How Baseline Budgeting is Bankrupting My Generation

Posted: Mar 09, 2013 12:01 AM
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How Baseline Budgeting is Bankrupting My Generation

Congratulations America! With the sequestration implemented, we finally cut spending!


Wrong! Unfortunately, the American public has just been deceived by politicians and the mainstream media.

Too often we hear politicians boasting about "cutting" spending and how they are "reducing" the federal deficit. During the recent sequestration debate, the vast majority of the media, Congress and President Obama all referred to the sequester as "cuts."

During the past few weeks, we have been told these sequester "cuts" will be detrimental to firefighters, teachers and seniors. In order to realize what they mean by a "cut," we must first look at the definition of "cut." A cut, according to Washington math, means a reduction in the amount of increased spending. The mainstream media and demagogues in Washington are trying to keep our citizens in the dark by neglecting to point out that the net result of these "cuts" is actually an increase in spending!

How is this deception possible? How can Washington "cut" spending, but then end up spending more? It is because of an accounting method Washington has used for years called "baseline budgeting."

The beginning of baseline budgeting started in 1974 with the Congressional Budget Act signed by President Nixon. This bill required the Office of Management of Budget to release projections of federal spending for the upcoming fiscal year. These projections are designed to naturally anticipate population growth, inflation and other market tendencies. When baseline budgeting was implemented, it gave Congress a "baseline" of spending from the previous year. For example, if Congress allocated $50 Billion last year to the Department of State, then the next year their budget would automatically start with the "baseline" of $50 Billion. When you incorporate the automatic increases in spending, for example, a 10% increase, then spending would increase to 55 Billion without Congress acting at all.

This system of budgeting is extremely dangerous for many reasons. If spending is automatically increasing every year without any congressional action, the size of the federal government could DOUBLE over the next 10 years without Congress ever taking a vote. Right now federal spending is on cruise control growing at an automatic average rate of approximately 7%. Therefore, if Congress does absolutely NOTHING during the next 10 years, then government spending will double! Unlike your car, Uncle Sam's cruise control is not maintaining the same speed but rather is increasing speed going faster and faster. Baseline budgeting makes it almost impossible to put the brakes on government spending which is out of control. My generation will bear the brunt of the inevitable crash that will occur. Where are the leaders who have the courage to disengage this dysfunctional cruise control and put on the brakes?

Baseline budgeting is dangerously deceptive to the American people because while politicians and the media talk about spending cuts, government spending and borrowing is actually increasing adding to the debt being passed down to my generation. Baseline budgeting is bankrupting my generation and stealing the future from children not old enough to vote yet. Big government advocates love baseline budgeting because they can increase spending while, in the next breath, proclaim they cut spending! The best way to truly understand baseline budgeting is to compare how a typical American family does its budgeting versus the US government.

Let's say the Jones family typically earns $100,000 and spends $100,000 a year to maintain their standard of living. But due to a lackluster economy, both Mr. and Mrs. Jones are told by their bosses they have to take 10% pay cuts at their jobs. In order to continue living within their means, they decide to "tighten their belts" and cut their annual household spending 10% from $100,000 to $90,000. This type of budgeting makes sense to the common person and is how we would expect our government to operate its budget.

But now let's see how the government does its budgeting.

Let's say, for example, Dan Smith is a government bureaucrat with an annual operating budget of $100,000 to run his small department in 2013. Due to baseline budgeting, Dan's budget may automatically increase 10% to $110,000 in 2014.

Now let's imagine that the President and Congress finally decide to get spending under control and agree to cut spending across the board by 10% starting in 2014. This means the budget for Dan's department will not increase and instead will go down from $100,000 to $90,000 just like the Jones family had to cut its budget by 10%... Right?

WRONG! Dan's budget for 2014 will actually grow from $100,000 to $109,000! The government calls this $9000 increase a "cut" of 10%. Sounds crazy but the government calls Dan's annual increase of $9000 a 10% "cut" because Dan is getting 10% less of the automatic increase built into his department's budget. Dan was expecting $110,000 in 2014, but Congress forced him to "tighten his belt" and "cut" his budget to $109,000 in 2014. In the meantime, most of the country thinks that Dan will be cutting his department's budget to $90,000. What politicians and the media often call a "cut" are in reality "reductions in the rate of growth."

To summarize, let's look at the math formula of the Jones's world of logical reasoning versus the government's insane world of baseline budgeting. In the normal world of the Jones family, $100,000 - 10% = $90,000. But in the irrational world of government arithmetic, $100,000 - 10% = $109,000.

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After understanding how the government runs its budget, is it any surprise we are accelerating towards 17 Trillion dollars of debt and over 100 trillion dollars in unfunded liabilities? If politicians and the mainstream media continue to tell the American people we are "cutting spending," when in reality we are merely lowering the rate of growth, then my generation will never see a balanced budget in our lifetime. Thus far, Washington has failed to address the reality of our spiraling debt and deficits and their only solution is to "kick the can down the road" with band-aids like the recent sequestration. Eventually, all these cans are going to end up in my generation's front yard. For the sake of my generation, I hope Washington and the mainstream media begin to tell the truth about why government spending is out of control. Otherwise, today's youth will become the first generation to be worse off than the previous generation.