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Tuesday, August 2, 2011

Budget Busting Baseline Budgeting ...

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Baseline budgeting was consummated with passage the Congressional Budget Act of 1974 in the immediate wake of the resignation of Nixon and assumes a fixed growth in the federal budget below which even budgetary growth is considered a "cut".

How does it work?

Lets say the current budget is $10 and under baseline budgeting next year's budget is assumed to be $15. But after a flurry of activity impossibly deep cuts are made in the next year's budget that brings it down from $15 to $14. Voila, budget cuts that result in an increase in the budget from $10 to $14.

Lets look at a chart of how often the debt limit has been raised since 1940:




Baseline budgeting seems to have been a mistake.

Rush:











out

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