Changes in CBO’s Baseline Since January 2008

In conjunction with its annual analysis of the President’s budgetary proposals, the Congressional Budget Office (CBO) typically updates its baseline budget projections, which show the paths of federal spending and revenues over the next 10 years under current laws and policies (see Table A-1). This year, the updated baseline reflects new information from various sources, including the President’s budget, an updated economic forecast by CBO, and legislation enacted since mid-January, when CBO completed its previous baseline projections.¹ In most years, CBO does not update its economic forecast when it prepares its March baseline. However, this year, in light of new data about the weakness of the economy, recent actions by the Federal Reserve, and the enactment of the stimulus package, CBO revised its economic projections in February.

				Actual 2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	Total, 2009- 2013	Total, 2009- 2018


				In Billions of Dollars
Revenues
	Individual income taxes			1,163	1,141	1,337	1,412	1,624	1,767	1,875	1,969	2,076	2,192	2,314	2,445	8,014	19,009
	Corporate income taxes			370	326	338	331	332	356	325	339	347	357	369	384	1,683	3,480
	Social insurance taxes			870	912	950	1,002	1,056	1,107	1,154	1,202	1,251	1,303	1,357	1,413	5,268	11,793
	Other			165	168	168	171	188	234	246	261	274	287	300	313	1,008	2,443

		Total		2,568	2,546	2,793	2,916	3,200	3,463	3,600	3,770	3,947	4,138	4,341	4,555	15,973	36,725
			On-budget	1,933	1,880	2,097	2,183	2,428	2,653	2,755	2,889	3,028	3,180	3,342	3,515	12,116	28,071
			Off-budget	635	667	696	734	772	810	845	882	919	958	998	1,040	3,857	8,654

Outlays
	Mandatory spending			1,451	1,577	1,664	1,740	1,853	1,889	2,031	2,151	2,286	2,470	2,597	2,725	9,177	21,406
	Discretionary spending			1,042	1,092	1,122	1,146	1,171	1,187	1,218	1,245	1,274	1,309	1,336	1,363	5,844	12,371
	Net interest			237	234	214	243	270	282	281	284	283	280	274	266	1,291	2,677

		Total		2,730	2,903	3,000	3,130	3,294	3,358	3,530	3,680	3,843	4,059	4,207	4,354	16,312	36,455
			On-budget	2,277	2,433	2,500	2,604	2,748	2,787	2,929	3,047	3,175	3,353	3,458	3,559	13,567	30,159
			Off-budget	454	470	500	526	546	572	601	633	668	707	749	794	2,745	6,296

Deficit (-) or Surplus				-162	-357	-207	-213	-93	105	70	90	104	79	134	202	-339	270
	On-budget			-343	-553	-403	-421	-320	-133	-174	-158	-147	-172	-116	-44	-1,451	-2,088
	Off-budget			181	197	196	208	227	238	244	249	251	251	250	246	1,112	2,358

Debt Held by the Public				5,035	5,367	5,591	5,822	5,933	5,845	5,792	5,717	5,627	5,563	5,444	5,255	n.a.	n.a.

Memorandum:
Gross Domestic Product				13,671	14,242	14,773	15,589	16,490	17,284	18,077	18,885	19,713	20,569	21,457	22,386	82,213	185,223

				As a Percentage of Gross Domestic Product
Revenues
	Individual income taxes			8.5	8.0	9.0	9.1	9.8	10.2	10.4	10.4	10.5	10.7	10.8	10.9	9.7	10.3
	Corporate income taxes			2.7	2.3	2.3	2.1	2.0	2.1	1.8	1.8	1.8	1.7	1.7	1.7	2.0	1.9
	Social insurance taxes			6.4	6.4	6.4	6.4	6.4	6.4	6.4	6.4	6.3	6.3	6.3	6.3	6.4	6.4
	Other			1.2	1.2	1.1	1.1	1.1	1.4	1.4	1.4	1.4	1.4	1.4	1.4	1.2	1.3

		Total		18.8	17.9	18.9	18.7	19.4	20.0	19.9	20.0	20.0	20.1	20.2	20.3	19.4	19.8
			On-budget	14.1	13.2	14.2	14.0	14.7	15.4	15.2	15.3	15.4	15.5	15.6	15.7	14.7	15.2
			Off-budget	4.6	4.7	4.7	4.7	4.7	4.7	4.7	4.7	4.7	4.7	4.7	4.6	4.7	4.7

Outlays
	Mandatory spending			10.6	11.1	11.3	11.2	11.2	10.9	11.2	11.4	11.6	12.0	12.1	12.2	11.2	11.6
	Discretionary spending			7.6	7.7	7.6	7.4	7.1	6.9	6.7	6.6	6.5	6.4	6.2	6.1	7.1	6.7
	Net interest			1.7	1.6	1.5	1.6	1.6	1.6	1.6	1.5	1.4	1.4	1.3	1.2	1.6	1.4

		Total		20.0	20.4	20.3	20.1	20.0	19.4	19.5	19.5	19.5	19.7	19.6	19.4	19.8	19.7
			On-budget	16.7	17.1	16.9	16.7	16.7	16.1	16.2	16.1	16.1	16.3	16.1	15.9	16.5	16.3
			Off-budget	3.3	3.3	3.4	3.4	3.3	3.3	3.3	3.4	3.4	3.4	3.5	3.5	3.3	3.4

Deficit (-) or Surplus				-1.2	-2.5	-1.4	-1.4	-0.6	0.6	0.4	0.5	0.5	0.4	0.6	0.9	-0.4	0.1
	On-budget			-2.5	-3.9	-2.7	-2.7	-1.9	-0.8	-1.0	-0.8	-0.7	-0.8	-0.5	-0.2	-1.8	-1.1
	Off-budget			1.3	1.4	1.3	1.3	1.4	1.4	1.3	1.3	1.3	1.2	1.2	1.1	1.4	1.3

Debt Held by the Public				36.8	37.7	37.8	37.3	36.0	33.8	32.0	30.3	28.5	27.0	25.4	23.5	n.a.	n.a.

CBO constructs its baseline in accordance with provisions set forth in the Balanced Budget and Emergency Deficit Control Act of 1985 and the Congressional Budget and Impoundment Control Act of 1974. (Although the provisions of the Deficit Control Act that pertain to the baseline expired at the end of September 2006, CBO continues to follow that law’s specifications in preparing its baseline.) To project revenues and mandatory spending, CBO assumes that current laws continue unchanged in the future, with only a few exceptions.² That approach includes the assumption that various changes in tax law enacted since 2001 expire as scheduled, by the end of December 2010, causing a rise in revenues thereafter. To project discretionary spending, CBO adjusts the current year’s budget authority for inflation and for certain other factors, as the Deficit Control Act specified. The resulting baseline projections are not intended to be a prediction of future budget outcomes. Rather, they serve as a benchmark that lawmakers can use to measure the effects of spending or revenue proposals, such as those in the President’s budget.

Since January, CBO has increased its current-law estimate of the deficit for 2008 by $138 billion, to $357 billion (see Table A-2). Most of that change stems from the enactment of the Economic Stimulus Act of 2008 (Public Law 110-185) in February. The net impact that CBO’s baseline updates have had on its projection of the cumulative surplus for 2009 through 2018, however, has been minimal—a drop of $4 billion from CBO’s January estimate of $274 billion. For that 10-year period, changes in economic assumptions improve the budget outlook by an average of $30 billion a year—but technical changes and the impact of enacted legislation more than offset those economic effects. (Technical changes are those not directly related to changes in law or in the economic outlook.)