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The U.S. Budget

Why Do Budget Baselines Matter?

Last Updated March 20, 2025

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This year, lawmakers are considering proposals to address the expiration of certain provisions of the Tax Cuts and Jobs Act (TCJA) that were originally enacted in 2017. Leaders in the House and Senate are using the budget reconciliation process to address those expirations, which has led to a debate on the appropriate benchmark against which to evaluate the budgetary impacts of the legislation.

Normally, the budgetary effect of any proposal would be measured against a current-law baseline, which reflects the law as written. Under that approach, extending expiring provisions would correctly show a cost for continuing them. However, some have argued that the cost of extending expiring provisions should not be counted in a budget “score,” as they are the policy currently in effect. The current-policy baseline approach is a budget gimmick that would allow for increases in the deficit without proper accounting.

Applying the current-policy baseline would not only be fiscally irresponsible in terms of this year’s tax debate, but it would set a dangerous precedent for the future, potentially opening the door to unknown trillions more in added debt in the years ahead.

What is Current Law Versus Current Policy?

Simply put, a baseline is a set of detailed projections of federal spending, revenues, deficits or surpluses, and debt for the current year and some years to follow (normally a decade under current budgetary practices). Typically, those projections inform policymakers on the nation’s fiscal condition if no changes are made, providing a benchmark against which to measure legislative actions. Two main entities in the federal budget process create such baselines each year — the Office of Management and Budget (OMB) and the Congressional Budget Office (CBO). OMB’s mission is to assist the President in meeting policy goals, budgeting, management, and regulation. CBO is a non-partisan agency within the legislative branch that provides economic and budgetary information to support the Congressional budget process. Both agencies create current-law baselines as directed by language in the Congressional Budget and Impoundment Control Act of 1974 and subsequent modifications. CBO, as part of the legislative branch, generally provides the baseline that Congress uses to evaluate the cost of legislation.

Most of the rules that govern CBO’s current-law baseline are specified in law, although some guidance has been developed jointly by the House and Senate Committees on the Budget, OMB, and CBO. Here are the differences between a current-law baseline and a current-policy baseline:

Current Law

Current Policy

  • Estimates spending and revenue trends assuming that all policies are extended, even if the law states they are set to expire on a certain date.

For example, if Congress enacted a tax provision that was expected to cost $50 billion in 2025 and grow by 1 percent each year until its expiration in 2029, here is how the different baselines would play out:

Under a current-law baseline, the tax provision would be expected to cost $255 billion over the 10-year budget window; however, a current-policy baseline would assume that the tax provision would continue, thereby costing $523 billion. Under a current-policy baseline, the extra cost of the tax provision of $268 billion from 2030 to 2034 is simply incorporated into the totals, even though the provision is set to expire and a score had never been assigned to the second half of the period.

How Does the Baseline Affect Legislation?

The difference between using a current-law versus current-policy baseline becomes increasingly important when evaluating new legislation. CBO and the Joint Committee on Taxation (which has the responsibility for measuring changes to the tax code) score the cost of legislation proposed by Congress against a current-law baseline, which helps lawmakers understand the budgetary impacts of their policies. The fiscal outlook of the United States is already problematic, so having meaningful scores of proposed policies is necessary for lawmakers to understand how their actions will affect the federal budget. It is the conventional current-law baseline, as opposed to a current-policy baseline, that provides the appropriate benchmark to recognize the fully realized costs and budgetary impacts of proposed legislation.

Using a current-law baseline is especially important when budget reconciliation is on the table, as it is in 2025. Budget reconciliation allows for expedited consideration of certain legislation; it limits the time allowed for debate in the Senate and prevents the inclusion of non-budgetary provisions. The reconciliation process avoids the need to get 60 votes to end debate and, therefore, allows the Senate to adopt legislation with a simple majority (51 votes, or 50 votes plus the vice president as a tie-breaker). Instructions for the reconciliation process assign a dollar amount of changes to be made by specified committees, which would be determined relative to the baseline.

The proposed extension of the TCJA provisions in the context of budget reconciliation is an example of how using a current-law or current-policy baseline could affect the official evaluation of the legislation. Many provisions in the TCJA are set to expire in 2025, and lawmakers are trying to extend those provisions through budget reconciliation.

Relative to current law, extending the expiring TCJA provisions is projected to reduce federal revenues and increase the deficit by nearly $4 trillion (excluding interest) from 2025 to 2034. That is critically important in the context of budget reconciliation because a current-law baseline recognizes the legislated expiration of those TCJA provisions — i.e., the estimated $4 trillion reduction in revenues would need to be offset with $4 trillion in spending cuts or other revenue increases to remain deficit neutral over the budget window.

However, a current-policy baseline would assign no cost to those extensions, even though they would in reality contribute to annual deficits — their cost would already be baked into the baseline even though it had not been scored earlier. Essentially, a current-policy baseline could allow costly legislation to be enacted without properly accounting for it. Evaluating tax legislation against a current-policy baseline may make it easier for a tax bill to appear relatively costless.

Congress does have the ability to change the rules regarding how the baseline is calculated. It would be up to the Senate parliamentarian — the nonpartisan arbiter of Senate rules, precedents, and procedures — to allow the use of a current-policy baseline (instead of the conventional current-law baseline) to score a reconciliation bill.

A Current-Policy Baseline Would Set a Dangerous Precedent

Utilizing a current-policy baseline would set a dangerous precedent that could be exploited by future lawmakers. In the same way that a current-policy baseline would not account for the actual cost of legislating an extension of existing tax provisions, it also could be used to enact substantial spending increases without accounting for their costs.

The Bipartisan Policy Center notes that “adopting a current-policy baseline would open the floodgates for future Congresses — regardless of party control — to increase borrowing by trillions of dollars without accurately accounting for those costs.” One could imagine a future Administration applying the current-policy approach to spending programs rather than tax cuts. If such an approach were taken this year, for example, the enhanced subsidies currently in place under the Affordable Care Act could be extended after their expiration at the end of the calendar year. Similarly, a new spending program could be created for one year and then extended for the next decade in the following year.

Using a current-policy baseline is antithetical to the rules of the reconciliation process and would represent a systemic, institution-altering change. The Byrd Rule stipulates a budget window intentionally, typically of 10 years, in order to keep reconciliation legislation fiscally responsible. Scoring legislation against a current-policy baseline basically renders the Byrd Rule moot. Allowing this year’s budget reconciliation to use a current-policy baseline could normalize the consideration of legislation without the appropriate accounting for cost, thereby potentially worsening the nation’s fiscal outlook even further.

Conclusion

The baseline against which a piece of legislation is scored does not change the actual deficit or debt impact of the proposed law — but it does affect the way the budgetary impact of the legislation is evaluated for congressional scoring purposes, particularly in reconciliation, and can have the effect of easing passage of fiscally irresponsible legislation.

Budget reconciliation and the treatment of the TCJA under different baselines can have real impacts on what lawmakers can do with the federal budget this year. Regardless of the baseline used to score legislation, both presentations showcase a worsening fiscal situation. Deficits will average $2 trillion each year over the next 10 years and  debt will soon be higher than the size of the entire  economy, no matter which baseline is used to evaluate the legislation. Beyond this year, using the current-policy baseline sets an unwise and dangerous precedent that could open the floodgates to trillions more in deficit spending by future lawmakers. Given our daunting outlook, at the very least, lawmakers should stick to the current-law baseline, and choose from a wide range of available offsets for any policies they wish to extend or enact.

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