary measures are enacted and when they are continued.

This, of course, is not a panacea. Policymakers can find new ways to game the system or override the system entirely. Still, this reform seems likely to improve budget enforcement on the whole, and allow the estimates to be better used for other purposes. This reform is also one that policymakers on both sides of the aisle could potentially accept as one that better binds their hands going forward.

D. Clarifying Long-Term Baselines

Although one of the more powerful arguments for the existence of baselines is the ability to engage in long-term planning, it turns out that very long-term planning (as in over a multi-decade period) raises its own unique set of challenges and misconceptions. These long-term projections are often motivated by an understandable desire to evaluate whether the country is on an unsustainable fiscal course, given fiscal pressures such as the retirement of the Baby Boomers and rising health care costs. (213) However, as I have discussed, the very concept of projecting an unsustainable fiscal course is conceptually challenging. (214) This has led to considerable confusion among policymakers and academics, as well as exaggeration of the fiscal challenges we face. To be clear, the fiscal future is not necessarily rosy; there are probably problems to be addressed. But the types of problems and their degree have often been misidentified and exaggerated, in large part because of confusion about the baseline.

1. How the Long-Term Fiscal Challenge Has Been Exaggerated

The long-term fiscal challenge has been misidentified and exaggerated in at least two ways. First, the nature of that challenge is often misconstrued, as analysts and policymakers describe projections of unsustainable fiscal trends as if they were depictions of what we expect to occur--when the projections instead are quantifying uncertainty, not the expected course. Second, the assumptions underlying a number of these projections make little sense and overstate the degree of uncertainty.

To begin, and focusing on how uncertainty gets confused for expectations, I return to a theme explored earlier: the difference between expectations and policy uncertainty baselines. (215) To repeat, the expectations baseline reflects a best guess of the policy course we will experience. (216) If what we are focused on are deficits and debt, then this means taking a best guess at the path of these as time goes on. And, importantly, an expectations baseline would generally abide by the government's intertemporal budget constraint, with the net present value of income approaching the net present value of liabilities (over the infinite horizon). (217) By contrast, an uncertainty baseline roughly reflects the degree of uncertainty as to how the government will in fact meet that intertemporal budget constraint. (218)

Many, if not most, long-term projections--at least those people pay attention to--are uncertainty baselines; (219) yet, they are frequently described as if they reflect expectations. Take the introduction to the Bowles-Simpson Commission report. The Commission paints a grim picture:

   Debt held by the public will outstrip the entire American
   economy, growing to as much as 185 percent of GDP by 2035....
   Federal debt this high is unsustainable.... By making it more
   expensive for entrepreneurs and businesses to raise capital,
   innovate, and create jobs, rising debt could reduce per-capita
   GDP, each American's share of the nation's economy, by as
   much as 15 percent by 2035. (220)

Most readers would probably be left under the impression that, as of now, we expect a debt level of 185 percent of GDP in 2035 (and rising), with very large negative effects on the economy as a result. Yet the actual expectation is probably different from that. Policymakers are likely to take action before the federal debt reaches 185 percent of GDP.

In confusing uncertainty and expectations baselines, the long-term fiscal problem is misidentified. The implications of taking on vast amounts of debt--thus reducing incomes considerably for future generations and risking a fiscal crisis--is very different from the cost of uncertainty of how we will avoid that fate, even if we are relatively confident that we will. To be clear, neither outcome--high debt or high uncertainty--is good for the country. However, it is a problem of a different magnitude if we really believed that the debt were on track to be 185 percent of GDP as of 2035 (and rising rapidly from there) as opposed to simply being uncertain how that fate will be avoided. Baselines like the one being used by the Bowles-Simpson Commission are roughly measuring the uncertainty of how our long-term fiscal situation will be resolved. They are not actually trying to make a best guess at the track of federal fiscal policy.

Turning to the assumptions underlying those projections: the degree of uncertainty implied by these projections has been exaggerated because some of the assumptions make little sense, and perhaps can be attributed to the fundamental confusion over what these projections are meant to capture. Take CBO's alternative fiscal scenario in its 2012 long-term report, (221) a version of which was underlying the figures cited by the Bowles-Simpson Commission. (222) This is a scenario in which CBO does not follow its traditional baseline but instead offers what is meant to be a more realistic take on the budget outlook. Or, in the words of CBO, "[m]any budget analysts believe that the extended alternative fiscal scenario is more representative of the fiscal policies that are now (or have recently been) in effect than is the extended baseline scenario." (223) In 2012, this CBO projection painted a very dark picture, with a seventy-five-year fiscal shortfall equivalent to 8.7 percent of GDP (224)--meaning that some combination of tax increases and spending cuts equivalent to $1.3 trillion per year (in today's terms) would be necessary to close the long-term shortfall. Even properly interpreted as an uncertainty baseline, that is quite a bit of uncertainty in terms of the timing and composition of deficit reduction.

However, even if correctly framed as measuring policy uncertainty, this CBO scenario exaggerated the extent of the problem because of technical assumptions that did not align well with the unstated conceptual underpinning. I have taken issue with this baseline elsewhere (225) and others followed suit. (226) Most problematically, CBO assumed a return to historical spending levels as a share of the economy for annually appropriated spending--which is much higher than the track to which policymakers have committed over the current decade. Less problematically, CBO assumed that revenues are frozen as a share of the economy after the end of the ten-year budget window, despite the fact that revenues would continue rising as a share of the economy under current law. Both assumptions--and perhaps especially the first--created something like a treadmill for policymakers. The more policymakers committed to reducing the deficit, the more CBO doubted that the deficit reduction would continue.

Perhaps one could defend the CBO move as fitting into the policy uncertainty framework, but the justifications are relatively weak. The argument is that it is uncertain whether policymakers will maintain their commitment to historically low spending (as a share of the economy) on annually appropriated programs. And it is also uncertain whether policymakers will allow revenues to rise gradually as a share of the economy. However, it is a thin justification since it is inevitable that we will have some combination of higher revenues and lower annually-appropriated spending as a share of the economy than we have had in the past in order to address the rising costs of the major entitlement programs. There seems to be relatively little policymakers can do to allay that uncertainty as of now, to the extent bipartisan agreements (such as those reducing annually appropriated spending) fail to do so.

By contrast, in its 2013 report CBO dramatically deemphasized its alternative fiscal scenario. (227) It instead focused on a scenario that, among other things, assumed that annually appropriated funding remained at historically low levels and that revenues continued to grow as a share of the economy after the end of the decade. It reported the seventy-five-year fiscal shortfall as equal to 1.7 percent of GDP--far short of the 8.7 percent of GDP it had previously highlighted. (228) The change in emphasis was done with relatively little explanation, (229) but it represented a needed correction after years of emphasizing a scenario that simply was not particularly meaningful and had a significant effect on the public discourse. The new trajectory could be more justifiable as representing policy uncertainty--uncertainty with regard to how to resolve the fiscal shortfall and to which policymakers have some immediate power to address. And the correction may not have been necessary if CBO had rigorously considered the concepts underlying its report in the years before.

The bottom line is this: first, just because we are uncertain about how we will resolve our fiscal dilemma does not mean that we do not expect to do so. Second, fundamental confusion about the underlying goal of these projections has sometimes considerably exaggerated the degree of uncertainty. The consequences have been real, and have generated faulty information for policymakers. For example, this puts long-term deficits higher on the agenda than they should have been, because if policymakers did not pay much attention to the area now, the fiscal course would probably not have been as bad as it appeared in these projections. This faulty information also attributes a fiscal course to policymakers that is not reflective of what they have done. And it further suggests that more radical action is necessary than is actually the case to resolve the uncertainty.

2. Confusion Compounds: The Curious Case of Generational Accounting

It is important to emphasize the degree to which policymakers, analysts, and academics alike are confused about long-term baselines--often in ways that exaggerate, or at least misstate, our fiscal dilemma. The curious case of "generational accounting" illustrates this in another way. A group of thoughtful and leading public finance scholars--Alan Auerbach, Jagadeesh Gokhale, and Laurence Kotlikoff--some twenty years ago introduced generational accounting as a way to gauge the effects of fiscal policy across generations. (230) Although it has not been widely adopted, there has been a recent push to formalize this method as part of the budget process, including new legislation introduced in both houses, (231) a lobbying campaign by major deficit hawk organizations, (232) and signed support by seventeen winners of the Nobel Prize in Economics. (233) Yet, this method represents an innovation in confusion. It exaggerates our long-term fiscal challenge by confusing two very different types of baselines: expectations baselines and uncertainty baselines. This results in incoherent fiscal measures that show future generations facing much higher tax burdens than they likely will. Generational accounting should not become an official budget metric and independent analysts should not employ it--at least using the current methodology.

To be clear, generational accounting is a potentially helpful device as a theoretical matter. It is a method for estimating the relative net tax burdens that different generations of taxpayers will face on our current fiscal course. (234) By projecting the net tax burden (taxes paid less transfers received), it estimates the fiscal course in terms that could be quite useful as a normative matter. This accounting can, for instance, show how much, as a share of income, each generation must pay to the government. There is some question as to what is the fair pattern of such tax rates, but the point is that this seems relevant to our assessment of whether we are on a good course or not.

Generational accounting, however, is coherent only if it uses an expectations baseline. The basis of the accounting system is the idea that the government will stay within its budget constraint, with it then answering how it will distribute the burden of doing so. (235) So, unlike many other long-term fiscal metrics (including the fiscal gap measure discussed before, also introduced by Auerbach), (236) this baseline is not a measure of the degree of uncertainty involved in how the federal government's budget constraint will be met. Rather, it evaluates how our meeting that long-term budget constraint affects different generations.

