The Assumptions That Underly the Budget

Most conversations about the federal budget concern programs: whether their funding will be increased or decreased, whether they'll cut or hire staff, whether they'll disappear all together. But a memo from the Congressional Budget Office on whether it might make sense to switch from the Consumer Price Index to the chained Consumer Price Index as a means of calculating rates of increase for some benefits programs is a useful reminder that there are many underlying assumptions that influence the budget too, beyond the boundaries of any specific program:

According to many analysts, however, the CPI overstates increases in the cost of living because it does not fully account for the fact that consumers generally adjust their spending patterns as some prices change relative to other prices. One option for lawmakers, as discussed in a brief released today, would be to link federal benefit programs and tax provisions to another measure of inflation--the chained CPI--that is designed to account fully for changes in spending patterns. (CBO previously discussed the possibility of using the chained CPI in its August 2009 Budget Options volume.) The chained CPI grows more slowly than the traditional CPI does: by an average of 0.3 percentage points per year over the past decade. As a result, using that measure to index benefit programs and tax provisions would reduce federal spending (especially on Social Security and federal pensions) and increase revenues.

No matter what side of the aisle you're on, if lawmakers want to get serious about controlling the federal budget, they've got to look at much more than cuts.