Saturday, August 06, 2011

When Is a Budget Cut Not a Budget Cut?

It is when you use the (unprincipled) principle of baseline budgeting. I sat down to write something about how the federal government's use of this technique, as it did last week, to simultaneously claim both spending increases and spending cuts but I found that the Intellectual Conservative beat me to it (read the whole thing, of course):

Baseline budgeting says that the budgetary estimate of government spending in any fiscal year is automatically assumed to continue at pre-ordained rates of expansion in all subsequent years. This definition, boiled down to its least common denominator, means that spending never decreases from one year to the next.
P.J. O'Rourke had an amusing illustration of how this works in his 1991 book, Parliament of Whores:

Say the federal government has a program to teach self-esteem, motivation and marketable job skills to debutantes. Call it DebSelf. And say that congress has authorized $100 million in 1990 DebSelf funding. 1991 budgeteers would then factor in 5 percent for inflation, not a 10-percent increase in the population of girls who had coming-out parties in the Standard Metropolitan Statistical Areas' civilian labor force, assume a 10-percent increae in DebSelf program utilization based on Census Bureau surveys of cotillion-ball activity and give DebSelf a $125 million baseline. (Note that using the current services baseline reasoning, DebSelf grows to be a $10 billion program in twenty years.)
Until we abolish the use of this technique we will never see the federal budget cut as ordinary people like ourselves understand a budget cut; actually spending fewer dollars this year than we did last year. In the example above, the government will claim that the DebSelf program spending is flat and if say, a proposal is made to cut the 5% inflation assumption to 4%, the program still grows but the program's defenders will scream that it is being cut by 20%.

If a company in the private sector used baseline budgeting the executive management would end up in prison, and rightly so. Any company that spends more than it brings in in cash is going to actually cut costs if it wants to continue in business. It will lay off employees, close unprofitable lines of business, sell assets, etc. That is reality for any of us that can't print our own money or have a no-limits Visa card.

This should be the next mission for us Tea Partiers: honest budgeting using real dollar cuts. I'd say federal spending should be cut to 2006 levels, useless departments shut down and employees laid off. It's time the federal government lived with the realities the rest of us do.

Update: A minor case of link rot appears to have afflicted this post. The link to the Intellectual Conservative no longer takes you to the post. It can now be found at Philadelphia Speaks.
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1 comment:

Anonymous said...

Amen, Brother JB!

Our government simply reflects who we have elected. Nancy Pel-joke-si, Hairy Slippery-eel-Reed,Barney Flank Fife, JohnBoy Swiftboat-Kerry, Anthony Little-Wiener, not to mention Oregan Congressman, David Wu. And then there is the eminently qulified, Barry Hussein Obummer.

God save the Queen (of SF.)