Tom asked me to talk about baseline budgeting - as it pertains to the United States budget process.

In the packet beginning on page ___ I have included a number of items :

• First, there are Wikipedia articles on the U.S. Budget Process^1 P and Baseline Budgeting.^2 P
• Also included is Speaker Boehner's synopsis of the Budget Control Act.^P
• Next are charts which illustrate why S&P lowered the U.S. credit rating.^P
• And a final item is Representative Connie Mack's Penny plan.^P

Existing spending levels and current law are used as the basis for future funding requirements.

The Congressional Budget Office computes a current law baseline projection that estimates what federal spending and revenues would be in the absence of new legislation for the coming 10 fiscal years.

Both discretionary and mandatory spending are considered.

• Discretionary spending requires an annual appropriation bill
  - Defense spending is an example
  
• Mandatory spending refers to spending enacted by law, but is not dependent on an appropriation bill      - For example, Medicare and Social Security
  

In 1987 the Congress amended the definition of the baseline so that the discretionary budget would be adjusted to keep pace with inflation.

Cuts from a growing baseline almost never reduce actual spending.

Rather such so-called cuts are not real cuts and merely slow the rate of baseline growth.

A case in point is the recent Budget Control Act³ ushered through the House by Speaker Boehner^4 P to resolve the debt ceiling crisis.

A main feature was that spending would be cut more than the increase in the debt ceiling.

In return for raising the debt limit $900 Billion by next February, the new debt deal [quote] "would cut & cap discretionary spending immediately, saving $917B over 10 years."

But all this is in the language of baseline budgeting.

In the packet on page ___ are three graphs which compare the cut and uncut baseline budgets.

The $917 Billion "cut" is only a 2% reduction in the 46 Trillion growth in total spending over 10 years.⁵

History shows that budgets based on future baseline projections have failed to control spending.

• In the 2000 presidential election the campaign issue was what to do with the huge 6 trillion 10-year budget surplus.
• I surmise this projection of a surplus caused a relaxation of budget discipline.
• By 2002 the surplus had disappeared and by 2011, 6 trillion had been added to the national debt.⁶

So much for a budget process which counts chickens before they hatch.

Besides the baseline method there are the zero-based and incremental methods:^P

• Baseline budgeting uses existing spending levels and policy goals as the basis for establishing future funding requirements.
• Zero-based budgeting sets at zero all existing spending levels for the financial year, basing new funding only on the merits of policy goals and not on previous budgetary allotments.⁷
• Incremental budgeting determines a budget for an upcoming period by adding or subtracting from the allotments of the previous financial year.⁸

An example of incremental budgeting is H.R 1848⁹ the "One Percent Spending Reduction Act of 2011" introduced by Rep. Connie Mack.^10 P

Otherwise known as the Mack Penny Plan, it cuts total spending - mandatory and discretionary - by one percent each year for the next six fiscal years beginning in 2012.

This plan gets rid of the baseline budgeting fantasy.

By not adjusting for inflation, the budget is balanced by 2019 with REAL spending cuts until an overall cap of 18% GDP is reached.

The spending reduction of one penny for each dollar is sort of a gimmick.

Nevertheless, I have no doubt the Mack Penny plan addresses most of the present baseline budgeting silliness.

• The spending cuts are real.
• The 18% GDP spending cap is feasible.
• The numbers show the budget balancing by 2019 and even the national debt being eliminated by 2031.¹¹
• The Plan has been endorsed by FreedomWorks and has 57 co-sponsors in the House.¹²
• It has been introduced in the Senate by Sen. Enzi of Wyoming and has 5 co-sponsors including Senators Rand Paul and Marco Rubio.¹³

In conclusion, let me suggest the Mack Penny plan is a real cut, cap, and balance piece of legislation.

It pulls no punches and does not depend on baseline budgeting fantasy.

The people want fiscal sanity restored to our Federal government.

The budget language in Washington confuses rather than clarifies.

Reductions in projected increases are called spending cuts.

And tax cuts which might increase projected deficits are called spending increases.

This language serves demagoguery rather than statesmanship.

We should demand a budget method where so-called spending cuts are real cuts.

We the People want straight talk from our servants, not political spin and bureaucratic mumbo-jumbo.

Thank you.

-- Peter Cooper