Baseline Budgeting Magic

It’s hard to concentrate on anything but the debt ceiling debate right now. So, here’s another aspect or two.

Baseline budgeting, according to Wikipedia:

An estimate of spending, revenue, the deficit or surplus, and the public debt expected during a fiscal year under current laws and current policy. The baseline is a benchmark for measuring the budgetary effects of proposed changes in revenues and spending. It assumes that receipts and mandatory spending will continue or expire in the future as required by law and that the future funding for discretionary programs will equal the most recently enacted appropriation, adjusted for inflation. Under the Budget Enforcement Act (BEA), which will expire at the end of fiscal year 2006, the baseline is defined as the projection of current-year levels of new budget authority, outlays, revenues, and the surplus or deficit into the budget year and outyears based on laws enacted through the applicable date. 

Dry, I know. On Rush’s radio show this morning, he used an analogy to make this easier to visualize. I am paraphrasing here. Suppose your family has decided you can afford the payments for a new $40,000 car [this is not my family, just saying; we prefer the $5-$10,000 range]. So that is your plan, and you go out car shopping. But what you find is a $70,000 car that you love—that happens to be marked down to just $60,000. You can get it for less than expected, so that’s a $10,000 savings! You got for it. 

But it isn’t a savings of $10,000; it is an increase of $20,000 over what you had intended to spend and could afford. So now you’re in debt an additional $20,000, and you’re still just driving one (albeit marginally nicer) new car.  

So compare this to the budget debate. Because of the weird way government looks at their budget, they could freeze this year’s spending to exactly last year’s spending (something I think would have been at least the decent thing to do, since they haven’t written and voted on a budget since Obama took office), and we all know that would be an increase of zero, but no cut. Because we live in the real world. But in government-world, this is considered a $9 Trillion cut. Even though there are no cuts. [Pausing here to let you re-read that last sentence and let it sink in.] There is just a lower expectation back to the $40,000 new car, instead of spending on the unbudgeted but more appealing $70,000 car (that is a steal for $60,000—a $10,000 savings).  

It is difficult to communicate, to work with, to live with, people whose grasp on reality is tentative at best. The reality is, we ran out of money about $14.3 Trillion ago (that’s the current national debt, now hitting the ceiling). If you’re a family that is in debt nearly 1/4 the money you have been able to earn (gross) in your lifetime, it might not be a good time to buy a luxury car. It might be a better time to learn to function below your income, so that the mounting debt doesn’t bankrupt you. 

This could take prioritizing what you spend on. At home, this would be (besides covering your debt payments) shelter, food, and clothing—Walmart brands, not Armani. Then, if you can cover transportation and education (if needed), they might be next in priority—just beyond being able to survive. You don’t get to entertainment, vacations, new furniture, etc. at all until you get your debt completely under control. 

So, if Congress were to prioritize, maybe this order might work:

• Pay debt payments to prevent default (prevent bankruptcy).
• Pay essential government purposes as outlined in the Constitution (mainly protection of life, liberty, and property from international and local threats), so military and interstate police forces, and judiciary.
• Keep essential obligations that have already been promised to those who have no alternative way to make up for government default (SS, Medicaid for current recipients in need).
• Then, if it is possible to pay for anything else, open up each item for debate. (My plan here is to refuse anything in this debate that isn’t Constitutionally allowed.)

In the meantime, encourage our elected officials to call the president’s bluff (and he told us it was a bluff when he told Congress not to call his bluff—oops!) and then outline the spending he will be allowed to control. Because that is Congress’s job, to handle the purse strings; and it is the president’s job to use the available money to carry out his Constitutional duties—something he seems a little fuzzy on.