2009:1). The U.S. Office of Management and Budget (OMB), in its annual long-run budget outlook published in April 2009, also says that “increasing health costs and the aging of the population will place the budget on an unsustainable course without changes in policy to address these challenges” (U.S. Office of Management and Budget, 2009a:191). In sum, our conclusion that a change of course is needed is not at all controversial among the government’s experts, and private analysts agree (Auerbach and Gale, 2009; Cox et al., 2009; Moore, 2009). What is controversial is just how urgent is corrective action, an issue we address later in the report. Similarly, there will be controversy, even among those who believe that action is needed very soon, on what mix of spending and revenue policies should be pursued to close the fiscal gap.
Constructing a Budget Baseline
A baseline is useful for understanding the implications of current policies as they could playout over time and as a benchmark against which to measure the effects of proposed policy changes. A baseline is not a prediction—of course, no one can predict the fiscal future with much accuracy over even a few years. Nor is it a “realistic” projection in the sense that it unrealistically assumes no changes in policy. The study committee developed its baseline by making several modifications to baseline projections published by the Congressional Budget Office. In most cases, these modifications were to take account of likely congressional actions. Specifically, the committee’s baseline assumes that Congress acts to extend expiring tax breaks that have bipartisan support, continues providing relief from the alternative minimum tax, adjusts for expected costs of operations in Iraq and Afghanistan, assumes modest increases (instead of sharp cuts that are in the law but Congress annually overrides) in fees paid to physicians by Medicare, and adds an expected cost for federal disaster payments.