“The first of the dreams that [my parents] instilled in me was individual responsibility and accountability. They taught me that in life you have consequences to each and every decision that you make, and when you try to shy away from those decisions, when you try to shy away from those consequences then someone will come in and allow you to be seen as a victim, and when you become seen as a victim, it’s a spiraling slope downward and downward. Before the next thing you know, you become dependent upon something and right here in the United States of America this is one of the things that we combat against because too many Americans are being castigated as victims. Too many Americans are not being individually responsible and accountable. Too many Americans are becoming dependent upon government and therefore government continues to grow. My parents and their dream was to have a son that was not a victim, but a son that was a victor, and that enables me to stand here before you today.” – Col. Allen West (1961-) U.S. Congressman (FL-R), retired Lt. Colonel in US Army
WHAT IS BASELINE BUDGETING?
If you have been watching the debt ceiling debate I sure you have heard this term “baseline budgeting” used more than once.
The genesis of baseline budget projections can be found in the Congressional Budget Act of 1974. That act required the Office of Management and Budget (OMB) to prepare projections of federal spending for the upcoming fiscal year based on a continuation of the existing level of governmental services. It also required the newly established Congressional Budget Office to prepare five-year projections (now ten years) of budget authority, outlays, revenues, and the surplus or deficit.
To be polite, it is government creative accounting method to deceive the public and give the Washington political establishment cover. Under baseline budgeting spending is automatically increased at at pre-ordained rates of expansion in all subsequent years. The baseline is normally enhanced by adding adjustment factors based on issues such as inflation, new programs, and anticipated changes to existing programs.
As to the current budget, the ten year projection is increased by 9.5 trillion dollars, whether it is needed or not. Under this system of budgeting, spending never decreases from one year to the next. It is compounded increases so that every ten years the budget is literally doubled.
Let me give you an example:
Budget line whatever: Department xyz is in line for an automatic budget increase of 10% in the next fiscal year and for whatever reason their budget is cut by 4%, the CBO will score this as a 4% savings.
Here is another example:
A person who expects to gain 100 pounds but only gaining 75 pounds takes credit for losing 25 pounds. The federal government is the only place this absurd logic is employed.
If the government were to announce a spending freeze — that’s to say, no increases, no cuts, everything just stays exactly the same — the Congressional Budget Office would score it as a $9.5 trillion savings.
The political establishment will herald this to the public as to what a fine job we did and the opposition will label it as “draconian cuts.” As you can see there is no real spending cuts here, it is all smoke and mirrors.
And another factor to be considered in all this madness, if the debt ceiling is increased today by a trillion dollars and it is spent within the next year, that is today’s money and if the cuts come ten years down the road, that is deflated money and doesn’t have the same purchasing power.
This is not a Republican or a Democratic issue as both parties are complicit in this fiasco.
If we really desire a return to fiscal sanity at the federal level; baseline budgeting must go.
WHAT IS A CUT?
For most of us who live in ‘fly over America’, that’s the inconsequential space between the East and West coasts, look at the term spending cut or cuts as something very real and tangible. In Washington a spending cut is something totally different from what we average people think.
Example: To me a spending cut would be like rolling back all government salary increases back to the first day that Obama took office and freeze it there until further notice. That is something you could see in real dollars right NOW!
Example: In Washington a spending cut is a mythical misnomer that even the tooth fairy would question. If a budget increase of 10% is decreased by 2% they call that a spending cut. There is nothing real or tangible in actual dollar savings.
And the best example yet as Rep. Paul Ryan illustrated:
“Let’s pass a $5 trillion dollar bill today to cover the moon with yogurt and tomorrow rescind the bill and the CBO will score this as $5 trillion dollars in budget cuts.”
And I will add, the following day there will be calls from Congress to subsidize the yogurt industry for loss of business.
And when these so called cuts come about 10 years down the road they are absolutely meaningless because no future Congress is bound by these cuts.
Clearly it is not only time for a balanced budget amendment, which our profligate Congresses and presidents have shown to be a necessary restraint. But considering the makeup of Congress today and the requirement of a 2/3 superior majority in the House and the Senate to pass such a balanced budget amendment, it will never happen until we send people to Washington will serve the people rather than themselves.
