Current-Law vs. Current-Policy Baseline Primer

Senate Republicans are preparing to vote on a budget resolution this week in order to adhere to the timeline of getting a reconciliation bill – the main focus of which will be to extend and expand the 2017 TCJA tax cuts – to the President’s desk by Memorial Day. While leadership originally planned to hold off on a vote until receiving confirmation from the Senate Parliamentarian that current-policy is an acceptable baseline through which to score the bill, it seems that Majority Leader Thune (R-SD) is ready to move forward without the Parliamentarian’s blessing in hopes of receiving it down the line.

But what is a budgetary baseline? According to the Congressional Budget Office (CBO), a baseline is “a set of detailed projections of federal spending, revenues, deficits or surpluses, and debt for the current year” and a set number of years to follow – a decade under current budgetary practices.

Typically, the budgetary effect of any proposal would be measured by the CBO against a current-law baseline, which reflects the law as written. Under this approach, extending expiring provisions would correctly show a cost for continuing them. On the other hand, some argue that the cost of extending expiring provisions should not be counted in a budget score, as they are the policy currently in effect.

More simply:

Current-law baseline: projects spending and revenue trends based on laws enacted through a specified date.

Current-policy baseline: projects spending and revenue trends assuming that all policies are extended, even if the law states they will sunset or expire on a particular date.

While budget reconciliation is known for being a partisan process that allows one party to move legislation through a simple majority vote and the minority party is largely sidelined, Democrats have an interest in which baseline is utilized. As Republican leadership and budget experts make the case to the Parliamentarian that current-policy is the preferable baseline to use for budget scoring, Senate Democrats are arguing that the current-law baseline should remain as the norm.

Why does the baseline matter? Especially to the point of becoming a high-profile point of contention in budget discussions? If the current-policy baseline assumes that something like a tax cut will remain in effect even if it legally expires, revenue projections under that baseline are likely to be extremely different than what the federal government actually collects. And that’s just assuming that one law continues when it actually expires; the compounding effects of dozens or hundreds of expired programs and tax provisions could add up to billions of dollars improperly estimated over a 10-year period.

The difference between using a current-law versus current-policy baseline is important when evaluating new legislation. CBO currently scores the cost of proposed legislation against a current-law baseline, which helps lawmakers understand the budgetary impacts of their policies. Having relatively accurate scores for proposed policies is crucial for lawmakers to understand how new laws will impact the federal budget.

At a time when draconian steps are being taken by the new administration to cut the federal government’s spending and reduce the national debt, it would seem that the current-law baseline would provide a more appropriate benchmark to recognize the true costs and budgetary impacts of the proposed legislation than a current-policy baseline. In fact, budget stakeholders like the Committee for a Responsible Budget argue that employing a current-policy baseline would actually explode the national debt.

While it’s unlikely that Senate Republicans will get a firm stance from the Parliamentarian ahead of a vote on the resolution this week, the consensus is that they will ultimately get affirmation that current-policy is an acceptable baseline before the actual bill is taken up in the next few months.