Playing By the (Budget) Rules: Understanding and Preventing Budget Gimmicks

1. CRFB.org1

2. CRFB.org
Budget Gimmicks
The breakdown in the federal budget process and erosion of
budget discipline have led to the reliance on budget
gimmicks.
While a number of budget rules and norms exist to enforce
fiscal discipline, budget gimmicks provide legal workarounds
to these rules and norms.
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Budget Gimmicks
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For more information on the 20 budget gimmicks
presented in this chartbook, read CRFB’s in-depth paper:
Playing By the (Budget) Rules:
Understanding and Preventing Budget Gimmicks
http://www.crfb.org/papers/playing-budget-rules-understanding-and-
preventing-budget-gimmicks

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Playing By the (Budget) Rules:
Understanding and Preventing Budget Gimmicks
1. Unrealistic Policy Assumptions
2. Rosy Economic Scenarios
3. Magic Asterisks and Unspecified Savings
4. Inflated Savings Estimates
5. Shopping for Estimates
6. Arbitrary Phase-Ins
7. Front-Loading Costs, Back-Loading Savings
8. Pushing Costs Outside the Budget Window
or Savings Inside the Window
9. Using Temporary Savings to Offset
Permanent Costs
10. Arbitrary Policy Sunsets
11. Back-Loading Costs Beyond the Ten-Year
Window
12. Changing the Ten-Year Window to Evade
Fiscal Responsibility
13. Counting Timing Shifts as Budgetary
Savings
14. Using OCO to Circumvent Discretionary
Spending Caps
15. Counting Planned War Spending
Reductions as Savings
16. Phantom Savings from Uncapped
Discretionary Spending
17. Counting Savings from Extending
Discretionary Spending Caps
18. Phony Changes in Mandatory Programs
(CHIMPs)
19. Double Counting Trust Fund Improvements
20. Directing Scorekeeping to Favor Chosen
Policies
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We break down the 20 gimmicks into 4 categories:
 Assumption Gimmicks
 Manipulating the Budget Window
 Discretionary Spending Gimmicks
 Other Gimmicks
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Playing By the (Budget) Rules:
Understanding and Preventing Budget Gimmicks

