Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, August 3, 1993 TAG: 9309090307
SECTION: EDITORIAL PAGE: A5 EDITION: METRO
SOURCE: JAMES K. GLASSMAN
DATELINE: LENGTH: Long
Fraud is a word I don't use lightly, but this budget, like the dozen or so that preceded it, qualifies. The main deception is that the budget, as advertised by the Clinton administration since February, is supposed to cut spending by $200 billion over five years and cut the deficit by a half-trillion dollars or so over the same period. It does nothing of the kind.
Federal spending this year will be $1.450 trillion. Spending at the end of fiscal 1998 will be $1.756 trillion - and that's accepting all of President Clinton's assumptions. So instead of falling $200 billion, spending will rise $306 billion.
As for the deficit, it will decline from $285 billion to $202 billion; that's a drop of $83 billion, not $500 billion.
The reason for these vast differences between rhetoric and reality is that Congress and the president calculate budget cuts from an imaginary number called the baseline.
Let me explain. Say you run a business that spends $50 million a year and is losing money. You need to cut your costs, so you close some plants, fire some workers, go easy on the paper clips and the next year spend just $45 million. That's a spending cut in the language most people speak.
But using the nomenclature of the federal government, you could spend $52 million and still count it as a f+icut,o even though it's $2 million more than you spent the year before. Why? Because the government does not use last year's spending as its base.
Instead, economists at the Office of Management and Budget and the Congressional Budget Office estimate what you'll be spending if you keep doing what you did before. Let's say that that figure - thanks to inflation, increased population and various ``technical'' factors - will be $53 million. So, if you spend $52 million, you've cut spending by $1 million!
(Of course, lacking the borrowing power of the federal government, you're also out of business.)
Baseline accounting is a bipartisan fraud. Most Americans don't know it exists, so when they hear that federal spending will be cut $200 billion, they assume that it will fall from $1.450 trillion to $1.250 trillion.
Among such naive souls - at least until recently - was Martin Hoke, 41, of Shaker Heights, Ohio, who got elected to Congress last November. A Republican, he won a seat on the Budget Committee, where he confronted firsthand what he calls ``the dark alchemy of baseline budgeting.''
``Look at the whole damn budget process. There's nothing that does not abuse it and debase it,'' he said. ``Taxes are `contributions,' spending is `investment.' There's a `deficit trust fund.' But the biggest lie is `deficit reduction.' We talk about a five-year plan, but any more than two years out and you're playing games.''
Even two years may be too long. The Congressional Budget Office reported in January that ``the 1992 budget resolution maintained a sobering pattern. For the 13th year in a row, the actual deficit was higher than the resolution target.'' In other words, in every year from 1980 to 1992, the real deficit ended up being worse than the deficit that was budgeted 18 months earlier. The average overrun was $42 billion, which is a big number when you consider that the average deficit was $180 billion.
One conclusion from the mass of statistics pumped out by OMB and CBO is that these experts can't predict what the government will spend and what it will take in. But our politicians build an entire economic policy around these inaccurate guesses.
``I call it the joys of baselining,'' said Allen Schick, a visiting scholar at the Washington-based Brookings Institution. ``It's as much of a kick as mainlining, and just as addictive.'' Schick explains that the baseline concept had innocent beginnings. The idea was that Congress and the president needed to know the future consequences of present policies.
The problem, as Schick sees it, is that politics took over, and the budget agencies began to inflate their baselines. The higher the baseline, the easier it is to cut ``spending'' in next year's budget.
Let's go back to the numbers I cited earlier: Where does this half-trillion dollars in deficit reductions come from?
OMB now expects the deficit for fiscal 1993, which ends Sept. 30, to be $285 billion. Under the still-to-be-enacted Clinton budget, the latest figures - not including the ill-fated stimulus package - show a $254 billion deficit in fiscal 1994. The CBO baseline for 1994 is $287 billion.
A corporation would, of course, calculate its budgeted deficit reduction for 1994 as $31 billion: the 1993 deficit ($285 billion) minus the 1994 deficit ($254 billion).
But the joys of baselining bring the deficit cut up to $33 billion: the 1994 baseline ($287 billion) minus the 1994 deficit ($254 billion).
``If we did this in business,'' Lee Iacocca once said, ``they'd lock us up.''
Steeped in the fraudulent language of the federal budget and only vaguely aware of the language of business and household finance, many officials in Congress and the administration actually believe they're cutting spending when they're increasing it. The truth is that, if we freeze spending - not cut it, just hold it at 1993 levels - then, based on Clinton's revenue numbers, the budget would be balanced by 1996.
George Orwell, as usual, had it right when he wrote 47 years ago: ``Political language ... is designed to make lies sound truthful and murder respectable and to give an appearance of solidity to pure wind.''
\ James P. Glassman is the former editor of Roll Call and former publisher of the Atlantic Monthly.
The Washington Post
by CNB