But generational accounting as normally operationalized--and as it would be operationalized if adopted officially--uses an incoherent baseline. It essentially follows something akin to the policy uncertainty baseline for all living generations (assuming these generations pay relatively little in taxes relative to the benefits they receive), and then presumes that as yet unborn generations (or sometimes unborn generations plus those currently children) will completely pay off the full, resulting fiscal burden. This implies that we will run large deficits up front, to be entirely bailed out in the future. The result is not surprising, with unborn generations paying much higher tax rates than any living generation, raising rather large concerns about the equity of our fiscal policies. And yet it is a scenario that almost certainly will not occur. Current generations can expect to pay higher net taxes than the policy uncertainty baseline suggests.

To put this differently, it would make just as much sense to assume that the entire burden of the long-term fiscal shortfall falls on living generations as it does to assume that it falls on those not yet living. In that case, the future generations would appear to make out rather well. That, too, is not what we expect to occur, and yet, the logic is basically indistinguishable from that driving the analysis in generational accounting as now done, which simply posits that the burden will fall entirely on those not yet born.

Auerbach, Kotlikoff, and Gokhale have offered responses to a similar critique, (237) but their defense still suggests a misunderstanding of the kind of baseline that generational accounting requires in order to be coherent. Auerbach, Kotlikoff, and Gokhale suggest that "in asking what would happen if policy were not to change, we are illustrating the inevitability of such policy changes, and offering an analytical framework within which the fiscal policy implications and intergenerational impacts of any changes can be examined." (238) This response nicely defends metrics gauging what I call the uncertainty baseline, trying to measure the size of the inevitable fiscal adjustments and their effects. But it does not justify mixing an uncertainty baseline with an expectations baseline and creating a scenario--unborn generations facing all fiscal consolidation (or my hypothetical alternative of current generations bearing all of the burden)--that neither reflects what we expect to occur nor the degree of uncertainty as to how to achieve fiscal balance.

In short, while the basic idea of generational accounting is valid, it has gone astray in application, as its users have employed an uncertainty baseline for living generations in which an expectations baseline is needed. This error has produced measures of net taxes for different generations that are largely meaningless and certainly overstate the degree to which unborn generations will pay more than living ones under any reasonable projection of the current budget.

And, just like CBO's now abandoned "alternative fiscal scenario" projections, generational accounting--if more widely adopted--could misinform the national debate. Among other things, this could lead to the long-term fiscal challenge getting more attention on the national agenda than it deserves, and it could attribute an intergenerationally unfair distribution of the fiscal burden to current and past policymakers when that is neither expected nor intended.


This Article will not end abuse and confusion surrounding budget baselines. After all, baseline controversies are often featured in heated and politicized budget fights, in which actors will try to manipulate budget metrics to help achieve their desired outcomes. Moreover, the concepts themselves can be deeply challenging. For instance, it is difficult to define what it means to project and measure the degree to which budget deficits are unsustainable.

Still, despite these challenges, this Article has shown that reducing the manipulation and allaying the confusion is possible. Baselines are not inherently arbitrary or merely creatures of irrational thought. Instead, they have important and constructive purposes for which some baselines are better than others. Moreover, the official budget baseline can be improved to reduce gamesmanship and improve political accountability, among other things.

In sum, this Article provides a framework for understanding what we are doing when we look into the future and ask what course the budget laws are on. It provides a framework for defining our fiscal future.

(1.) Policy Basics: The 2001 and 2003 Tax Cuts, Ctr. ON BUDGET & POL'Y PRIORITIES (Mar. 5,2009), [http://].

(2.) For instance, as an opening offer, the House Republicans passed the Job Protection and Recession Prevention Act of 2012, H.R. 8, 112th Cong. [section] 2 (as passed by House, Aug. 1, 2012). The bill continued almost all the expiring tax cuts for another year (although it did leave out some newly enacted expansions of refundable tax credits that benefited low income Americans). Id.

(3.) President Obama's administration proposed eliminating about 30 percent of the 2001 and 2003 tax cuts. See infra note 67.

(4.) See Cong. Budget Office [CBO], Economic Effects of Reducing the Fiscal Restraint That Is Scheduled to Occur in 2013, at 6 tbl.2 (2012) [hereinafter CBO, ECONOMIC Effects 2013] (showing the economy shrinking in the first half of 2013 if the country went over the fiscal cliff, including both the effects of the expiring tax cuts and the sequester on the spending side).

(5.) The fiscal cliff broke through to mass culture sufficiently enough that "The Simpsons" posted a short segment in which Mr. Burns explains the fiscal cliff. Animation Domination, The Simpsons: Fiscal Cliff, YOUTUBE (Dec. 4,2012), T4PluO [].

(6.) Baseline Definition, MERRIAM-WEBSTER, baseline [] (last visited Sept. 27, 2015). This is actually the fifth definition offered by Merriam-Webster. The first three are not directly relevant to this Article (though an article about the tennis baseline might be of interest to a broader audience). The fourth definition is a possible alternative. It defines baseline as "a usually initial set of critical observations or data used for comparison or a control." Id. However, as I employ the term baseline, it is not simply a random point of comparison but, in some meaningful sense, the starting point against which to compare legal change.

(7.) For a description of the baseline rules, see infra note 158 and accompanying text.

(8.) See infra notes 88-90 and accompanying text for a description of how expiration, in combination with the baseline rules, eased passage of the tax cuts.

(9.) See CBO, COST: ESTIMATE OF THE BUDGETARY EFFECTS OF H.R. 8, THE AMERICAN Taxpayer Relief Act of 2012 (2013).

(10.) See infra Part IV. C.

(11.) CBO, The 2012 Long-Term Budget Outlook 2 (2012) [hereinafter CBO, 2012 Long-Term Budget Outlook].

(12.) See id. In fact, this scenario was prominently shown on the cover of the report (along with the "extended baseline scenario"). Id. at 1.

(13.) See Ed O'Keefe, What Is the Simpson-Bowles Commission? (and Why Does it Still Matter?), WASH. POST (Nov. 27,2012), 2012/11/27/what-is-the-simpson-bowles-commission-and-why-does-it-still-matter/ [http://].

(14.) David Kamin, Are We There Yet?: On a Path to Closing America's Long-Run Deficit, 137 Tax Notes 53,59-60 (2012).

(15.) See CBO, THE 2013 LONG-TERM Budget Outlook 2 (2013) [hereinafter CBO, 2013 LONG-TERM Budget Outlook], To be clear, the 2013 report also included the same dire "alternative fiscal scenario" as the 2012 report. See id. at 4. It was, however, explicitly deemphasized. See, e.g., id. at 64 (describing how in its revenue projections the new report focused primarily on the "extended baseline" rather than the "alternative fiscal scenario").

(16.) Id.

(17.) While CBO explains that its move to deemphasize the alternative fiscal scenario resulted from congressional action, this in fact does not account for most of the difference in the projections. In particular, Congress did make permanent most of the 2001 and 2003 tax cuts between the 2012 and 2013 projections. See American Taxpayer Relief Act of 2012, H.R. 8, 112th Cong. [section][section] 101-102. According to CBO, Congress's action meant that CBO no longer had to rely on its "alternative fiscal scenario" to paint a realistic picture of the federal budget's future course, or at least that was the implication. See CBO, 2013 LONG-TERM BUDGET Outlook, supra note 15, at 64. The problem with this explanation is that the projection CBO emphasizes in its 2013 report hugely differs from its 2012 alternative fiscal scenario. Very little of this difference can be explained by congressional action on the tax cuts. The 2012 alternative fiscal scenario had assumed extension of all the 2001 and 2003 tax cuts. See CBO, 2012 LONG-TERM BUDGET OUTLOOK, supra note 11, at 18. Congress had, in fact, made 80 percent of them permanent. Chye-Ching Huang, Budget Deal Makes Permanent 82 Percent of President Bush's Tax Cuts, CTR. ON BUDGET & POL'Y PRIORITIES (2013), []. That was the main legislative development. The huge swing in the projections is instead largely explained by assumptions about growth in revenues and discretionary spending after the end of the decade--changes that cannot be reasonably explained by legislative developments in the ensuing year. See infra Part IV.D.1.

(18.) See, e.g., DANIEL N. SHAVIRO, TAXES, SPENDING, AND THE U.S. GOVERNMENT'S MARCH TOWARD Bankruptcy 159 (2007) ("The choice of a baseline is inevitably arbitrary, or at least subject to differing interpretations.").

(19.) See, e.g., W. Mark Crain & Nicole Verrier Crain, Fiscal Consequences of Budget Baselines, 67 J. PUB. ECON. 421, 423-24 (1998) (explaining that baselines matter because of the "loss aversion" bias); see also David Gamage, Preventing State Budget Crises: Managing the Fiscal Volatility Problem, 98 CALIF. L. Rev. 749, 758-60 (2010) (arguing that these irrational mechanisms are one of the key ways that baselines affect decision making).

(20.) Congressional Budget and Impoundment Control Act of 1974, Pub. L. No. 93-344, 88 Stat. 297. For another history of budget baselines (up until the mid-1990s), see Timothy J. Muris, The Uses and Abuses of Budget Baselines, in THE BUDGET PUZZLE: UNDERSTANDING FEDERAL Spending 42 (John F. Cogan et al. eds., 1994). That history provides an especially good overview of the early development of the "current services" baseline, including legislative history and disagreements on methodology. Id. Muris is a strong critic of baselines as currently employed, and I address and summarize a number of his arguments. See infra Part IV.B.

(21.) Congressional Budget and Impoundment Control Act [section] 605. The idea for requiring a current services baseline was first proposed by Senator Ed Muskie, reflecting back on his time as governor of Maine where they used such a baseline to evaluate program changes. The Budget Puzzle, supra note 20, at 125.

(22.) Congressional Budget and Impoundment Control Act [section] 201.

(23.) Id. [section] 308(c).