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Assumption Gimmicks
1. Unrealistic Policy Assumptions
2. Rosy Economic Scenarios
3. Magic Asterisks and Unspecified Savings
4. Inflated Savings Estimates
5. Shopping for Estimates
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1. Unrealistic Policy Assumptions
 Budget authors will propose or assume policies they
know can never actually be realized in order to make
their budget appear more fiscally responsible.
 For example, the President’s FY 2019 budget assumed
$1.5 trillion in cuts to non-defense discretionary (NDD)
spending just after policymakers agreed to increase
discretionary spending, including NDD spending, for 2018
and 2019.
 Every year they have been in place, the sequester-level
caps on discretionary spending have been raised.
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Percent Real GDP Growth
Source: WSJ = a survey compiled by the Wall Street Journal; Professional Forecasters Survey (PF Survey)
= compiled by the Federal Reserve Bank of Philadelphia; EIU = The Economist Intelligence Unit;
OMB = Office of Management and Budget (President’s FY 2018 Budget); CBO = Congressional
Budget Office (June 2017 Baseline); OECD = Organisation for Economic Co-operation and
Development; IMF = International Monetary Fund; UN = United Nations.
2. Rosy Economic Scenarios
2017 Survey of Projected Real GDP Growth Rates
2.4 2.3 2.3
1.9
3.0
2.1
1.9
1.6
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2017 Long-Term (FinalYear)
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Billions of BA
Source: Office of Management and Budget and CRFB calculations.
Data excludes the effects of the Bipartisan Budget Act of 2018.
3. Magic Asterisks and Unspecified Savings
Base NDD Budget Authority in the FY 2019 President’s Budget
$0
$100
$200
$300
$400
$500
$600
$700
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
President's Budget Levels
~$1.75
Trillion
Baseline
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4. Inflated Savings Estimates
 Inflated savings occur when policymakers overstate
potential deficit reduction from a given policy.
 For example, the President’s FY 2019 budget claimed
$140 billion of savings from reducing improper payments
when similar policies have saved less than $10 billion.
 Savings in the FY 2019 budget assumed improper
payments could be reduced by 1/3 by 2028 – far in excess
of what experts and analysts believe is possible.
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5. Shopping for Estimates
 The Chair of the Budget Committee technically has the
right to select the official score and thus could shop
around for a preferred score.
 To use a score that is not from CBO, however, would be
extraordinarily unusual.
 For example, in July 2017, one Senator suggested having
HHS score an amendment to the Better Care
Reconciliation Act if CBO could not produce a score
quickly enough.
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Manipulating the Budget Window
6. Arbitrary Phase-Ins
7. Front-Loading Costs, Back-Loading Savings
8. Pushing Costs Outside the Budget Window or Savings
Inside the Window
9. Using Temporary Savings to Offset Permanent Costs
10. Arbitrary Policy Sunsets
11. Back-Loading Costs Beyond the Ten-Year Window
12. Changing the Ten-Year Window to Evade Fiscal
Responsibility
13. Counting Timing Shifts as Budgetary Savings
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Billions of Dollars
Source: JCT. Excludes timing shifts of corporate tax revenue from one year to another.
6. Arbitrary Phase-Ins
Annual Cost of the 2001 Tax Cuts
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Fully In Effect
Set To
Expire
Tax Cuts Phasing In
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7. Front-Loading Costs, Back-Loading Savings
 Front-loading costs while back-loading savings reduces
the likelihood that offsets will ultimately materialize while
leading to additional borrowing costs even if they do.
 For example, the Bipartisan Budget Act of 2013 provided
sequester relief in FY 2014 and 2015.
 $47 billion of its $85 billion in offsets occurred in the final
two years of the budget window.
 One of these back-loaded offsets – an adjustment to
military retirement benefits – was later repealed.
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Billions of Dollars
Source: Congressional Budget Office and CRFB calculations.
8. Pushing Costs Outside the Budget Window or Savings Inside the Window
Annual Savings of Pension Provisions of the Bipartisan Budget Act of 2015
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
2018 2019 2020 2021 2022 2023 2024 2025 2026
Artificial “Savings”
Transferred Inside the
Window: $2.6 Billion
Endoftheten-yearbudgetwindow
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2015
2016
2017 2018
2019
2020
2021
2022
2023 2024
-$25
-$20
-$15
-$10
-$5
$0
$5
$10
$15
$20
$25
$30
Billions of Dollars
Source: Congressional Budget Office.
9. Using Temporary Savings to Offset Permanent Costs
Savings/Costs (-)of the 2014 House Proposal to Replace the Sustainable GrowthRate
Total Costs: $49 billion
Total Savings: $94 billion
Costs
Continue
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Billions of Dollars
Source: Joint Committee on Taxation, CRFB calculations.
Numbers rounded to the nearest $5 billion. Interest effects not shown.
10. Arbitrary Policy Sunsets
Annual Costs of the Tax Cuts & Jobs Act
$136
$280
$260
$220
$180
$140
$120 $115
$40
-$35
$285
$265
$230
$220
$200
$180 $175
$210
$280
-$50
$0
$50
$100
$150
$200
$250
$300
$350
2018 2019 2020 2021 2022 2023 2024 2025 2026
Tax Cuts and Jobs Act
If Extended
2027
Provisions Start
Expiring
Most Provisions for
Individuals Expire
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-$10
$0
$10
$20
$30
$40
$50
$60
$70
$80
2014 2017 2020 2023 2026 2029 2032 2035
11. Back-Loading Costs Beyond the Ten-Year Window
2015 Permanent Doc Fix Illustrative Costs and Savings Path
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First Decade Second Decade
Costs
Savings
Source: Congressional Budget Office Score of H.R. 2 and CRFB calculations.
Costs include associated debt service.
Billions of Dollars

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12. Changing the Ten-Year Window to Evade
Fiscal Responsibility
 Policymakers could extend (or shrink) the budget window
simply to evade current budget rules or norms.
 For example, during consideration of the Tax Cuts and
Jobs Act, some advocated for extending the budget
resolution from 10 years to 20 or 30 years to circumvent
the Byrd rule.
 This would have helped make the tax cuts more
permanent rather than expire after 8 years.
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13. Counting Timing Shifts as Budgetary Savings
Annual Deficit Impact of Pension Provisions in 2014 Transportation Bill
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2014
2015
2016
2017
2018
2019
2020 2021 2022 2023 2024
-$5
-$4
-$3
-$2
-$1
$0
$1
$2
$3
$4
$5
$6
Total Savings: $19 billion
Total Costs: $12.5 billion
Costs
Continue
Source: Joint Committee on Taxation, July 2014.
Billions of Dollars

