So Why Are We Always Broke?

A new report appears to show bad news on the financial front, as “the federal budget deficit this year will increase in relationship to the overall size of the economy for the first time since 2009 and continue to grow over the coming decade.” The Congressional Budget Office (CBO) estimates that the deficit will grow by an additional $105 billion, totaling $544 billion for 2016.

In August, the same CBO estimated the 2016 deficit to be around $414 billion. Still a lot, but nowhere near the revised estimate. So what happened between then and now? Simple – a republican sanctioned shopping spree to the tune of an additional $2 trillion in December. Remember that? Oh sure, republicans say they are also instituting spending cuts, but there aren’t.

Now, in the grand scheme of things, whether we add $400 or $500 billion of deficit spending, the difference won’t make a hill of beans worth of difference. Not with a debt load of around $20 trillion and unfunded mandates approaching a quarter of a quadrillion dollars. That’s a two, a five, and 13 zeros. What’s a few hundred billion?

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It is potentially so bad that the CBO says, “The likelihood of a fiscal crisis in the United States would increase without appropriate action,” the CBO study said. “There would be a greater risk that investors would become unwilling to finance the government’s borrowing needs unless they were compensated with very high interest rates; if that happened, interest rates on federal debt would rise suddenly and sharply.”

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So what do we do about it? Is there “appropriate action” we can take? The standard answer or conventional wisdom has always been to just vote republican. They will get in and cut the budget – they will slash spending and lower the deficit. The problem is that no, they won’t – even if they wanted to.

And herein lies the problem – why we are broke and get broker every year – and it’s inherent in our present system, thanks to the 1974 Congress. That year, they passed the Congressional Budget Act of 1974. This created what’s known as “baseline budgeting” or a “current services baseline.” It also created the unconstitutional Office of Management and Budget (the President’s budget office) – unconstitutional, being that the President has no budgetary authority. That was unconstitutionally granted him in 1921 by the passage of the Budget and Accounting Act, but I digress.

It’s an ingenious, albeit evil, way for Congress to forever dodge their fiscal responsibilities. Baseline budgeting is a scheme Congress concocted to prevent a president or any lawmaker from actually cutting spending. The evil brilliance of it is the assumption that the previous year’s budget magically becomes next year’s baseline. That way, spending will always automatically increase. It’s a bit more complicated, but that’s the gist.

As an example: Say you spent an average of $200 per week on groceries this year. Baseline budgeting would conclude that $200 per week is now the spending floor for next year. Your grocery budget would automatically increase, whether you require it (or want it to) or not – whether you can afford it or not. Next year, you might be required to spend $210 every week – the following year, $220 and so on. If you can’t afford it – tough. By law, you must spend that money. If you don’t have it, you must then borrow the money to buy the groceries. That’s deficit spending and how our country is $20 trillion in debt. Oh, and those spending cuts republicans always tout? Here’s how a spending cut works in the era of base-line budgeting.

Say after years of baseline grocery budgeting, your bill is approaching $300 per week. There’s no way you can swing that. You have to cut spending. Under the rules, you can’t cut spending – only maybe trim a little off next year’s increase. So instead of $320 per week next year, you “cut” it back to $315. What? That’s still an increase of $15 per week. That’s not a cut! Yes, it is, according to Congress. So when “conservative” republicans say they’re cutting the budget – this is really what they are doing – just trimming the increase.

Baseline budgeting doesn’t get much press during times of good economy and expansion because the rate of growth offsets the spending increases, keeping deficits lower. It’s when the economy slows that deficits appear to balloon. We’re spending the same amount, but we’re bringing in less to offset it.

This is why we’re broke. We spend too much money because Congress passed a law saying we must. So don’t be deceived by lawmakers who say they will slash the budget or they are fiscal hawks. It’s a lie – and worse – they know it is.

There are two ways to start down the path of reasonable fiscal policy. One is to repeal the 1974 Congressional Budget Act, getting rid of baseline budgeting – and while they’re at it, repeal the 1921 Budget and Accounting Act. Carly Fiorina suggested just that, with her call for “zero-base” budgeting in one the last debates.

And two, start closing government departments, such as the IRS, Dept. of Education, EPA, etc. A department can’t have a budget if it doesn’t exist.

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