Baseline budgeting: The statists’ thumb on the scale

Ken Hagerty Policy Vice President, Renewing American Leadership Action
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On the afternoon of July 12, 1974, House and Senate Democratic leaders were arriving early at the White House — well before their demoralized Republican counterparts. And were they ever pumped! As they trouped into the President’s office for their photo-op, it became clear they considered this a victory party. They almost literally pranced around the Oval Office giving each other the 1970s equivalent of high-fives and chest bumps.

President Richard Nixon was about to sign the Congressional Budget and Impoundment Control Act, one of his last major acts before he resigned from office on August 9. Tucked into the minutiae of its pages was a secret weapon, little understood by most of official Washington then or now, but well appreciated by Senate Majority Leader Mike Mansfield (MT) and his deputy Robert Byrd (WV), House Speaker Carl Albert (OK) and his Majority Leader Tip O’Neill (MA), House Ways and Means Chairman Al Ullman (OR) and his Senate Finance counterpart Russell Long (LA), all in attendance.

Juxtaposed against the Democrats’ frolic was the Watergate-crushed President, standing there like a stone. His eyes were dead. He was shell-shocked and numbed by the looming collapse of his presidency. In a lifeless monotone he recited about two paragraphs, signed the bill into law, and that was that.

But what had those excited insiders known that the rest of us hadn’t? It took me years to recognize that the little drama I witnessed exemplified the Democrats’ success in embedding their statist budget philosophy into law while Nixon was still president, but powerless. The crucial provision of that budget act — baseline budgeting — gets nearly as little attention today as it did in the summer of ’74. Yet that rule has silently and relentlessly bloated the size of our government for nearly four decades.

The Budget Act of 1974, for the first time, mandated one particular approach to budgeting that the federal government would be required to use in perpetuity for discretionary appropriations. Rather than deciding the spending level of each budget account from scratch — a “zero base” — every year, or periodically, the act mandates that the Congressional Budget Office establish a “baseline” that continues and increases the previous year’s appropriation every year, until the underlying authorizing law expires — which often is never. Later Congresses added additional dollars to the baseline formula for estimated inflation, and still more for population expansion, and a list of other factors.

This “CBO Baseline” put the discretionary side of the federal budget on autopilot and immortalized most federal spending programs. Baseline budgeting is a hidden ratchet that drives up every discretionary budget line item every year, regardless of need or program effectiveness, unless Congress or the president intercede on a case-by-case basis.

What’s worse, this provision encourages congressional laziness. If Congress doesn’t act, baseline budgeting acts for them. And these increases are cumulative over time. Most of the legislators who are even aware of it consider baseline budgeting a big labor saving device, rather than a compounding ratchet that inflates government every year, even before any new programs are added.

Assigning the non-partisan Congressional Budget Office to calculate the “CBO Baseline” also slyly implies that the resulting increases are non-partisan. But there was nothing non-partisan about it. As we saw in the Obamacare fight, the “non-partisan” CBO can be highjacked by the majority party. During that battle, the Democrats directed CBO to “score” a fraction of the bill that omitted Medicare’s multi-billion dollar annual “doc fix.” The Democrats and CBO knew their cost estimate was incomplete and misleading. But the Administration and the press were happy to use that number to sell Obamacare.

Baseline budgeting is one of the chief culprits in making the federal budgeting process so arcane and complicated that hardly any citizens or even legislators understand it. And because the CBO baselines are “mandated by law,” proponents of every discretionary program are able to accuse anyone who favors a lower amount than the next baseline, of “cutting” those programs, even though the new spending level in the “cut” is almost always higher than the previous year’s appropriation.

Mandatory baseline budgeting is the hidden engine of American statism. If we are to remain a constitutional republic we must abolish it. Now that would be worth a few chest bumps.

Ken Hagerty is a public policy strategist in Washington, D.C. From 1972-76 he was Deputy Assistant to the Director for Congressional Relations at the Office of Management and Budget.