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Discretionary Spending Gimmicks
14. Using OCO to Circumvent Discretionary Spending Caps
15. Counting Planned War Spending Reductions as Savings
16. Phantom Savings from Uncapped Discretionary
Spending
17. Counting Savings from Extending Discretionary
Spending Caps
18. Phony Changes in Mandatory Programs (CHIMPs)
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14. Using OCO to Circumvent Discretionary Spending Caps
Omnibus Reduces OCO Spending, But Still Spends Above Caps
$18
$80 $87
$79
$115
$166
$182
$140 $163 $159
$127
$82 $86
$64 $59
$83
$65
$8
$23
$3
$3
$4
$5
$14
$11
$11 $7
$9 $15
$21
$13
$20
$88
$110
$82
$118
$170
$187
$154
$163 $159
$138
$93 $92
$74 $74
$104
$78
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
2002 2004 2006 2008 2010 2012 2014 2016 2018
Omnibus
Defense
Non-defense
President's Request
Source: Office of Management and Budget, Congressional Research Service, Republican Study Committee
documents for 2018 Omnibus.
Before 2013, the defense and non-defense categories were not as clearly defined, so the allocations
between the categories are not comparable across years. Totals for each year are in black.
Billions of Dollars
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15. Counting Planned War Spending Reductions as Savings
2014 Example of War Drawdown “Slush Fund”
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Sources: Congressional Budget Office, Office of Management and Budget, U.S. Senate Committee on Veterans
Affairs, and CRFB calculations.
Billions of Dollars

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16. Phantom Savings from Reducing Uncapped Discretionary Spending
Emergency Designation Spending over Time
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$10B
$53B
$6B
$12B
$8B
$28B
$110B
$0
$20
$40
$60
$80
$100
$120
2012 2013 2014 2015 2016 2017 2018
Hurricane
Sandy
Hurricanes Harvey,
Irma, & Maria
Source: Congressional Budget Office.
Billions of Dollars

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$1,000
$1,100
$1,200
$1,300
$1,400
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
CBO Baseline OMB Baseline Discretionary Caps in President's Budget
2022-2025 OMB
Claimed Savings:
$230B
2022-2025 Actual
Cost: $80B
17. Counting Savings from Extending Discretionary Spending Caps
Budgetary Effect of the President’s FY 2016 Proposed Discretionary Caps
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Sources: Congressional Budget Office, FY 2016 President’s budget, and CRFB calculations.
Billions of Dollars

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18. Phony Changes in Mandatory Programs
Nearly All the CHIMPs Produce No Savings
Sources: Congressional Budget Office and CRFB calculations.
CHIMPs without
real savings by
cutting empty
budget authority:
$3.7B
CHIMPs without real
savings by delaying
spending:
$13.3B
Net CHIMPs with real savings:
$500M
Total net CHIMPs: $17.5 billion
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Other Gimmicks
19. Double Counting Trust Fund Improvements
20. Directing Scorekeeping to Favor Chosen Policies
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19. Double Counting Trust Fund Improvements
 Lawmakers often use trust fund savings or revenue to
finance non-trust-fund spending or tax cuts; if this money
improves solvency, it is counting the same money twice.
 For example, among the pay-fors included in the
Affordable Care Act was a new Medicare surtax on wages
over $200,000 as well as a number of spending reductions
within the Medicare HI program.
 These changes improved the solvency of the HI trust fund;
at the same time, they were counted as offsets to new
spending.
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20. Directing Scorekeeping to Favor Chosen Policies
 The Budget Committees have the power to direct CBO to
change the way they score certain legislation.
 For example, in 2000, the Budget Committees directed CBO
to approximate OMB’s methods for estimates of a variety of
programs but most notably for defense.
 The directed scorekeeping lowered the score of
appropriations by $3 billion in budget authority and about
$19 billion in outlays.
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For More Information, Read
Playing By the (Budget) Rules:
Understanding and Preventing
Budget Gimmicks
http://www.crfb.org/papers/playing-budget-rules-
understanding-and-preventing-budget-gimmicks
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