The first budget proposal from President Donald J. Trump stunned liberals and moderate Republicans, and delighted conservatives because it has actual spending cuts. Real, honest-to-goodness, spend less than the year before cuts. This is unheard of inside the Beltway where a spending cut is actually a spending increase, but is called a spending cut because it is less than the initial proposed spending increase for a department or agency.
Confused? You should be. The real world does not work like this. Your real world does not work like this. However, like many things inside the Beltway, the real world does not exist, for there at work are people who pass laws that apply to us but not themselves. Inexplicably, we send many of them back again and again to continue doing the same. In between, we grumble about it. We also grumble, some of us anyway, about the lavish perks those inside the Beltway vote themselves at our expense. The slush funds they cheerily call office expenses and, of course, the in-your-face (if you pay any attention, at all) vehicle leasing perk that they so generously voted themselves in which we pay up to $1,000 per month for members of Congress to lease a vehicle as well as having us pay the insurance, gas, maintenance, and perhaps most galling of all, any excess mileage charges they may incur.
That tip of the contemptible inside the Beltway iceberg leads us back to the federal budgeting process where, again, a spending increase becomes a spending cut. As an example, the head of a department proposes that the budget for the next fiscal year increase by 13% to cover its existing and new initiatives. Along comes a counter to that which calls for a 9% increase instead of the proposed 13% increase. In the real world, a 9% increase is more not less. Everyone reading this would gladly take a 9% increase in income, net worth, and likes for the latest posting on a writing page while bemoaning a 9% increase in weight, hair loss, and invites to play CandyBubblePopVille. Not inside the Beltway, however. The immediate response there by the usual suspects of politicians and pundits: it is a 4% spending cut! Then follow dire warnings of grievous harm to women, children, minorities, and climate because everything affects climate.
How is this so? How does a 9% increase constitute a 4% cut? Simple, because 9% is 4% less than 13%, and 13% is what was initially proposed to meet what is needed for the department to function. Ipso facto, because the department cannot function with less than the 13% increase, any increase less than 13% is a cut. This is how inside the Beltway, a 9% increase over the previous year turns into a 4% apocalyptic cut.
But wait! There is more! There is always more when it comes to the inside the Beltway crowd spending our money. That 13% increase is an increase of the baseline budget not the previous year’s budget. What is a baseline budget? It is the previous fiscal year’s budget times inflation times population growth and serves as the starting point for the new fiscal year. In other words, they take the previous year’s budget and increase it by inflation and population growth to keep pace with those factors. Only after they establish the baseline do they start adding. That means even if there is no adding, the old “holding the line on spending” wink wink nod nod that they trot out, there is still an increase because the baseline always increases by those two factors.
So to review: federal budgets work by taking the previous fiscal year’s spending and increasing it by two factors—inflation and population growth—to create the baseline for the new fiscal year. Whatever increase is deemed necessary by a department or agency for the new fiscal year is taken based on the new baseline with its already baked-in increase. Over the past eight years, the inflation-population growth combo has averaged 2% making the 13% increase in the example above actually a bit more than a 15% increase when applied to a new baseline.
Against that backdrop of automatically increasing budgets by way of the baseline ruse and any reduction in growth is a calamitous cut mentality of all within the Beltway, comes President Trump’s plan to cut spending by real reductions and outright elimination of programs. The howls of pain far and wide are deafening. The difficulty is in determining whether the howling is more from the cuts themselves or simply from the shock of seeing an actual cut.
Now to be sure, the cuts proposed so far deal with discretionary spending which is only approximately one-third of the budget. How the other two-thirds of mandatory spending will be handled is an open question. The cynics say this is all for show, that Congress will restore whatever is cut in discretionary spending and then the mandatory spending will be used to hide the real increases, or some combination of their usual games, making it business as usual when all is said and done. However, we can look for guidance to British politician Nigel Farage’s brilliant skewering of European Parliament members on the morning after the Brexit vote when he said to them, “I know that virtually none of you have ever done a proper job in your lives, or worked, or worked in business, or worked in trade, or indeed, ever created a job.”
Many inside the Beltway have also never done a proper job or have forgotten what it is like to work a proper job in which the company providing the proper job makes its proper budget based on real conditions on direction from the CEO. The President of the United States, one Donald J. Trump, was a CEO. President Trump thinks like a CEO, runs his end of Pennsylvania Avenue like a CEO, and just proposed a budget like a CEO. The inside the Beltway crowd is quickly learning it is not business as usual for them, but business as usual in the business world where jobs, budgets, and budget cuts are proper. A hefty dose of corporate boardroom shock and awe applied courtesy of the occupant of 1600 Pennsylvania Avenue.