Exposing the baseline-budgeting myth

Victor Joecks

At the federal level, the greatest challenge facing believers in limited government is a practice called baseline budgeting. (For a short and humorous example of baseline budgeting, watch this video.)

In zero-based budgeting (aka real-life budgeting), you compare how much you spent last year to how much you plan to spend in the next year. For example, if you spent $50,000 last year and planned on spending $55,000 in the next year, you’d have a $5,000, or 10 percent, spending increase.

Not so with baseline budgeting. In baseline budgeting, you compare how much you spent last year plus your desired amount of spending increases to how much you plan to spend in the next year. For example, if you spent $50,000 last year and wanted to increase spending to $60,000, but decided to “reduce” spending and only spend $55,000 next year, that would be a $5,000, or 8.3 percent, spending decrease.

Do you see the trick there? In the two examples, you spent the same amount last year and are spending the same amount next year, but because of the baseline-budgeting assumptions, you can claim a $5,000 cut in spending.

This, of course, is garbage and gives advocates of big government an incredible PR advantage. Since most people would rather have a colonoscopy than try to understand federal budget numbers, this system allows tax consumers and leftists to publicly bemoan “cuts” – even if what’s being proposed are actually spending increases that are merely below the numbers that the “baseline” approach would entail.

Exhibit A is the recent debate over raising the debt ceiling and the $2 trillion in spending “cuts.” These aren’t cuts in the real sense – they are simply reductions in future spending. Even if Congress reduces future spending increases by $2 trillion, the deficit will rise to over $20 trillion in less than 10 years.

This is exactly the same trick that leftists used to claim that Nevada faced a $3 billion budget deficit before the 2011 legislative session. Fortunately, many elected officials and members of the media in Nevada understood that the common narrative was inaccurate and began noting that Nevada’s deficit was only about $1 billion.

Fixing the problem in the national press isn’t going to be so easy, but the Las Vegas Review-Journal editorial board has an excellent suggestion.

As Mr. [Peter] Ferrara suggests, the top tea party priority right now should be to replace baseline budgeting with “zero-based or family-style budgeting,” under which the word “cut” could be used only if the government really spent less than it did last year.

If the debate isn’t defined accurately, it’s no use having a debate on the merits of an issue. If your opponent can make you accept inaccurate assumptions, you’ve already lost.

The same is true in the debate over the national debt. First, believers in limited government need to expose and correct the baseline-budgeting myth. Once the terms of the deficit debate are defined accurately, it will be easy for conservatives and libertarians to show the country that America’s broke and that the growth in government spending needs to be slowed or, better yet, actually reduced.

If you’d like to read more on this issue, NPRI’s Geoffrey Lawrence has written a great commentary on the problems with baseline budgeting.