The term “baseline budgeting” is a term used by our government to describe how money is budgeted each year for financial programs. It sounds pretty straightforward and that’s just what our politicians want you to believe. The history of baseline budgeting goes way back to the 1970s and had good intentions at the time. But over the subsequent years the politicians have changed it to their own advantage, both Republicans and Democrats. If you Google the words “baseline budgeting” you will find many explanations of how it works. But I will save you the time and try to give you a simple example of how it works.
Baseline budgeting uses phrases like “cuts” and “increases” in a way that easily deceives the average voter. To the unaware voter a 10 percent “cut” to a $100 billion program sounds like next year’s budget for that program will be “cut” by $10 billion. That program would have a budget of $90 billion dollar, right? Wrong! Baseline budgeting has built into it yearly “increases” based on a number of factors: projected inflation and increased revenues to name a few. This “increase” is usually between 7 and 10 percent. So with a 10 percent “increase,” the budget for the $100 billion program next year will be $110 billion. So when the politicians propose a “cut” of 10 percent they are applying that “cut” to the 10 percent “increase” not the total budget.
So the budget for this program for next year with a 10 percent “cut” is going to be $109 billion. Not a “cut” but an “increase” of $9 billion of your hard earned dollars! Get the picture? The deception is all in the wording. Always ask yourself: “a percentage of what, a percent of the increase or a percent of the total budget”? Never in a hundred years can we balance our budget with deceptive bookkeeping like this.