(24.) See CBO, Statement of Alice M. Rivlin Before the Joint Economic Committee 1 (Dec. 3,1975) ("The baseline that most often has been used is last year's budget level."); see also Muris, supra note 20, at 42 ("Throughout most of U.S. history, the base used to compare alternative budget proposals was either the levels in the previous year's budget or those proposed by the President.").

(25.) Muris, supra note 20, at 42.

(26.) See, e.g., OFFICE OF MGMT. & BUDGET [OMB], Exec. Office OF THE PRESIDENT, Budget of the United States Government, Fiscal Year 1970, at 61 (1969) (identifying the effects of legislated and proposed changes in tax rates on receipts, separate from the effects of such factors as economic growth if current law were kept in place).

(27.) See CBO, supra note 24, at 1-4 (describing why a previous year's funding level is not relevant for analyzing many programs' future funding levels).

(28.) Id. at 12.

(29.) Id. at 13.

(30.) Cogan and co-authors describe how three different concepts were seen as potentially consistent with the broad language of the 1974 Act, which required programs to be held at "the same level as the current year without a change in policy." See THE BUDGET PUZZLE, supra note 20, at 125-26 (citation omitted). One concept was something close to a true "current services." Id. at 126. For all federal programs, this meant adjusting for inflation based on individual programmatic needs. Id. In addition, phase-ins and expirations--both with regard to taxes and spending--were excluded, so that law was continued consistent with the current year, regardless of what was written on the books. Id. at 128. A second concept was "current policy." Id. at 126. Under this concept, a uniform inflation adjustment was used for all "discretionary" programs--those which were annually appropriated--irrespective of individual programmatic needs. Id. For mandatory programs (like Social Security), the adjustment was made based on past program performance. Id. Phase-ins and expirations were assumed to occur as actually scheduled. Id. at 128. Finally, under a "current law" concept, no inflation adjustment was used at all for projecting discretionary programs, and revenues and mandatory programs followed what was actually on the books. Id.

Although it is possible to take issue with some of this typology as laid out by Cogan and his co-authors, there was undeniably considerable conceptual confusion as to exactly how to implement the baseline under the 1974 Act. Many of the initial projections from CBO and OMB mixed and matched these concepts, and neither budget office was completely consistent over time. For an example of such inconsistency with CBO, compare CBO, FIVE-YEAR BUDGET PROJECTIONS: FISCAL YEARS 1977-81, at 2-3 (1976) (assuming that discretionary appropriations continue and are increased with inflation over time in the baseline projection), with CBO, Five-year Budget Projections: Fiscal Years 1981-1985, at 24-25 (1980) (focusing on a "current law" projection in which discretionary programs are assumed to continue at a nominal freeze, and providing a scenario with inflation adjustments as an alternative). For an example of such inconsistency with OMB, compare OMB, THE BUDGET OF THE UNITED States Government, Fiscal Year 1980, at 14 (1979) (not adjusting all programs for inflation in the current services projections), with OMB, The BUDGET OF THE UNITED STATES GOVERNMENT, Fiscal Year 1981, at 3-4 (1980) (apparently adjusting all programs for the effects of inflation--or what is here called "rising program costs"--in the current services projection).

(31.) See Balanced Budget and Emergency Deficit Control Act of 1985, Pub. L. No. 99-177, [section] 251(a)(6), 99 Stat. 1037, 1067-68 (setting out the assumptions to be used in calculating the "budget base"); Budget Enforcement Act of 1990, Pub. L. No. 101-508, [section] 257,104 Stat. 1388-591 (establishing the baseline and setting out the assumptions to be used). In these two laws, Congress established the baseline (or, as the 1985 law called it, the "budget base") to help facilitate the new budget enforcement rules. The first law set out deficit targets to be adhered to. See Balanced Budget and Emergency Deficit Control Act [section] 251(a)(6). The second--overriding the first--established a new "pay-as-you-go" (PAYGO) rule that required any new tax cuts or mandatory spending increases to be fully paid for. See Budget Enforecement Act [section] 257. Enforcing these rules required a baseline for two reasons. First, a baseline was needed to determine whether the budget rules had been breached, as the first rule required projecting deficits for the upcoming fiscal year and the second required measuring the magnitude of tax cuts or mandatory spending increases relative to a baseline. Second, a violation of the rules would trigger a sequester (automatic spending cuts on eligible programs), and a baseline was needed to determine what share of the cuts would fall on a given program.

(32.) See, e.g., CBO, The Economic and Budget Outlook: Fiscal Years 1992-1996, at 60-62 (1991) (describing how CBO conformed its baseline to that adopted in the 1990 law, with the exception that it would show discretionary levels adjusted for inflation, as under that law, and assume the recently enacted discretionary caps were followed); OMB, BUDGET of the United States Government, Fiscal Year 1993, at 13 app. two (1992) (describing the assumptions underlying OMB's "current services" baseline, which generally adhered to the baseline described in the 1990 law with the exception of discretionary funding levels that were assumed to follow the discretionary caps).

(33.) See, e.g., OMB, Exec. OFFICE OF THE PRESIDENT, BUDGET OF THE UNITED STATES Government, Fiscal Year 2015: Analytical Perspectives 381 (2014) [hereinafter OMB, FISCAL Year 2015] (describing how, throughout the 1990s, the baseline was calculated according to the rules set out in the Budget Enforcement Act, and detailing adjustments to that baseline that OMB now employs in projecting current services).

(34.) Budget Enforcement Act of 1990 [section] 257.

(35.) Id. This rule changed in the Balanced Budget Act of 1997. See Balanced Budget Act of 1997, Pub. L. No. 105-33, [section] 10209(a)(1)(A)(i), 111 Stat. 251, 710. The Act gave discretion to the budget committees and OMB to decide how to treat temporary programs in the baseline with annual spending of over $50 million per year, and tasked the institutions with consulting each other. Id. The rule they agreed to is to assume that these programs actually expire if they are explicitly stated to be temporary; otherwise, such programs are assumed to continue in the baseline. For programs enacted before 1997, the original rule (assuming extension) continues to apply. See OMB, FISCAL YEAR 2015, supra note 33, at 382 n.2 (explaining treatment of temporary mandatory programs enacted after 1997).

(36.) Budget Enforcement Act of 1990 [section] 257.

(37.) See CBO, The Economic and Budget Outlook: Fiscal Years 1994-1998, at 35-39 (1993) (showing budget figures projected for an additional five years beyond the then-traditional five-year window). By 1996, CBO had completed the switch to the now-standard ten-year budget window for its projections. See generally CBO, THE ECONOMIC AND BUDGET OUTLOOK: Fiscal Years 1997-2006 (1996) (using a ten-year budget window for all of the key budget projections).

(38.) By the end of the Clinton Administration, OMB was using a ten-year budget window. See OMB, Exec. Office of the President, Budget of the United States Government, FISCAL YEAR 2001, at 391-422 (using a ten-year window for budget projections). The Bush Administration then switched to a five-year window in its second budget. See OMB, EXEC. Office of the President, Budget of the United States Government, Fiscal Year 2003, at 395-417 (using a five-year window). Finally, the Obama Administration switched back to a ten-year window in its first budget. See OMB, EXEC. OFFICE OF THE PRESIDENT, BUDGET OF the United States Government, Fiscal Year 2010: Updated Summary Tables 114 (using a ten-year window for budget projections).

(39.) Economic Growth and Tax Relief Reconciliation Act of 2001, Pub. L. No. 107-16, 115 Stat. 38; Jobs and Growth Tax Relief Reconciliation Act of 2003, Pub. L. No. 108-27,117 Stat. 752.

(40.) See William G. Gale & Peter R. Orszag, Sunsets in the Tax Code, 99 TAX NOTES 1553, 1557-58 (2003) (describing how the tax cuts were made temporary as an accounting maneuver to make them appear less expensive and evade budget rules, even as supporters intended to make them permanent).

(41.) See William G. Gale, Opinion, Five Myths About the Bush Tax Cuts, WASH. POST (Aug. 1,2010), 73002671.html [] (noting that the revenue lost because of the Bush tax cuts equals "nearly 2 percent of GDP").

(42.) Gale & Orszag, supra note 40, at 1557 ("Policymakers supporting sunsets have every intention of trying to make the policies permanent.").

(43.) Full disclosure: I joined said cottage industry at the beginning of my career while at the Center on Budget and Policy Priorities. See, e.g., DAVID KAMIN & RICHARD KOGAN, CTR. on Budget & pol'y priorities, deficit Picture Grimmer Than CBO's March Projections Suggest (2004) (detailing deficit projection based on likely policies).

(44.) See, e.g., William G. Gale & Peter R. Orszag, The Budget Outlook: Baseline and Adjusted Projections, 100 TAX Notes 1595 (2003) (adjusting the CBO baseline to take into account likely policies).

(45.) The coalition included the Committee for Economic Development, the Concord Coalition, and the Center on Budget and Policy Priorities. See generally COMM. FOR ECON. Dev. et al., Mid-Term and Long-Term Deficit Projections (2003).

(46.) See, e.g., Editorial, Don't Count on It, WASH. POST (Aug. 17, 2005), http://www. [http://]; Edmund L. Andrews, Leap in the Deficit Instead of Fall Is Seen for U.S., N.Y. Times (Aug. 27,2003), [] (emphasizing an alternative scenario to the official baseline in which the tax cuts are extended, among other additional costs).

(47.) OMB, EXEC. OFFICE OFTHE PRESIDENT, BUDGET OF THE UNITED STATES GOVERNMENT, Fiscal Year 2005: Analytical Perspectives 358 (2004) (describing how the Administration adopted a current services baseline that extended the Bush tax cuts, which "were clearly not intended to be temporary," and criticizing the official baseline, which OMB described as appearing identical to a current services baseline until that point, for having serious technical flaws). For a description of how tax-cut supporters effectively manipulated the baseline rules, see infra Part IV.C.

