The Concord Baseline makes some key assumption changes to the CBO baseline. CBO is required to assume that congressional appropriations continue increasing only at the rate of inflation for the 10 year baseline.
They also extend emergency supplemental at their “current” level plus inflation over the duration of the baseline. For tax legislation, they assume current law will govern–so if there are tax cuts that have sunsets (as the 2001 and 2003 tax cuts have), CBO is required to project revenues assuming the tax cuts expire as written in the legislation. They also project economic growth in a very conservative fashion–they do not try to anticipate major changes in the economy, either recessions or accelerations.
Currently neither the Democrats or Republicans are proposing to eliminate the Bush tax cuts completely. Obama is proposing to continue $2 trillion of the Bush tax reductions out of a total of about $2.7 trillion (lower taxes over the 2010-2020 decade). There are some Tea Partiers, Alan Greenspan and few others who oppose extension of the tax cuts.
It will take a change from historically government budget trends to actually reduce the US deficit below $1 trillion per year again.
The Concord Coalition takes the CBO baseline and adjusts it to assume appropriations increase at the same rate as the economy (GDP growth). This increase is closer to the historical average rate of increase. We also assume that supplemental appropriations do not continue indefinitely. For recent appropriations for the wars in Iraq and Afghanistan, we include realistic estimates from CBO about how much will be spent under a scenario where troop levels slowly decrease to about one-third of their level at the time of the estimate. We assume that Medicare physician payment cuts (under the Sustainable Growth Rate (SGR) are postponed, as they have been for the last several years.
For taxes, we assume that all of the major tax cuts will be extended beyond 2010. We also assume the one-year patches to the Alternative Minimum Tax will continue to be enacted, holding the level of taxpayers hit by the tax roughly constant throughout the baseline period. We assume that the tax cuts enacted in the 2009 stimulus package are extended. Finally, we include a calculation for the increased debt service (interest payments) that these policies (both on the tax and spending side) would cause by their increasing the deficit. We do not make any changes to CBO’s economic assumptions.
Brian Wang is a Futurist Thought Leader and a popular Science blogger with 1 million readers per month. His blog Nextbigfuture.com is ranked #1 Science News Blog. It covers many disruptive technology and trends including Space, Robotics, Artificial Intelligence, Medicine, Anti-aging Biotechnology, and Nanotechnology.
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