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Letter to the Honorable Tom Price Regarding Accounting for Automatic Spending Reductions in CBO's Baseline Projections 1 (March 13, 2015)

handle is hein.congrec/cbo2119 and id is 1 raw text is: O CONGRESSIONAL BUDGET OFFICE Douglas W. Elmendorf, Director U.S. Congress Washington, DC 20515 March 13, 2015 Honorable Tom Price, M.D. Chairman Committee on the Budget U.S. House of Representatives Washington, DC 20515 Re: Accountingfor Automatic Spending Reductions in CBO's Baseline Projections Dear Mr. Chairman: As you requested, the Congressional Budget Office is providing an explanation of the amounts included in budget function 920 (known as allowances) in its baseline projections.' Estimates in that function relate to the caps on discretionary funding as well as some of the required reductions in mandatory spending (a process called sequestration); likewise, both of those effects appear in function 050 (national defense), and the reductions in mandatory spending also affect function 570 (Medicare). Discretionary Spending In CBO's baseline for discretionary spending, budget authority for most accounts is assumed to grow with inflation from the most recent appropriations, as specified in the Balanced Budget and Emergency Deficit Control Act of 1985. However, CBO's baseline also incorporates the caps put in place by the Budget Control Act of 2011 (as later amended), and it 1. Budget functions are the broad programmatic categories used to classify federal programs and activities by their purpose or mission; they include, for example, agriculture, energy, and transportation. CBO's reports on its baseline projections do not generally show spending by budget function; however, the agency provides that additional detail to the House and Senate Committees on the Budget for use in preparing their budget resolutions. 2. Mandatory (or direct) spending includes spending for certain benefit programs and other payments to people, businees, nonprofit institutions, and state and local governments. It is generally governed by statutory criteria and is not normally constrained by the annual appropriation process. Discretionary spending is controlled by annual appropriation acts; policymakers decide each year how much money to provide for a broad array of government activities, including defense, law enforcement, and transportation.

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