Sunday, April 19, 2009

There Is No Such Thing As A ‘Draconian’ Budget Cut in Washington!

There is absolutely nothing that makes me more crazed and reduced to tearing my hair out by the roots than to hear any politician on either side of the political spectrum scream about “draconian cuts” in national defense, Medicare, Medicaid, education funding, environmental protection or even ‘congressional earmarks’!

Do you know how many federal agencies have been completely eliminated over the past 30 years since President Ronald Reagan took office? Precisely ‘1’, and I am not sure anyone can even remember what it was since it was so tiny of an agency.

Only in Washington can the following sentence be considered as ‘true’ or mean anything to anyone so pay attention and listen carefully as you say it aloud with your own mouth:

“ SPENDING ‘CUTS’ IN THE U.S. FEDERAL BUDGET WILL MEAN MORE MONEY WILL BE SPENT
ON A PROGRAM NEXT YEAR THAN THIS YEAR!”

When you experience a ‘budget cut’ in your household budget, you ‘cut back’ or reduce your spending on cable television, going out to eat or selling your new car and buying a used one. In short, you will spend less next month or year than what you spent last month or year on a comparative basis.

Simple, right? Spending cuts in the real world mean spending less next time period than in your most recent budgeting time period prior to this one, correct?

In any other part of the 800 billion galaxies in which we live, you would be correct. But not if you were a Member of the US House of Representatives, the US Senate, the President of the United States of America or any person who worked in Congress or any of the massive federal agencies spread around the country.

Only in Washington and the federal government can a ‘spending increase’ be considered a ‘draconian spending cut”. I know it sounds ludicrous, and it is, but bear with me and let me explain.

There is this ‘thing’ in Washington called ‘baseline budgeting’ and everything in a federal budget is scored against this baseline that usually runs 5-10 years into the future. It is what is assumed will happen to the federal budget if ‘nothing happens in successive Congresses to change the baseline assumptions of growth in the program'.

In many cases, it would be preferable to just put the federal budget on auto-pilot, give Congress a 5-10 year recess and see what happens. It is only when Congress is in session that we wind up spending more money…on everything. I’d bet we’d save money in the long-run if we operated on a ‘continuing resolution’ basis. (more in a later post)

A colorful former Speaker of the House, Joseph Cannon of Illinois, supposedly once made a famous statement that ‘the best Congress is one that does absolutely nothing!’ Given events of recent years, he might have been correct.

But getting back to baseline budgeting, anytime you hear a politician squealing about a “draconian cut here’ or a ‘draconian cut there’, the only melody that should be ringing in your head as your process their tantrums is this: “That program is going to have more spent on it next year than this year!”

That is right and that is the truth. When politicians in Washington squeal about their favorite program being ‘cut mercilessly’, it means that it will be‘reduced from what it would have otherwise grown to, given inflation and other expectations’ scored by the Congressional Budget Office (CBO).

I know it sounds crazy and you wish your boss would look at your budget and salary the same way, or you could run your household budget in the same la-la land manner. But that is the way politicians have crafted the language and mores of Washington to suit their political needs. Like getting re-elected every other year in the House or every 6 years in the Senate. That is what it comes down to in most cases, unfortunately.

So think about this seriously the next time you hear your elected leader bemoan the fact that their favorite program, or yours, is being sliced and diced to death like in some Ronco Veg-a-Matic.

It is simply not the truth.

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