(48.) Sometimes, the Obama Administration assumed extension of nearly all of the Bush tax cuts in the baseline. See, e.g., OMB, EXEC. OFFICE OF THE PRESIDENT, BUDGET OF THE United States Government, Fiscal Year 2010: Analytical Perspectives 375 (2009) (describing how the Administration's current services baselines fully extended the 2001 and 2003 tax cuts, except for estate tax repeal for which the Administration assumed extension at the 2009 parameters). At other times, the Administration used a baseline that assumed expiration of the "high income" tax cuts and extension of only the "middle class" Bush tax cuts, as opposed to a baseline that assumed extension of both. See, e.g., OMB, Exec. OFFICE OF THE PRESIDENT, BUDGET OF THE UNITED STATES GOVERNMENT, FISCAL YEAR 2012: ANALYTICAL PERSPECTIVES 420 (2011) (adopting a baseline extending only the middle class Bush tax cuts, and notably not explaining why the baseline had shifted as compared to earlier budgets).

(49.) CBO first produced this table with its budget projections released in 2003. See CBO, The Budget and Economic Outlook: An Update, at 12 tbl.1-6 (2003) (showing budget outcomes under alternative baseline assumptions like extension of the Bush tax cuts). Before this, CBO had discussed the effects of some of these alternatives--such as extension of the temporary tax cuts--but not in this more comprehensive fashion. See, e.g., CBO, THE BUDGET and Economic Outlook: Fiscal Years 2003-2012, at 4 (2002) (showing the effects of extending temporary tax cuts).

(50.) CBO started by showing a scenario in which certain policies--the most expensive of which were the tax cuts--were continued. See CBO, PUB. No. 4236, THE BUDGET AND Economic Outlook: Fiscal Years 2011 to 2021, at 16 tbl.1-4 (2011) [hereinafter CBO, FISCAL YEARS 2011 TO 2021]. CBO later began emphasizing what it called the "alternative fiscal scenario," which also reflected a scenario in which the tax cuts were continued. See CBO, Pub. No. 4474, The Budget and Economic Outlook: Fiscal Years 2012 to 2022, at 22 tbl.1-7 (2012).

(51.) See infra notes 189-97 and accompanying text.

(52.) See, e.g., Alan J. Auerbach et al., Generational Accounting: A Meaningful Way to Evaluate Fiscal Policy, 8 J. ECON. PERSP. 73, 75-77 (1994) [hereinafter Auerbach et al., Generational Accounting] (explaining generational accounting); Alan J. Auerbach, The U.S. Fiscal Problem: Where We Are, How We Got Here, and Where We're Going, 9 NBER MACRO-ECONOMICS ANN. 141,168-72 (1994) [hereinafter Auerbach, U.S. Fiscal Problem] (introducing fiscal gap analysis). Although among the most prominent, Alan Auerbach and co-authors were not the first economists to focus on projected outcomes and develop comprehensive frameworks for evaluating the fiscal status of the government taking into account future cash flows. For earlier work in this vein, see, for example, Willem H. Buiter, Measurement of the Public Sector Deficit and Its Implications for Policy Evaluation and Design, 30 INT'L Monetary Fund Staff Papers 306,306-46 (1982).

(53.) CBO first introduced such long-term analysis in its annual Budget and Economic Outlook in 1996. See CBO, BUDGET AND ECONOMIC OUTLOOK: FISCAL YEARS 1997-2006, at 79 (1996). That report included a chapter projecting budget outcomes through 2050. Id. at 69-95.

(54.) See OMB, FISCAL YEAR 2015, supra note 33, at 23-32.

(55.) For instance, this was the assumption used until recently by Alan Auerbach and William Gale--perhaps the leading sources for long-term budget projections outside the government. See, e.g., Alan J. Auerbach & William G. Gale, The Federal Budget Outlook: No News Is Bad News, 136 Tax NOTES 1597,1602 (2012) ("We assume that after 2022, most categories of spending and revenues remain constant as a share of GDP."). It is also the method employed in CBO's long-term alternative fiscal scenario, which was heavily emphasized in past reports. See CBO, 2012 Long-Term Budget Outlook, supra note 11, at 9 tbl. 1-1. Until recently, OMB also assumed that revenues stayed constant as a share of the economy. See OMB, Exec. Office of the President, Fiscal Year 2013 Budget of the U.S. Government: Analytical Perspectives 60 (2012).

(56.) For instance, Alan Auerbach and Bill Gale now offer this additional revenue as alternative to their base case. See, e.g., Alan J. Auerbach & William G. Gale, Forgotten but Not Gone: The Long-Term Fiscal Imbalance, 23 tbl. 1, research/files/papers/2014/03/long-term-fiscal-imbalance-gale/longterm_fiscal_imbalance_ gale.pdf []. In its long-term projections, CBO now emphasizes a scenario that assumes this revenue growth occurs. See CBO, 2013 LONG-TERM BUDGET OUTLOOK, supra note 15, at 68 tbl.5-1 (decomposing the increase in revenues over time among its sources). And OMB has begun to incorporate the additional revenue into its own projections, substantially improving the fiscal outlook. See OMB, FISCAL YEAR 2015, supra note 33, at 25 ("The projections take into account the automatic growth in revenues that would result under a continuation of 2015 Budget policies.").

(57.) Auerbach & Gale, supra note 56, at 23 tbl. 1.

(58.) For examples of how these long-term projections have been employed, see infra Parts III. E, IV.D.

(59.) See supra notes 18-19.

(60.) See Bryan D. Jones & Frank R. Baumgartner, The Politics of Attention: How Government Prioritizes Problems 4-5 (2005).

(61.) Id. at 5.

(62.) See id. at 247-48 (explaining how, given Congress's limited capacity to focus on particular policy issues, agenda setting is of primary importance).

(63.) See supra note 41.

(64.) See CBO, ECONOMIC EFFECTS 2013, supra note 4, at 3-10 (projecting economic outcomes under its baseline in which the country went over the fiscal cliff, and comparing those outcomes to a world in which that was avoided).

(65.) The problem of starting from a true tabula rasa is further discussed infra Part IV.A. There is a theory of budgeting called zero-base budgeting, which attempts to push budget decisions to be independent of what came before, as if every program were new. See infra Part IV. This attempt to fully abandon baselines is inherently problematic given the information that is lost and has been met with limited success as a result. See id.

(66.) Jari Stehn et al., Fiscal Cliff Scenarios: The Not So Good, the Bad, and the Ugly, U.S. ECON. ANALYST 1-3 (Oct. 5,2012), [].

(67.) In the 2013 Mid-Session Review, OMB reported that allowing the high-income tax cuts to expire, as the Administration proposed, would raise $952 billion from 2013-2022. See OMB, Exec. Office of the President, Fiscal Year 2013 Budget of the U.S. Government 206 tbl.S-2 (2012) [hereinafter OMB, FISCAL YEAR 2013], At the same time, OMB stated that the direct cost of continuing all the temporary tax cuts, including the estate tax at its then parameters, was $2.6 trillion. Id. at 216 tbl.S-8. Extending these tax cuts also made fixing the Alternative Minimum Tax (AMT) more expensive. OMB reported that extending the AMT patch would have cost $1.9 trillion. Id. Of this amount, about half was attributable to the extension of the other tax cuts. See CBO, PUB. NO. 4474, THE BUDGET AND ECONOMIC OUTLOOK: Fiscal Years 2012 TO 2022, at 19 tbl.1-6 (2012) (showing that the interaction effect between the AMT patch and extension of the other tax cuts amounted to about $920 billion from 2013-2022). Adding this together with the direct costs of extending the tax cuts suggests that the total cost of extending the tax cuts was about $3.5 trillion. The projected savings of $952 billion composes somewhat less than 30 percent of that amount.

(68.) See, e.g., Job Protection and Recession Prevention Act of 2012, H.R. 8, 112th Cong. [section] 2 (as passed by House, Aug. 1, 2012) (continuing all of the 2001 and 2003 tax cuts for another year, but not the refundable tax credits expanded in President Obama's stimulus package).

(69.) As Edmund Burke wrote:

   We must all obey the great law of change. It is the most powerful
   law of nature, and the means perhaps of its conservation. All we
   can do, and that human wisdom can do, is to provide that the change
   shall proceed by insensible degrees. This has all the benefits
   which may be in change, without any of the inconveniences of

4 Edmund Burke, Letter to Sir Hercules Langrishe, on the Subject of the Roman Catholics of Ireland, in The WORKS OF THE Right HONORABLE EDMUND BURKE 241, 301 (1866).

(70.) Charles E. Lindblom, The Science of "Muddling Through," 19 Pub. Admin. Rev. 79, 81 (1959).

(71.) The modern political science literature tends to describe the political system as moving in fits and starts--"a pattern of extreme stability and occasional punctuations, rather than either smooth adjustment processes or endless gridlock." See JONES & BAUMGARTNER, supra note 60, at 5.

(72.) As the political scientists Jones and Baumgartner note in revising the theory of incrementalism: "Incrementalism was not wrong; indeed we show that it was probably understated by its proponents. But it is far from the full story. It must be combined with a theory of punctuated equilibrium to reach its full potential." Id.

(73.) Andreas Schedler, Conceptualizing Accountability, in THE SELF-RESTRAINING STATE: Power and Accountability in New Democracies 13, 14 (Andreas Schedler et al. eds., 1999).

(74.) Id. at 17.

(75.) Id. at 17, 19.

(76.) To give an extreme (if hopefully evocative) example: even if one might desperately desire everlasting summer, there is no good reason to hold policymakers responsible for the onset of winter. Yes, it has occurred on their watch, but it is not something for which the policymakers are responsible in any sense.

