Baseline Budgeting: An Introduction to Government Accounting

I was originally planning on starting a post on the failure of the so-called "Super Committee" to come to an agreement, but a major point of that article will depends on understanding how Washington keeps its books.  Anyone who looks closely at Washington will see that our government does a lot of things in ways that no sane person would consider, and naturally, spending money is one of them.

The Federal Government tracks spending using a system called "Baseline Budgeting".  Under Baseline Budgeting, there are never any real spending cuts, only cuts in the rate of growth.  So while to the average, normal person, a spending cut involves actually spending less money, to Government it simply means not spending as much more as they were going to.

As a practical example, imagine you have worked at your job for several years, and every year you have gotten a five percent raise.  Now suppose this year, your boss calls you in and tells you that business is slow, and he can only afford to give you a raise of three percent.  A normal person will look at his three percent raise and think, "I'm still getting more money next year than I did this year."  But if you use the same logic as our Federal Government, you've just taken a pay cut.  You complain to anyone who will listen, likely using lots of words like, "deep", "substantial", or even "draconian".  You claim that your boss wants your family homeless and starving in the street.  Meanwhile, the people who pay your salary are wondering why they bother keeping you at all.

The problems with Baseline Budgeting are many.  The first is its abuse of the English language.  The average citizen assumes that "cutting the budget" means that the budget is actually being cut, rather than simply not growing as much.  When they hear politicians decrying attempt to cut the budget, they don't know that, even with the "cuts", the budget - and every individual line item in the budget - is still growing.

But the real problem with Baseline Budgeting goes much deeper.  Under Baseline Budgeting, it's just assumed that Government keeps getting bigger.  It assumes that every Government agency is necessary, effective, and worth keeping.  When the economy is booming, Government spending increases.  When the economy slows and families across the nation are cutting back, Government spending increases.  The government never looks at itself and asks, "Is this really working?  Are we getting our money's worth with this?"  And in the rare cases where somebody points out something isn't working, the answer is always, "We need to spend more on it."