Difference Between CBPP and CBO Ten-Year Budget Projections

This technical note explains how we adjust the Congressional Budget Office (CBO) ten-year budget baseline issued in January 2025 to create our CBPP baseline, which we use in our analyses of budget trends, proposed budget plans, and proposed or enacted budget legislation. Although our changes to CBO’s bottom lines are very small, we believe our modified baseline is useful because it better represents defense and non-defense appropriations.

We modify CBO’s budget projections of annually appropriated (“discretionary”) programs modestly, but make no changes to CBO’s projections of revenue or mandatory expenditures. Because some of our discretionary modifications increase funding while others decrease it, the trajectory of deficits and debt in our projections are very similar to CBO’s.

Because final 2025 appropriations were not enacted at the time CBO made its projections, CBO chose to assume that appropriations in 2025 would equal those in the continuing resolution in effect in January or would adhere to the statutory caps on defense and non-defense discretionary (NDD) funding established in the Fiscal Responsibility Act of 2023 (FRA)^[1], whichever was lower.

Our approach differs from CBO’s in three ways:

• For defense, CBO relied on the backup defense cap that applies temporarily — only when some portion of discretionary funding is in effect on a part-year basis,^[2] as in the current “continuing resolution,” which is scheduled to expire on March 14. This backup defense cap is $45 billion lower than the cap that will ultimately apply once full-year funding is enacted, so CBO reduced 2025 defense funding from its level in the continuing resolution to adhere to that lower cap, and projected defense funding for 2026-2035 to grow with inflation from that lower 2025 level.

  We, in contrast, assume that full-year 2025 funding for defense will be enacted at some point, in which case the 2025 defense cap as intended by the FRA will apply, rather than the lower backup cap; for that reason, we assume 2025 funding will be modestly higher than in the continuing resolution, and project defense funding for 2026-2035 to grow with inflation from that higher 2025 level.

• For non-defense funding, the situation is different: under the continuing resolution, existing 2025 funding is below both the non-defense cap as intended by the FRA and the higher backup cap currently in effect (see footnote 2). CBO therefore worked from the existing level of 2025 non-defense funding and projected it to grow with inflation for 2026-2035.

  We, in contrast, assume that full-year funding for non-defense programs will be enacted at some point, and that Congress will adhere to 2025 levels in the FRA plus the agreed-on adjustments — offsetting savings included in appropriations bills but outside normal, ongoing programs — that were part of the 2023 debt-limit negotiations and that are analogous to those enacted in 2024. For that reason, we assume 2025 non-defense funding will be modestly higher than in the continuing resolution, and then project non-defense funding for 2026-2035 to grow with inflation from that higher 2025 level.^[3]

  The continuing resolution for 2025 continues all but roughly $10 billion of those offsetting savings simply by instructing the executive branch to continue 2025 funding in a manner consistent with the 2024 appropriations bills. We assume that Congress will find roughly $10 billion more in offsetting savings elsewhere, raising the level of 2025 non-defense funding to the FRA non-defense cap for 2025 plus $70 billion in agreed-upon offsetting savings.

• Finally, we modify CBO’s projected funding for responding to natural disasters such as hurricanes, tornadoes, floods, wildfires, and earthquakes. Such funding is outside the FRA’s caps, so CBO’s baseline follows the standard rule of assuming that it grows with inflation from year to year, starting from the amount provided so far in 2025.

  Experience teaches us that in most years, disaster needs are below average, measured as a percent of GDP.^[4] But in a minority of years, disaster funding is far above the average, as when a major destructive hurricane cuts a swath across heavily populated areas. For this reason, over the course of a decade the historical average — the statistically likely level — is frequently greater than a simple projection of what occurred in the most recent year.

  In this year, just the opposite: the very large December 20 appropriations for disaster relief in response to Hurricanes Helene and Milton, some earlier wildfires, and the collapse of the Bay Bridge are about 2½ times the historical average level. And CBO projects almost all that funding to be repeated each future year, growing with inflation — the standard baseline approach to annual appropriations.

  But, as we have in the past, we modify the standard approach by instead projecting disaster funding in future years to equal its statistically likely (historically average) level as a percent of GDP. We therefore modify CBO’s baseline to assume a noticeably lower level of disaster funding, consistent with the statistically likely level, over the coming decade, 2026-2035.

Our assumed funding increases for regular, ongoing programs will increase CBO’s projected expenditures more rapidly than our assumed funding reductions for disaster relief will reduce CBO’s projected expenditures.^[5] Therefore, the net result is slightly higher expenditures for discretionary programs over 2025-2035. And these slightly higher expenditures directly — but slightly — increase projected deficits and net debt,^[6] which in turn leads to very slightly increased net interest costs through 2035.

In total, our baseline differs from CBO’s over the 2025-2035 period by including $99 billion more expenditures for discretionary programs (for defense, non-defense, and disaster relief) and $38 billion more interest costs.