StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



GOP: Candidate For All-Time Budget Hypocrites

28 Feb 2012
Posted by Stan Collender

My column from this morning's Roll Call explains why the Republican position on not using cuts in the projected spending for military activities in Afghanistan makes them all-star budget hypocrites, and then some.

After reading the column, you may also say it's "par for the course."

Republicans Set Stage to Become All-Time Budget Hypocrites

By Stan Collender
Roll Call Contributing Writer
Feb. 28, 2012, Midnight

Congressional Republicans so far have been adamant that reductions in the projected spending assumed in the federal budget baseline for projected continuing military activities in Afghanistan must not be used to offset the cost of anything.

They’re not wrong in making this line-in-the-sand stand. They are, however, being astounding, perhaps even top-10 all-time, hypocrites in the process.

The key concept the GOP is misusing to qualify for the budget hypocrisy hall of fame is “the baseline.” While both political parties are often guilty of misstating what the baseline is and means, doing this has been a staple of Republican budget politics for the three-plus decades I have been involved with the Congressional budget process. It’s anything but surprising, therefore, that it has re-emerged now.

The federal budget baseline is an estimate of what would happen if the federal government were put on automatic pilot and just continued to do what it is doing now.

Pentagon programs, including overseas military activities such as those currently being conducted in Afghanistan, are assumed to continue. The baseline for taxes and mandatory programs assumes they will be implemented as current law provides — that is, the amount collected or spent will change according to what’s already enacted and from changes in demographics and the economy.

The frequently used GOP statement that, because of the baseline, Washington is the only place where an increase in spending is characterized as a cut is doubly wrong.

First, appropriating less than the baseline but more than the program received the previous year is clearly both an increase in the dollars provided and a reduction in the number of things that can be purchased, people hired or people served. Admitting the first without also conceding the second has to be seen for what it is: deceptive.

The same is true of changing a tax provision so that less is paid this year than would happen under the baseline: Revenues may still go up but the amount received will be reduced compared to current law.

And contrary to what former Office of Management and Budget Director Richard Darman used to routinely complain about when he was in office, an increase in spending for a mandatory program such as Medicare can indeed be a reduction if less will be spent than would occur under current law.

Second, it’s absolutely not true that Washington is the only place where an increase is often characterized as a cut.

For example, if you are expecting a 5 percent pay raise this year but receive only a 3 percent increase, you are likely to think of that as a cut rather than an increase.

The same is true on Wall Street. A company that reports a 3 percent increase in profits over the previous year is very likely to see its stock price hammered if analysts had been forecasting a 5 percent rise.

The best example of all is golf. If you get an eagle on a par 5 you actually have 3 strokes more than you had after the previous hole. But compared with the baseline for that hole, you actually have 2 less.

Now, about that GOP baseline hypocrisy ...

In 2001, Republican President George W. Bush and the GOP Congress saw the baseline-projected $5.6 trillion surplus during the next 10 years and decided that it could be used to pay for a tax cut. We now know that the baseline wasn’t even close to what actually happened. The projected surplus was based on incorrect assumptions that the high-flying economy would continue to fly high, there would be no new substantial domestic spending programs and the U.S. military wouldn’t be required to carry out new activities overseas. The fact that none of those turned out to be true was beside the point; the GOP White House and Congress didn’t wait to offset the tax cut with  the baseline.

The GOP is saying the opposite in 2012: Republicans in the House and Senate have decided the $850 billion or so the baseline assumes will be spent in Afghanistan during the next decade isn’t real and, therefore, cuts to it can’t be used as an offset for anything else.

Let me state again that not wanting to use projected military spending that’s very unlikely to occur as an offset for cutting other revenues or increasing other spending is the correct thing to do from a bottom line point of view.

But doing that while also insisting that it was appropriate to use the projected $5.6 trillion surplus to pay for the 2001 tax cut is all-star level hypocrisy. The surplus was as unlikely to occur from 2001 to 2010 as the Afghanistan-related spending is from 2012 to 2021, and the two positions are absolutely contradictory, inconsistent and incompatible.

I’d feel much better about this situation if Congressional Republicans would do one of two things: agree to allow the baseline spending for Afghanistan to be used as an offset or admit that their refusing to do so means they made a big mistake in 2001.

Doing neither is the equivalent of the golfer on that par 5 hole carrying his ball to the green instead of hitting from the tee but still taking credit for the eagle on his scorecard.

Laughter as first response

Somebody who comes up with corn and cupcakes as analogies or metaphors or whatever that literary skill is really has quite a remarkable communication skill.

Recommendation: writing in Health Affairs, the single leading health policy journal.

A predecessor: Jonathan Swift, Gullivers Travels


Increase vs decrease and simple math?

Maybe in your warped accounting world a 3% pay raise instead of a 5% raise is considered a pay "cut", but to the average American anything over 0% is a raise. Evidently you've never had a checking account or balanced a checkbook. Baselines mean nothing. It's revenues vs. expenses. Why do I think I'm talking to a 1st grader? Do you know how to add and subtract? That's the problem in DC. You elites have no clue what real life is. We don't need accounting gimmicks for the federal budget, we need sane and simple math. Who cares what the baseline is. Do you ask your spouse what the baseline was from last year when figuring out your annual budget (assuming you have the common sense God gave a hamster and have a budget)? No! You look at income vs bills and adjust accordingly. We have to do the same with our federal budget to get out of this debt crisis that men like you helped create.


So, when the GM bankruptcy

So, when the GM bankruptcy was used to reduce future contractual obligations to union workers, that wasn't a cut? And it wasn't a gain to the new GM?

I think that Collender is right.


Hypocrisy

Stan, as you're always reminding me, don't take this stuff so seriously: hypocrisy is the mother's milk of both parties.


Budget Math

"We need sane and simple math."

If only it were so simple. Even the household budget isn't simple addition and subtraction. Figuring out what you're going to spend in 2012 on Dec 31, 2011 requires forecasting, not adding and subtracting. How do we know what we'll spend on groceries next year, or in 2022? If you don't look at prior year's spending and historic growth rate as a base line, how are you calculating future spending needs?

If you simply say I'm going to keep spending flat at X dollars, you may think you're spending the same amount each and every years. But in ten years, you'll find that budget buys far fewer groceries than it originally did. And while "simple math" may tell you you're spending hasn't dropped, your empty stomach will beg to differ.

With respect to government programs, assume a government program that paid one person $100 last year (call it Social Security). Next year, two people will be eligible for the program. What is the correct budgeted spending? If we keep spending flat at $100, beneficiaries will see their benefits cut in half. Clearly that is a cut to the program even though we haven't reduced the total amount of spending. Even if we increase the total budget 10%, we'll still have to cut individual benefits. It's possible, therefore, to spend more while also cutting benefits.

Not so simple after all.




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