(77.) To be sure, there are other ways to measure responsibility for policy that could be at least as meaningful for the purposes of political accountability. For instance, one might compare the expected course of policy to possible alternatives that policymakers could have affected, perhaps weighting the possibilities by the relative difficulty of achieving them. This would have the benefit of attributing outcomes to policymakers if they could have changed those outcomes, even if the ultimate policy result was the same course policy was on before they took power. This has the benefit of not attributing outcomes to policymakers to the extent that they had no ability to change course. With that said, this requires imagining states of the world as they could have been and evaluating the relative difficulty of achieving those states of the world--which may be even more difficult (and abstract) than asking what course policy was on before and after a policymaker took power.

(78.) See, e.g., Bill Heniff, Jr., Cong. Research Serv. [CRS], Baselines and Scorekeeping in the Federal Budget Process 1 (2012).

(79.) See supra notes 9-17 and accompanying text.

(80.) See, e.g., Jonathan Weisman & Jeremy W. Peters, Government Shuts Down in Budget Impasse, N.Y. TIMES (Sept. 30, 2013), congress-shutdown-debate.html?_r=0 [] (describing the "rapid-fire back and forth legislative maneuvers" the two parties engaged in during the waning hours before a government shutdown).

(81.) See, e.g., Matt Bai, Obama vs. Boehner: Who Killed the Debt Deal?, N.Y. TIMES (Mar. 28,2012), [] (describing the politically fraught negotiations between President Obama and then-House Speaker John Boehner, which were frequently derailed by the brinksmanship of their respective parties).

(82.) Id. (explaining that, in issuing an initial dollar figure for new government revenue to then-Speaker Boehner, President Obama's negotiators expected to keep crossing out their number, moving down to meet Boehner's rising number, until the two sides met).

(83.) Alan J. Auerbach, US Experience with Federal Budget Rules, CESIFO DICE REPORT 41, 43 (2009).

(84.) Id. at 43-44.

(85.) See supra Part II.D.

(86.) See, e.g., Billy House & Erik Wasson, Deficit, War Funds at Center of House Republican Budget Fight, BLOOMBERG (Mar. 19,2015,11:37 AM), politics/articles/2015-03-19/house-republicans-in-standoff-over-deficit-war-funds-in-budget [] (describing Republican Senator Trent Franks, a member of the Senate Armed Services Committee, objecting to a bill that would provide $19.5 billion in military funding because the offsets were not specified, and therefore he could not ensure that they were deficit-neutral).


(88.) See William G. Dauster, The Congressional Budget Process, in FISCAL CHALLENGES: An Interdisciplinary Approach to Budget Policy 4,26-34 (Elizabeth Garrett et al. eds., 2008) (describing the reconciliation process and restrictions on it). This was a result of the "Byrd rule" governing the reconciliation process. Id. The 2001 and 2003 tax cuts were enacted using this fast-track process. Id. Among other benefits, the reconciliation process avoided having to break a filibuster in the Senate, and so passage required fifty-one votes rather than sixty votes. Id. However, if the legislation increased deficits outside the window of the budget resolution, this would have allowed a motion requiring sixty votes to waive. Id. The tax cuts were enacted as temporary in part to avoid the sixty-vote threshold. See Gale & Orszag, supra note 40, at 1554 (describing how tax cuts were sunsetted in part to avoid the Byrd rule); Rebecca M. Kysar, Lasting Legislation, 159 U. Pa. L. Rev. 1007, 1021 (2011) ("For instance, the conference committee sunsetted the entirety of EGTRRA before the end of the budget window to avoid the Byrd Rule.").

(89.) Gale & Orszag, supra note 40, at 1554.

(90.) In order to attract moderate Senators, the 2001 tax bill was cut back to hit a target of $1.35 trillion as scored under the official baseline rules. See, e.g., Fowler W. Martin, US House-Senate Tax Bill Negotiators Reach Accord, DOW JONES NEWS SERV., May 26, 2001, Factiva, DOC. No. dj00000020010711dx5q03vhk ('The Bush administration and conservative Republicans originally wanted $1.6 trillion in tax cuts, but were forced, during the Congressional budget process, to settle for $1.35 trillion when centrist Senators from both political parties balked at the larger number.").

(91.) See, e.g., Eric M. Engen & William G. Gale, Effects of Social Security Reform on Private and National Saving, in SOCIAL SECURITY REFORM: LINKS TO SAVING, INVESTMENT, AND GROWTH, at 115-18 (Fed. Reserve Bank of Bos., Conference Ser. No. 41, 1997), http://[].

(92.) See, e.g., Aswath Damodaran, Applied Corporate Finance 216 (3d ed. 2011) (describing how the hurdle rate--the threshold at which it makes sense to make an investment--is defined in after-tax terms.

(93.) See, e.g., COUNCIL OF ECON. ADVISERS, ECONOMIC ACTIVITY DURING THE GOVERNMENT Shutdown and Debt Limit Brinksmanship 1 (2013), default/files/docs/weekly_indicators_report_final.pdf [] (describing how the shutdown and debt limit brinksmanship in 2013 not only reduced government activity but led businesses to reduce investment and hiring due to the uncertainty).

(94.) See, e.g., Jan Hatzius et al., Goldman Sachs, The Federal Budget Deficit: SHRINKING Faster 6-7 (2013) (giving updated budget projections through 2023).

(95.) See id. at 5.

(96.) See, e.g., Neal Soss & Jay Feldman, Credit Suisse, How Steep is the Fiscal Cliff? 6 (2012) (estimating the fiscal effects of different scenarios and identifying a "most likely" scenario); Stehn et al., supra note 66, at 2-3 (describing different scenarios, including their "base case," for resolution of the fiscal effect, and how they would affect economic performance).

(97.) See supra note 19.

(98.) Gamage, supra note 19, at 799-800.

(99.) Id. at 800.

(100.) See Gregory Klass & Kathryn Zeiler, Against Endowment Theory: Experimental Economics and Legal Scholarship, 61 UCLA L. REV. 2, 30-46 (2013) (cataloguing recent evidence that endowment theory does not explain human behavior and arguing that legal scholarship has ignored this new evidence, to its detriment).

(101.) Edward J. McCaffery & Jonathan Barron, The Political Psychology of Redistribution, 52 UCLA L. Rev. 1745, 1751 (2005) (defining these "behavioral" mechanisms as ones that result from people "react[ing] to the form of a choice or decision problem, even where the substance is held constant") (emphasis added).

(102.) See, e.g., id. at 1759.

(103.) Id.

(104.) Id.

(105.) See supra notes 1-9 and accompanying text.

(106.) See Adam M. Samaha, On the Problem of Legal Change, 103 Geo. L.J. 97, 118 (2014) ("[P]eople who wanted current tax rates extended could say that they opposed a 'tax increase' (focusing on resulting rates), while those who supported higher tax rates could say that they opposed another 'tax cut' (focusing on current law)."). For an example of a supporter of extending the tax cuts describing the alternative as a tax increase, see Curtis S. Dubay, Taxmaggedon: Massive Tax Increase Coming in 2013, THE HERITAGE FOUND. (Apr. 4, 2012), [] ("If President Obama and Congress fail to act this year, an enormous, unprecedented tax increase will fall on American taxpayers starting on January 1, 2013."). For a voice on the other side describing an extension as a tax cut and expiration as allowing tax cuts to go away, see Ethan Pollock, Let the Bush Tax Cuts Expire, There Are Better Options, ECON. Pol'Y INST.: WORKING ECON. Blog (Dec. 20, 2012, 11:30 AM), [] ("Republicans want to extend all of the Bush tax cuts, while Democrats generally support extending the tax cuts for only the bottom 98 percent of households.").

(107.) See, e.g., OMB, FISCAL YEAR 2013, supra note 67, at 206 (showing expiration of the high-income tax cuts as a tax increase).

(108.) To be sure, analysts and academics do explore different sets of assumptions with regard to baselines. But there is rarely, if ever, a serious discussion of the concepts underlying those assumptions, or why some assumptions would be better than others. Take the analysis offered by Alan Auerbach and Bill Gale, two of the leading academics analyzing the long-term fiscal trajectory. They provide what they describe as a "current policy" projection. See Auerbach & Gale, supra note 56, at 4. And they make various adjustments to the CBO baseline in their projection. See id. at 4-5. However, there is never a discussion of the concept underlying the projection other than to call it "current policy." See id. at 4-6. As a result, it is hard to judge the baseline assumptions they make and the alternatives they provide to their base case (like allowing revenues to grow as a share of the economy after ten years, or growing discretionary spending with inflation and population rather than inflation alone). See id. at 15 tbl.1. In fact, the baseline they construct is probably something more like an uncertainty baseline as described infra Part III.E.

(109.) Samaha, supra note 106, at 104. Specifically, Samaha suggests that measuring legal change requires identifying: (1) an object; (2) a metric; and (3) a timeframe of interest. Id. Or, to put this in terms of the baseline, one has to define what the baseline is holding constant (the "object"--as in "current law" or "current services"); the measure in terms of which it is held constant (the "metric"--as in real dollars or share of GDP or some other metric); and, finally, the time point from which the baseline jumps. In my own view, the "object" and "metric" tend to collapse together, but this is still a helpful elucidation of the concept of legal change, and, thus, provides a framework for thinking about baselines.

(110.) Id.

(111.) I have found only one other source that offers a basic taxonomy of budget baselines like this. In early testimony as CBO's first director, Alice Rivlin briefly offered her thoughts on the purposes of baselines (or what she called "budget projections"). See generally CBO, Statement of Alice M. Rivlin Before the Joint Economic Committee (Apr. 3,1975). She broke those projections into four categories, which are related to the taxonomy I use here: a "current services" projection (the equivalent of my status quo baseline); a "most likely" projection (the equivalent of my expectations baseline); a "most feared" projection (something akin to my policy uncertainty baseline although not conceptualized in the same way); and a "desired course of policy" projection (not a baseline, but rather a proposed set of policies). Id. at 5-8. Rivlin offered brief thoughts on each of these options--notably, cautioning against reading too much into the "most feared" projection, id. at 7-8, and calling for clarity by asking those doing such projections to specify the kind of projection that they are actually running, id. at 10.