Sen. Coburn & Neil Cavuto Discussing Debt Limit Deal
Here is what I don’t like:
As they say the “Devil is in the details”, and of course the actual written agreement of 74 pages is not available at this time, but from what I have been reading and hearing I am not a happy camper.
Why is it that all the grand deals are done behind closed doors and We the People don’t ever have chance to review it until after the law is passed?
No tax hikes in the deal is what the Republicans are selling ..but wait, there are automatic tax hikes scheduled for Jan. 2013, that’s when the extension of the so called Bush tax cuts expire.
Obama has already signaled that he won’t extend the Bush tax cuts. The CBO as already scored the tax hikes into the long range projections of the budget. This is a one trillion dollar tax hike in real money!
The so called “Super Congress” that is being appointed to look for spending cuts will claim that if the Bush tax cuts are extended this will be a one trillion dollar savings which is pure B.S. because these are not REAL dollars. But of course they will all gather around in a press conference and pat themselves on the back for a job well done.
The plan calls for $900 billion in spending cuts from statutory caps on discretionary spending over ten years, but only $10 billion (chump change) of those cuts are scheduled to occur over the next two years. The remaining $1.5 trillion in cuts is supposed to come from a “Super Congress” made up of House and Senate members pulled equally from each party.
Have you ever seen one of these commission ever accomplish anything other than taking up space?
Obama gets a blank check for $ 2.4 trillion dollars and this will bring the debt ceiling issue beyond the 2012 Election. This issue is of primary importance to him, why are the Republicans giving him a pass on it?
The only positive I see in all of this is at least we have turned the debate around to focus on our unsustainable debt.
Another point: Since we have our fiscal woes what the hell are we doing giving a $90 million grant to China for studying prostitution? And/or spending millions of dollars rebuilding Mosques around the world? And/or providing a weekly payroll to 500 Palestine terrorist sitting in Israeli jails?
These are but a few of hundred of examples that illustrate how Washington squanders our hard earned money away and we are NOT talking about millions, we are talking about BILLIONS of our dollars being wasted.
This kind of fiscal insanity is what got us in trouble in the first place.
Washington’s misleading budget theater By: Steve Chapman.
It’s been a long and exhausting fight, but the debt ceiling clash will have a big payoff. After it’s finally resolved — with the Boehner plan or the Reid plan or something else — we will have confronted our budget crisis, made tough choices and forced the federal government to live within its means.
That’s right. And I’m Katy Perry.
We have heard a lot lately about plans to slash spending by trillions of dollars. Though these sound like deep cuts, they are not even shallow cuts. Under the plans being discussed in Washington, federal spending would rise, and so would the federal debt — not by a little, but by a lot.
Paul Ryan: Cut, Cap & Balance the Budget; Grow the Economy; Save this Country
The impasse over the debt ceiling has our federal government on the verge of default, according to President Obama. Yet one obstacle to reaching a sound agreement on fiscal policy is Mr. Obama’s recurring Robin Hood obsession. No matter what is at stake in terms of fiscal stability, economic growth and even unemployment, he always returns to his desire to take more from our nation’s famously odious millionaires and billionaires.
Frankly, raising marginal tax rates on the highest-income earners is not helpful for creating a meaningful economic recovery.
Our present fiscal situation grew out of the events of the past three years. In the wake of the financial turmoil of 2008, massive bailouts by the U.S. and other countries were unfortunate but necessary. The depression threat was too serious to allow the collapse of systemically important institutions. Allowing Lehman Brothers to fail was an error. And it was a lesson quickly learned by the government, which did not let it happen to AIG, Morgan Stanley, Citigroup and other large financial institutions.
What came after the financial crisis was a different matter, especially the Obama administration’s $800 billion-plus stimulus package of 2009. This intervention was largely a waste of money and has sharply enlarged the hole facing the U.S. economy.
The Obama administration has consistently overestimated the beneficial effects of government spending by using an unrealistically high spending “multiplier” of two or more. According to this Keynesian logic, government expenditure is more than a free lunch. By spending a dollar, we not only get back that dollar but also another dollar of free consumption or investment. This idea, if correct, would be even more brilliant than the magic of creating mounds of AAA mortgage-backed paper out of heaps of underlying garbage. With unemployment at 9.2% and consumption still at abysmal levels, it’s clear the Keynesian magic did not work.
