March 11, 2011

Remember, Government Doesn't Budget Like We Do

Marc Comtois

When we say we're going to cut what we spend on, say, ice cream at my house, that means we either buy less, wait for sales or just stop buying it. So let's say, instead of $5 a week, we'll shoot for $4/week. We just cut the ice cream budget by $1. As Jonah Goldberg reminds us, that's not how governments define a "cut":

By earth-logic, if you got a raise of 10 percent last year, but this year you're only getting a raise of 8 percent, you're still getting a raise. On Planet Washington, that qualifies as an indefensible slashing.

So when the GOP cut $4 billion from the budget last week, the Democrats acted as if it was an involuntary amputation.

Now the GOP wants to cut $61 billion of discretionary nondefense spending from the total budget of $3.7 trillion, and Democrats are responding as if this will spell the end of Western civilization.

But given their terror of forcing a government shutdown, Democrats were forced to counteroffer with a cut of $10.5 billion, or 0.28 percent of the federal budget.

Imagine you have a budget of $10,000 (about 40 percent of it borrowed on a credit card), then "slash" 28 bucks. That's what it's like to be a frugal Democrat....In 2007, the budget was 19.6 percent of the GDP. In 2009, it went up to 25 percent of GDP. That's where the Democrats would like to see it stay.

What happened? The financial crisis, of course. But as many of us suggested at the time, one of the Democrats' real motives behind the stimulus was to inflate the "baseline" budget so that huge increases would never be reversed, thanks to the DC logic that a cut in growth is a cut.

Back to the ice cream. Let's say we spent $4/week in 2009 and $5/week in 2010 and expected our budget to increase (following the pattern) to $6/week in 2011. But we re-assessed and decided that, instead of the $6/week we projected, we would "freeze" our spending at $5/week. Hence, in government speak, we just cut our bill by $1/week. Even though we did nothing.

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Ah, the bad analogies of the right. Try this on for size. Let's say your household has 2 adults and a child and a household budget of X dollars per week for food, utilities, etc. Next year you're blessed with a new baby. Oh, and by the way your heating oil went up 25%. What would your wife say if you said the food and utility budget is going to remain fixed, but that it's OK because that's not really a cut?

I'm not commenting on the appropriate amount of the percent increase, only that the anology used is a bad one.

Posted by: Russ at March 11, 2011 3:14 PM

Or Marc, you could look at it this way, you can *cut* your ice cream budget to $5.50 and see a 50 cent "savings"!

Posted by: Patrick at March 11, 2011 3:54 PM

How much of the ice cream is nondiscretionary?

Posted by: Dan at March 11, 2011 4:13 PM

Dan, I don't understand. Is any ice cream "discretionary"? Certainly not at my house!

Posted by: Patrick at March 11, 2011 4:27 PM

Russ is projecting again. His "analogy" bears no resemblance to how our federal government is supposed to work.

It only makes sense if you base your worldview on this "principle": "From each according to his ability, to each according to his need."

Russ really belongs in Europe.

Posted by: BobN at March 11, 2011 8:45 PM

Russ, it was a purposefully simple analogy. Your attempted critique betrays a large blind spot: you still assume that the family can't make cuts elsewhere and implies that they can only spend more in all areas. If faced with such a situation, my wife would say, "Time to cut down the cable package and reduce the entertainment budget." In other words the family could still keep to the same budget by cutting in other areas like entertainment, holding off on buying the new car and, yes, even ice cream. Heck, with real cuts they could even (gasp) reduce spending! And you know what? That's exactly what my family has done as my pay has effectively been reduced over the last few years with a salary freeze and increasing medical costs. Is that real world enough for you?

Posted by: Marc at March 12, 2011 9:16 AM

Russ' analogy also assumes it's natural for the government workforce to expand its numbers.

Posted by: Andrew at March 12, 2011 10:52 AM
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