Rivlin's brief testimony, when compared to much of the writing on baselines that would follow, is a paragon of clarity. Unfortunately, it seems to have been lost to the ages, and its lessons along with it. In some sense, the project I take on here builds on these early thoughts that Rivlin offered on baselines, and adds a deeper conceptual layer by discussing in detail the relative purposes of these baselines rather than just differentiating the types. I come to somewhat different conclusions (such as giving priority to the expectations baseline over the others), but the idea is the same--to clarify exactly what kinds of information different baselines convey. See id. at 4-5.

(112.) See, e.g., infra note 118.

(113.) See infra notes 189-94 and accompanying text.

(114.) See supra note 64 and accompanying text.

(115.) See generally Clinton T. Brass, CRS, RL34680, Shutdown of the Federal Government: Causes, Processes, and Effects (2013).

(116.) The 2013 government shutdown vividly illustrated the degree of attention paid to appropriations in the case of a shutdown. A Lexis search of the New York Times database for articles that include the term "government shutdown" indicates that from October 1, 2013 to October 31, 2013--the month of the two-week government shutdown at the start of fiscal year 2014--there were 263 separate articles in the New York Times alone that mentioned the phrase.

(117.) See supra notes 20-21, 30 and accompanying text.

(118.) Some interpretations of the Congressional Budget Act's baseline would incorporate changes in tax and mandatory policy that are scheduled to occur under current law. See supra note 30. Such changes may very well he what we expect to occur, but, in my view, including such changes in a status quo baseline confuses this baseline with an expectations baseline, when these baselines are actually conveying different types of information. The status quo baseline illustrates what would occur if current policies were held constant, whereas the expectations baseline shows what would occur based on current expectations. See infra Part III.D for further discussion of the expectations baseline.

With that said, there is some question as to what it means to experience a policy now. To the extent people are forward-looking and have information about the future, current experience may in some sense incorporate the expectations of the future. For instance, people may spend more or less today incorporating the expected effects of future fiscal policies. Thus, under some assumptions, the status quo baseline may, to a significant degree, collapse into the expectations baseline. The relevance of a status quo baseline therefore largely depends on people differentiating between the policies in place today and those in the future and believing that they have more information about what is happening now.

(119.) See supra Part II.C.

(120.) See supra note 69 and accompanying text.

(121.) Tax Relief, Unemployment Insurance, and Job Creation Act of 2010, Pub. L. No. 111-312, [section] 601, 124 Stat. 3296, 3309-3310. For the initial cost estimate, see JOINT COMM. ON Taxation, Estimated Budget Effects of the Tax Relief, Unemployment Insurance, and Job CREATION act of 2010, at 4 (2010). The payroll tax cut was scheduled to be in place for only 2011, but it was later extended through 2012. See Middle Class Tax Relief and Job Creation Act of 2012, Pub. L. No. 112-96, [section] 1001, 126 Stat. 156, 158.

(122.) Neither President Obama nor any of the Republican leadership had proposed to make it permanent.

(123.) See supra Parts II.B, F.

(124.) See supra text accompanying notes 39-42.

(125.) See supra note 40.

(126.) See supra Parts II.A, D, E.

(127.) See supra text accompanying note 40.

(128.) See supra Part II.E.

(129.) Market actors certainly do not seem to expect a default on the federal debt. Presently, the federal government can borrow at very low interest rates, even over the long-term. See Selected Interest Rates (Daily)-H.15, FED. Res., data.htm [] (last updated Dec. 19, 2013). And commentators note that, while there is a market in credit default swaps on Treasury debt to insure against default, the only value of the credit default swap is probably to protect against a temporary nonpayment--for instance, in the event that Congress is late in raising the debt limit. See Matt Levine, Why Would Anyone Buy Credit Default Swaps on the U.S.?, BLOOMBERG VIEW (Sept. 26, 2013, 3:06 PM), on-the-u-s- [] (noting that "[i]n U.S. government CDS, the value of the credit protection is more or less zero," but that there may be some value to the swap in the case of a temporary delay in payment).

(130.) The federal government faces a budget constraint such that the net present value of the government's future stream of revenues must equal the net present value of future government consumption plus the current value of government debt. See Auerbach et al., Generational Accounting, supra note 52, at 75. If the government were to violate this "budget constraint," the government essentially would have defaulted on its debt, taxing resources away from lenders in order to meet its needs. See id.

(131.) William G. Gale et al., Distribution of the 2001 and 2003 Tax Cuts and Their Financing, 103 Tax NOTES 1539, 1539 (2004) ("Popular discourse about tax cuts frequently ignores a simple truism: Someone, somewhere, at some time will have to pay for them. The payment may be in the form of increases in other taxes or reductions in government programs; it may occur now or later; it may be transparent or hidden. But iron laws of arithmetic and fiscal solvency imply that the payment has to occur.").

(132.) See generally Kamin, supra note 14.

(133.) Id. at 58-59.

(134.) See, e.g., Gov't ACCOUNTABILITY OFFICE [GAO], LONG-TERM FEDERAL BUDGET SIMULATIONS 6 (2014) (showing a graph with skyrocketing debt as a share of the economy under both the "baseline extended" and the "alternative" scenarios); Nat'L COMM'N ON FISCAL Responsibility & Reform, The Moment of Truth 10-11 (2010) (showing debt rising on an unsustainable trajectory, and citing to CBO's then-alternative fiscal scenario and using the figures to build the case for a "looming fiscal crisis").

(135.) See, e.g., GAO, supra note 134, at 2.

(136.) See, e.g., id. at 2-4, 13-15, 17.

(137.) This is true for almost any long-term projection. But the Government Accountability Office (GAO) projection provides a good example. In its annual update, GAO usefully clarifies that these projections are not what it expects to occur. Id. at 2. As GAO says, "[t]hese simulations are not predictions of what will happen in the future, as policymakers would likely take action to prevent damaging out-year fiscal consequences." Id. But GAO does not say what the projections actually represent as a theoretical matter, other than a bundle of technical assumptions that it specifies. Id. at 3, 4, 13-15, 17. Or, to put this in terms of a question, if GAO is not projecting what it expects to occur, what exactly is it projecting?

(138.) See, e.g., Zachary Goldfarb, Long Debate over Debt Ceiling Could Harm Economy, Reports Says [sic], WASH. POST (Oct. 3, 2013), could-harm-economy-reports-says/2013/10/03/992c482e-2c35-11e3- b139-029811dbb57f_story.html []; Jeanne Sahadi, Debt Ceiling: 8 Things You Need to Know but Wish You Didn't, CNN MONEY (Oct. 1, 2013, 11:20 AM), [].

(139.) See supra note 111. For instance, all the long-term baselines that I have seen reflect the scheduled (and gradual) increases in the Social Security normal retirement age that are set to occur under current law and were first enacted in the early 1980s. See, e.g., CBO, 2013 LONG-TERM Budget Outlook, supra note 15, at 50 (describing a gradual increase in the normal retirement age). To give another example, before the payroll tax cut expired in 2012, these long-term projections still incorporated the assumption that the payroll tax cut would expire, as was widely expected. See, e.g., CBO, 2012 LONG-TERM BUDGET OUTLOOK, supra note 11, at 9 tbl.1-1 (following current law in both the "extended baseline" scenario and the "extended alternative fiscal" scenario). These examples show how these long-term projections do not capture the status quo.

(140.) See supra Part III.C.

(141.) See supra note 109 and accompanying text.

(142.) See Auerbach, U.S. Fiscal Problem, supra note 52.

(143.) William G. Gale & Benjamin H. Harris, Reforming Taxes and Raising Revenue: Part of the Fiscal Solution, 27 OXFORD REV. ECON. Pol'y 563, 564 (2011).

(144.) See, e.g., Eduardo Porter, A Tax Bite Tailored to Help All, N.Y. TIMES (Jan. 22, 2013), [].

(145.) See MARC LABONTE, CRS, Reducing THE BUDGET DEFICIT: OVERVIEW OF POLICY Issues l, 11 (2014).

(146.) See id. at 11.

(147.) See Craig S. Hakkio & Elisha J. Wiseman, Social Security and Medicare: The Impending Fiscal Challenge, 1 ECON. REV. 7, 7-8 (2006).

(148.) See Sandra Block, Many Find it Hard to Plan Ahead as Tax Uncertainty Looms, USA TODAY, taxpayers/53708328/1 [] (last updated Mar. 23, 2012, 9:18 AM).

(149.) See CBO, Federal Debt and the Risk ofa Fiscal Crisis 1 (2010) (outlining the risk and potential consequences of a fiscal crisis).

(150.) See supra Part III.D.

(151.) See David N. Weil, The Concise Encyclopedia of Economics: Fiscal Policy, LIBR. ECON. & LIBERTY, [] (last visited Sept. 27, 2015).

(152.) See infra Part IV.D.

(153.) In fact, one set of analysts attempted to capture the full incidence of the 2001 and 2003 tax cuts by speculating on the financing that would eventually be enacted. See Gale et al., supra note 131, at 1544-45.

(154.) See supra notes 31-36 and accompanying text.

(155.) See supra notes 31-32 and accompanying text.

(156.) See infra Part IV.C.

(157.) See, e.g., CBO, FISCAL YEARS 2011 TO 2021, supra note 50 (describing on the cover of the report its debt projection as reflecting "current law").