Moreover, the Obama administration’s deficit financing has led to a sharp increase in our debt-to-GDP ratio, which the Congressional Budget Office now projects will soar to 70% by the end of this year—the highest percentage since shortly after World War II. This much public debt eventually requires higher taxes (unless future spending is cut by even more). But higher taxes lead to additional decreases in future economic growth.
SideBear: I have posted many different version of this article and the reason I do it is to hammer the point home.
They are all saying the same thing in different ways but what is interesting is Washington has learned a damn thing, specially the left and their Keynesian economic agenda.
The definition of insanity is “Doing the same thing over and over again expecting a different result.” – Einstein
I don’t believe it’s an accident that the symbol of conservatives is the mighty elephant, the animal that represents strength, loyalty and wisdom, whereas the symbol of liberals is the donkey, the beast that best represents stupidity and stubbornness.
Of course, if the Democrats ever decide to trade the donkey in for a more modern look, they need look no further than the big-eared creature braying in the Oval Office.
Recently, a friend sent me a few quotes from Obama’s two books, quotes which make his victory in 2008 all the more amazing and depressing.
For instance, in “Dreams From My Father,” he or Bill Ayers wrote: “I ceased to advertise my mother’s race at the age of 12 or 13, when I began to suspect that by doing so I was ingratiating myself to whites.”
Or how about: “I found a solace in nursing a pervasive sense of grievance and animosity against my mother’s race”?
The scam artist who insisted he would preside over the first post-racial presidency also shared the following thoughts:
While Austrians and Keynesians don’t agree on a lot of things, there is one thing on which they both seem to agree: the US economy is sinking into the morass of depression. At that point, however, the agreement ends, as the two schools have very different explanations as to why this is happening.
The Keynesians, through Paul Krugman and his New York Times megaphone, have been claiming that the original Barack Obama “stimulus” was too little, and the current emphasis on budget cutting at all levels of government is exactly the wrong strategy. Austrians, not surprisingly, believe that this explanation is nonsense, and dangerous nonsense.
In a recent column, Krugman lays out his thesis, and it is useful, for it truly exposes the Keynesian mind at work, and a Keynesian mind that allows for no other explanations as to what is happening. The problem is — and always will be — a lack of “aggregate demand,” and the only solution is for governments to spend as though they have hit the jackpot.
If anything describes the Keynesian mindset, it is this: spend, spend, spend. It is a simple thesis, one that certainly appeals to politicians, and even to much of the general public, and has dominated professional economic thinking in the United States since World War II. As Krugman states above, households cannot spend what they don’t have, and businesses, because they don’t see future demand, are not going to invest (read: spend through capital investment — which is always defined by Keynesians as being valuable because of spending, not because of any aspects of capital productivity).
SideBear: The economic news couldn’t be worse and I still maintain the economy will not improve until we have a change of guard in the White House. Spending is the problem but you wouldn’t know it if you listened to Paul Krugman.
It is time for someone call Krugman out. He is one of the architects behind this fiscal disaster and continues to spill out his failed Keynes economic policies. While Krugman will never admit this because he suffers egocentric ideas that he must reaffirm his position as NYT chief economist and is incapable of admitting he was wrong.
As Einstein once said, “The definition of insanity is doing the same thing over and over again expecting a different result.”
(This is the economic model that Krugman thinks is the be and end all)
Obamanomics: In case you thought the economy was doing better, Friday’s report on gross domestic product likely disabused you of that notion. It shows the last two years of economic policymaking have been an utter failure.
New data show that the economy has been expanding far less robustly over the past two and a half years than initially claimed.
According to the Commerce Department, first-quarter GDP growth was 0.4%, not 1.9% as first reported. In the second quarter, it grew at a tepid 1.3% pace.
A recent problem? Hardly. Fourth-quarter 2010 growth was also revised down, from 3.1% to 2.3%.
In fact, all told, from the end of 2008 to this year, the government estimates U.S. GDP was $314 billion less than first estimated, not including this year’s revisions.
After spending $830 billion on stimulus, $700 billion on TARP, with unknown trillions more to be spent on ObamaCare and welfare, the nation’s not better off.
The Keynesian stimulus put in place by the Democrats two years ago has been an economic disaster. Sadly, these latest data prove it. Our budget deficit is bad enough. But our growth deficit is devastating.