(158.) For the assumptions underlying the baseline, see Budget Enforcement Act of 1990, Pub. L. No. 101-508, [section] 257, 104 Stat. 1388-573, 591-93 (establishing the baseline and setting out the assumptions to be used).

(159.) As noted in Table 1, the 1990 Budget Enforcement Act (BEA) requires that discretionary funding grow with inflation for baseline purposes, irrespective of the caps in place. Id. CBO has chosen to deviate from the BEA baseline in this case. CBO, BUDGET AND Economic Outlook: 2014 to 2024, at 65 (2014).

(160.) See, e.g., Zero-Based Budgeting Ensures Responsible Oversight (ZERO) Act of 2013, H.R. 239, 113th Cong, (requiring, among other things, that OMB issue guidelines telling agencies that they should assume that their baseline budget is zero and justify all spending as if it were a new expenditure).

(161.) See Peter A. Pyhrr, The Zero-Base Approach to Government Budgeting, 37 PUB. ADMIN. REV. 1,1 (1977) (applying the theory to government budgeting); Peter A. Pyhrr, Zero-Base Budgeting, HARV. BUS. REV., Nov.-Dec. 1970, at 111-12 [hereinafter Pyhrr, Zero-Base Budgeting] (outlining the theory of ZBB).

(162.) For a description of this history, see U.S. GEN. ACCOUNTING OFFICE, PERFORMANCE Budgeting; Past Initiatives Offer Insights for GPRA Implementation 46-51 (1997) (describing how ZBB was gradually deemphasized by the Carter Administration and then largely abandoned once President Reagan took office).

(163.) See Pyhrr, Zero-Base Budgeting, supra note 161, at 111 (opening his article with a quotation from Arthur Burns, Counsellor to the President, describing a budgeting system in which "every agency ... make[s] a case for its entire appropriation request each year, just as if its program or programs were entirely new").

(164.) See id. at 112-14.

(165.) See id. at 116 (describing the process of ranking decision packages).

(166.) See supra Part II.G.

(167.) See generally AARON WILDAVSKY, The POLITICS OF THE BUDGETARY PROCESS (4th ed. 1984).

(168.) Id. at 217.

(169.) Id.

(170.) To repeat the quote from a presidential advisor that Peter Pyhrr offers in the opening to his article on ZBB, it would be as if "every agency ... make[s] a case for its entire appropriation request each year, just as if its program or programs were entirely new." Pyhrr, Zero-Base Budgeting, supra note 161, at 111 (quoting Arthur Burns).

(171.) See, e.g., Gov't Fin. OFFICERS ASS'N, ZERO-BASE BUDGETING: MODERN EXPERIENCES AND CURRENT Perspectives 3 (2011) (describing how in zero-base budgeting, at least one of the decision packages should be a "current services" package, essentially setting a status quo baseline); U.S. Gen. ACCOUNTING OFFICE, supra note 162, at 48 (describing how, during the Carter Administration's attempt at zero-base budgeting, many agencies defined minimum funding levels in terms of an arbitrary percentage of current funding--generally between 75 and 90 percent).

(172.) See U.S. GEN. ACCOUNTING OFFICE, supra note 162, at 48-49 (noting how, after the first year of ZBB in the Carter Administration, "[f]ew significant budgetary actions were identified as resulting from ZBB, and some questioned the utility of the many hours spent by program managers, budgeteers, and top managers on ZBB"); see also Allen Schick, The Road from ZBB, 38 PUB. ADMIN. Rev. 177, 177 (1978) ("The first president to promise a zero base budget has delivered the most incremental financial statement since Wildavsky canonized that form of budget-making more than a dozen years ago.").

(173.) Baseline Reform Act of 2012, H.R. 3578, 112th Cong, (as passed by House, Feb. 3, 2012); Baseline Reform Act of 2014, H.R. 1871, 113th Cong, (as passed by House, Apr. 8, 2014).

(174.) Press Release, Representative Louie Gohmert, Gohmert Praises Baseline Reform Act of 2013 (May 9, 2013), ID=333177 [].

(175.) Id.

(176.) Muris, supra note 20, at 77.

(177.) Id. at 77-78.

(178.) Id. at 77.

(179.) Id. at 75.

(180.) Richard Kogan, Ctr. on Budget & Pol'y Priorities, "Baseline Reform Act" Is a Step in the Wrong Direction 3 (2012), [http://perma. CC/YXK6-5LZN].

(181.) Id.

(182.) Id.

(183.) See OMB, Historical Table 3.2 Outlays by Function and Subfunction: 1962-2020, [] (last visited Sept. 27, 2015) (showing rise in nominal spending by category over time).

(184.) CBO, The Long-Term Budgetary Impact of Paths for Federal Revenues and Spending Specified by Chairman Ryan 3-4 (2012), attachments/03-20-Ryan_Specified_Paths_2.pdf [].

(185.) KOGAN, supra note 180, at 1-2.

(186.) Muris, supra note 20, at 78.

(187.) Id.

(188.) This includes approximately $25 billion per year in expanded refundable credits for low-income Americans. See OMB, FISCAL YEAR 2015, supra note 33, at 158 tbl.12-2. These policies were first enacted as temporary measures in the American Recovery and Reinvestment Tax Act of 2009, Pub. L. No. 111-5, [section][section] 1002-1004,123 Stat. 115, 312-15, and the Obama Administration proposed that they be made permanent. Importantly, the Administration then stuck these new refundable credits in the baseline as permanent measures so that their further extension did not count as a cost relative to the Administration's baseline. See OMB, FISCAL Year 2015, supra note 33, at 157-58. The policies themselves are laudable; the use of baselines probably less so. Progressives similarly have added temporary tax subsidies for energy industries--with the intent yet again of further extending them. See, e.g., Darren Goode, Energy Incentives to Sweeten Tax Bill?, POLITICO (Dec. 8,2010,4:23 PM), http://www. [] (describing efforts by Democrats to extend temporary clean energy tax credits that had been added in the 2009 stimulus).

(189.) Ezra Klein, Want to Fix the Deficit? Get Real, BLOOMBERG VIEW (Mar. 12,2013,12:36 PM), [].

(190.) Id.

(191.) Id.

(192.) See generally Kysar, supra note 88.

(193.) Id. at 1028-30.

(194.) See id. at 1026-33.

(195.) See supra notes 89-90 and accompanying text.

(196.) See supra note 47 and accompanying text.

(197.) To be clear, there were analysts--especially tax cut opponents--emphasizing the cost if the tax cuts were made permanent at the time they were enacted. See, e.g., ROBERT Greenstein et al., New Tax Cut Law Uses Gimmicks to Mask Costs; Ultimate Price Tag Likely to be $800 Billion to $1 Trillion: Final Bill Both More Costly and More Regressive than Administration Plan 1 (2003), [].

(198.) See supra Part III.D.

(199.) See supra Part III.D.

(200.) See supra Part III.B.

(201.) See supra Part III.C.

(202.) See supra Part III.E.

(203.) See supra notes 189-93 and accompanying text.

(204.) See supra notes 189-93 and accompanying text.

(205.) See George K. Yin, Temporary-Effect Legislation, Political Accountability, and Fiscal Restraint, 84 N.Y.U. L. REV. 174,197 (2009) ("Because budget estimating baselines generally take termination dates seriously, Congress will be confronted with additional costs should it decide to extend the scheduled 2010 repeal beyond that time.").

(206.) See Auerbach, supra note 83, at 43-44.

(207.) See supra notes 83-84 and accompanying text.

(208.) See supra Part IV. C.1.

(209.) See infra Table 3.

(210.) An alternative approach would be to treat all temporary provisions as permanent unless explicitly designated as temporary--irrespective of whether the overall legislation adds to the deficit. There is some logic to this, given that these temporary provisions are also often extended. I do not, however, adopt this as the recommended change, since this method would preclude paying for a policy in short increments, as Congress has done in the past. For example, this has been the approach to the automatic cuts scheduled to go into effect in Medicare's physician payment system. See Mark Merlis, Medicare Payments to Physicians, HEALTH Aff. (Feb. 13,2013), id=83 []. In this case, Congress has repeatedly enacted temporary patches to avoid most of the cuts and paid for that cost. See Actually, the SGR Has Slowed Health Care Cost Growth: 98% of Doc Fixes Since 2004 Have Been Fully Paid For, Resulting in $140 Billion in Deficit Reduction, COMM. FOR A RESPONSIBLE FED. BUDGET: THE BOTTOM LINE (Mar. 13, 2014), []. The concern might be that these temporary provisions could, nevertheless, get incorporated in people's expectations, leading to an unpaid-for extension down the line--sneaking a deficit-increasing policy into the baseline. There is something to this concern; however, until Congress begins abusing the system in this way (which it has not so far), there instead seems to be an expectation that, when Congress has paid for an item in the past, it will do so again.

(211.) Of course, the Senate already has a sixty-vote threshold in the form of a filibuster. Nonetheless, the additional sixty-vote threshold may make some difference. First, it means that no such provision could be incorporated in reconciliation legislation--and so not subject to the filibuster--without triggering a sixty-vote point of order. Second, the additional point of order may change the politics of a vote; whereas a filibuster vote is simply to end debate, this vote could be cast as overriding budget enforcement and fiscally irresponsible. Finally, the filibuster is under some threat in the Senate, and, if it were eliminated, the remaining super-majority vote requirements would carry additional weight.

Some may still question the efficacy of a point of order given that a point of order can be changed. In other words, policymakers may want to bind their hands, but, if it becomes too easy to turn off or on in any particular circumstance, the commitment mechanism may be largely ineffectual. To combat this potential problem, the point of order could be enacted via a law, which requires sixty votes in the Senate, rather than a budget resolution, which requires fifty votes in the Senate. The traditional understanding is that, if created by sixty votes, a point of order would require sixty votes to remove it. The point of order could still be eliminated with sufficient support, but it would be more difficult to change.

(212.) See supra Table 1.

(213.) Some analysts also look to long-term projections because they believe that short-term ones are largely meaningless, or at least easily manipulated. See Auerbach et al., Generational Accounting, supra note 52, at 74 ("In short, it is impossible to measure the debt and the change in the debt--the deficit--in a way which carries a useful underlying economic meaning.").

(214.) See supra Part III.E.

(215.) See supra Part III.E.

(216.) See supra Part III.D.

(217.) See Auerbach et al., Generational Accounting, supra note 52, at 75 (describing the government's intertemporal budget constraint).

(218.) See supra Part III.E.

(219.) See, e.g., supra note 134 and accompanying text.

(220.) Nat'l Comm'n on Fiscal Responsibility & Reform, supra note 134, at 11.

(221.) See CBO, 2012 LONG-TERM BUDGET OUTLOOK, supra note 11, at 8-9 tbl. 1-1 (outlining assumptions underlying the alternative fiscal scenario).

(222.) Nat'l Comm'n on Fiscal Responsibility & Reform, supra note 134, at 10-11.

(223.) CBO, 2012 LONG-TERM BUDGET OUTLOOK, supra note 11, at 3.

(224.) Id. at 21 tbl. 1-3.

(225.) See Kamin, supra note 14, at 59-60.

(226.) See Michael Linden & Sasha Post, The United States' Long-Term Debt Problem Isn't as Bad as You Thought, CTR. FOR Am. PROGRESS (Mar. 11, 2013), http://www.ameri.can [].

(227.) See generally CBO, 2013 LONG-TERM OUTLOOK, supra note 15, at 75-91. Whereas the previous year, the alternative fiscal scenario was prominently displayed on the cover of the report and throughout, see CBO, 2012 LONG-TERM BUDGET OUTLOOK, supra note 11, depictions of the alternative fiscal scenario in the new report were largely isolated to one chapter of the report titled "The Economic and Budgetary Effects of Alternative Budget Policies," see CBO, 2013 Long-Term Budget Outlook, supra note 15, at 75-91.

(228.) CBO, 2013 LONG-TERM BUDGET OUTLOOK, supra note 15, at 117 tbl.B-1; CBO, 2012 Long-Term Budget Outlook, supra note 11, at 21 tbl.1-3.

(229.) See supra note 17.

(230.) See generally Auerbach et al., Generational Accounting, supra note 52.

(231.) Intergenerational Financial Obligations Reform Act, H.R. 2967, 113th Cong. (2013); Intergenerational Financial Obligations Reform Act, S. 1351, 113th Cong. (2013). In addition to requiring generational accounting, the INFORM Act also requires OMB and CBO to calculate the "fiscal gap." See Intergenerational Financial Obligations Reform Act, H.R. 2967, 113th Cong. (2013). By contrast to generational accounting (as applied), this metric is a much more valid way of accounting for the long-term budget outlook. See infra note 236 and accompanying text. In fact, both CBO and OMB already annually report the seventy-five-year fiscal position in terms of the fiscal gap. See CBO, 2013 LONG-TERM BUDGET OUTLOOK, supra note 15, at 117 tbl.B-1 (showing fiscal gap); OMB, FISCAL YEAR 2015, supra note 33, at 26 tbl.3-2 (also showing fiscal gap).

(232.) See, e.g., Steve Bell, Economic Policy Project Statement on the INFORM Act, BIPARTISAN POL'Y Center (July 31, 2013), []; New Life for Generational Accounting, Comm, for Responsible Fed. Budget: The Bottom Linie (July 24,2013), http:// []; Concord Coalition Praises Plan to Focus More Attention on Intergenerational Fairness, Long-Term Impact of Budget Decisions, CONCORD COALITION (July 24, 2013), press-release s/2013/0 724/concord-coalition-praises-plan-focus -more-attentionintergenerational-fairn []; Maya MacGuinness, Statement from the Campaign to Fix the Debt, Fix THE DEBT (July 24, 2013), uploads/files/INFORM%20Act%20Statement%207.24.13.pdf [].

(233.) Nobel Laureate Supporters of the Inform Act, [] (last visited Sept. 27, 2015).

(234.) See generally Auerbach et al., Generational Accounting, supra note 52.

(235.) See id. at 75-76.

(236.) See generally Auerbach, U.S. Fiscal Problem, supra note 52. As I have described, the fiscal gap measures the necessary immediate adjustment in spending and taxes to hold the debt-to-GDP ratio constant over a given period. See supra notes 142-43 and accompanying text. In contrast to generational accounting, the fiscal gap is consistent with an uncertainty baseline. The metric can be understood as capturing the degree of uncertainty as to how policymakers would achieve this fiscal target (stable debt-to-GDP ratio) over certain periods of time. Unlike generational accounting, the fiscal gap does not confuse the expectations baseline with the uncertainty baseline. This measurement has been more widely adopted than generational accounting, as it should be.

Some may respond that the two concepts are not so different after all, and both employ different assumptions about how the fiscal shortfall will eventually be closed. In particular, the fiscal gap metric essentially assumes that the same amount of fiscal consolidation occurs each and every year as a share of the economy, whereas generational accounting assumes fiscal consolidation falls only on unborn generations. Neither is likely to be the actual outcome. However, this undersells the fiscal gap measure and oversells generational accounting. The fiscal gap can be conceptualized as a measure of average annual consolidation required, the timing and composition of which is uncertain. This is a helpful way of quantifying the degree of uncertainty in future fiscal consolidation. Generational accounting, by contrast, does not provide that kind of information about uncertainty and instead seems only to present a particular budget scenario that no one expects to occur.

(237.) In one of the early evaluations of generational accounting, economist Robert Haveman noted that the apparent generational imbalance in fiscal burdens was largely the result of assuming that unborn generations rather than living ones faced all fiscal consolidation. See Robert Haveman, Should Generational Accounts Replace Public Budgets and Deficits, 8 J. ECON. PERSP. 95, 100 (1994). While certainly similar to my own objection, Haveman did not focus on the role of (and confusion around) baselines in generational accounting, which I think goes to the core of the problem.

(238.) Auerbach et al., Generational Accounting, supra note 52, at 88.

David Kamin, Assistant Professor of Law, New York University School of Law. For their comments and suggestions, thanks to Alan Auerbach, Oren Bar-Gill, Joshua Blank, Ryan Bubb, Steven Dean, Michael Graetz, Roderick Hills, Mitchell Kane, Richard Kogan, Rebecca Kysar, Marvin Phaup, Adam Samaha, Daniel Shaviro, David Schleicher, Art Stigile, and participants at the Harvard Law Seminar on Current Research in Taxation and faculty workshops at NYU School of Law and Brooklyn Law School. Thanks to the Filomen D'Agostino and Max E. Greenberg Faculty Research Fund for helping to support this project. Finally, thanks to Cerin Lindgrensavage for superb research assistance and to the staff of the William & Mary Law Review for their support and excellent editing.

Table 1: "Official" Baseline

   Budget Category                   "Official" Baseline

Debt Limit              Assumed to be increased

Trust Funds             Assumed to continue spending and taxing at
                        scheduled levels even once programs are
                        insolvent (such as the highway trust fund).

Annually Appropriated   Funding at capped levels; uncapped funding
Spending                grown with inflation from current year. *

Mandatory Spending      Current law except:

                        * Temporary programs over $50 million per year
                        and enacted before 1997 are automatically
                        assumed to continue as in effect in their last

                        * Same treatment for programs enacted after
                        1997 except assumed to expire if explicitly
                        specified as a temporary program.

Revenues                Current law except expiring excise taxes
                        dedicated to a trust fund are assumed to be

* The 1990 Budget Enforcement Act requires that discretionary
funding be grown with inflation for baseline purposes,
irrespective of whether there are caps in place. CBO has chosen
to instead follow the capped levels in its official projection.

Table 2: Uses of Budget Baselines

Purposes of                     Types of Baselines
                    Current Law     Attention     Status Quo

Agenda Setting           X              X
                   (what should    (what should
                    be enacted)      receive

Policy Design:

Expected Effects

Policy Design:                                        X
Status Quo as a
Reference Point


Budget                   X
Enforcement        (manipulable)

Private Sector

Purposes of                      Types of Baselines
                    Expectations     Uncertainty       Baseline

Agenda Setting           X                X
                   (if contingent   (if contingent
                      on "low          on "low
                    attention")      attention")

Policy Design:

Expected Effects

Policy Design:
Status Quo as a
Reference Point

Political                X                X

Budget                   X                X                X
Enforcement            (less            (less        (manipulable)
                    manipulable)     manipulable)

Private Sector           X

Table 3: Baseline Used for Budget Enforcement: Recommended

 Budget Category      Official Baseline    Recommended Change

                     Current law except:   Same as BEA except:

                     * Temporary           * All temporary
                     programs over $50     provisions in
                     million per year      deficit-increasing
                     and enacted before    legislation are
                     1997 are              continued unless
                     automatically         explicitly
                     assumed to continue   specified as a
                     as in effect in       temporary
                     their last year.      provision.

Mandatory Spending   * Same treatment      * Budget act point
                     for programs          of order if
                     enacted after 1997    temporary provision
                     except assumed to     repeated in the
                     expire if             year after it has
                     explicitly            expired.
                     specified as a
                     temporary program.

                     * Trust funds
                     assumed to continue
                     spending at
                     scheduled levels
                     even once

Revenues             Current law except
                     expiring excise
                     taxes dedicated to
                     a trust fund are
                     assumed to be
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Title Annotation:III. A Taxonomy of Baselines D. Expectations Baseline through Conclusion, with footnotes and tables, p. 181-219
Author:Kamin, David
Publication:William and Mary Law Review
Date:Oct 1, 2015
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