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Baseline Budgeting: Why the Government Doesn't Run Its Finances the Way You Do

BEGIN TRANSCRIPT

RUSH: Hi. Welcome back. Rush Limbaugh and the fastest three hours in media. Time now to add phone calls to the mix. We start in Littleton, Colorado. This is Ann. Welcome. It's great to have you here. Hi.

CALLER: Hey, Rush. It's great to talk to you.

RUSH: Thank you very much.

CALLER: Hey, if I understand the way the budgeting works, the last time the US had a budget was in 2009 and it was about $1.8 trillion.

RUSH: That's pretty close.

CALLER: Okay. Now, I think we're spending over $3 trillion annually.

RUSH: It's 3.6 or 3.7 if you add dimes.

CALLER: Okay. So almost double.

RUSH: Yeah.

CALLER: Okay. So it seems like those one-time things like TARP and bailouts and I don't know what all, somehow got added into the annual spending, and I don't understand that.

RUSH: Well, it's a great question. It really is. You know, I shouldn't say the answer is complicated because it makes sound intimidating. It really isn't. But the reason why those one-time expenditures seemed to build on themselves is because of the budget process that's known as "baseline budgeting," which was begun in the 1970s, I believe. The simplest way to explain the baseline budget is the federal budget is not like your household budget.

In your household budget, if you do one (let's hypothetically say that you do), you look at what you spent last year, you look at this current year, and you estimate as close as you can what your income is going to be. You then budget what your spending is going to be, and every year you do that starting from zero. That's not how the federal government does it. There is a thing in the federal government called "the Current Services Baseline," and that is the starting point every year, not zero.

There is not one government department or agency that looks at what it was given to spend every year, and then what it did spend, and is then budgeted accordingly. So let's say that agriculture was budgeted X. I'm just gonna make up some numbers here. Let's say the agriculture department was budgeted $100 billion and they spent $70 billion. You would think, "Okay, next year they'll be budgeted $70 billion."

No. Because of baseline budgeting, the more they spend, the more they will be allowed to spend or budgeted to spend the next year. The Current Services Baseline essentially -- and I'm gonna cut through a bunch of legalese to explain this to you. The Current Services Baseline requires, mandates, whatever, that every line item in the federal budget be increased by anywhere from three to 10% every year, no matter what is spent on that line item.

CALLER: Okay.

RUSH: So the more that is spent, the better. The more that is spent, the more that will be budgeted the next year. This was done purposefully to make sure the government would never shrink and never get smaller. The Current Services Baseline is built on current services. For example, you add TARP, or let's say the stimulus. The stimulus, by the time it was all said and done, we'll round the figure off to $1 trillion. Well, the stimulus was not $1 trillion thrown at one thing. It was divided up into a bunch of different parts of the budget. In the process, every one of those items thus saw an increase in that particular year in what it was given to spend, and that created the baseline for the next year's budget.

CALLER: But there wasn't a budget.

RUSH: It doesn't matter. The continuing resolution takes all of this into account. The continuing resolution being how we're funding the government makes it even worse, precisely because they can go even beyond the baseline budget targets.

CALLER: Okay, so I see how they got to the baseline for the stimulus. But how about for TARP? That got added in, too, but it was a completely... I mean, it didn't go to different departments, did it?

RUSH: Well, the thing about TARP is there's still $200 billion of it unspent, or there was last year at this time. There's still $200 billion.

CALLER: Right.

RUSH: TARP was essentially to bail out who knows who. One of the things about TARP is that we don't really know where it all went. In addition to TARP... People forget this about the Federal Reserve. Before TARP, which was not even $1 trillion, the Federal Reserve had doing a bailout on its own. Independent of the federal budget, the Federal Reserve had loaned or granted over $500 billion to somebody, a series of somebody's. We still don't know who.

Now, there was an effort made to have the Federal Reserve admit to whom they gave this money. This was the same year as TARP, 2008, but I don't think that they have ever had to be forthcoming with who got that money. Now, they can just print it. The Fed's independent. They can print the money that they want to give. They can add it to the money supply. They can do with it whatever they want. But the baseline simply exists for the government to bake in automatic increases regardless what's spent to cover inflation and population increases, and to give themselves cash.

Look, spending money is a member of Congress's job. Spending money is a senator's job. After getting reelected, that's the job. That's how you stay in office, is spending the money. That's how you buy votes. That's how you buy loyalty. It's a vicious, vicious cycle. But your question's a good one because you're wondering where did the money come from. I know what you're asking: "There hasn't been a budget allocating it, so where did we get the authority to spend it?" Continuing resolutions.

CALLER: And is it a continuing resolution that...? Okay, so there's the fiscal cliff, the limit --

RUSH: That's the debt limit. That's a whole different thing.

CALLER: Okay, and that's coming up again. But is there another continuing resolution that has to be signed pretty soon?

RUSH: Yes, at the end of March, and it's gonna make the sequester look like Romper Room. Because the continuing resolution authorizes all government spending. The sequester is ostensibly only over ten years. It's $1.5 in cuts in two areas, defense and Medicare/Medicare. The continuing resolution, absent a budget as we are, is the entire government's spending.

CALLER: Can the Republicans do anything in the continuing resolution to slow spending down, to take out some of that stimulus money?

RUSH: All they can do is negotiate with a guy who doesn't want to negotiate. All they can do is basically disagree with what he and the Democrats want to do. The only way they can ultimately disagree is to not sign on to it. You know, you need the House of Representatives signing on to it. You need the Senate agreeing to it, the House agreeing to it, and then Obama signing it. If the House, run by the Republicans, doesn't agree to it, then you get a government shut down.

CALLER: Okay. And if there's a government shutdown... I mean, people talk as if the government shutdown, I think, twice or three times under Newt Gingrich was a bad thing. But I don't see that it was a bad thing back then.

RUSH: Well, it depends on how you look at it. Politically for the Republicans, it ended up being very bad. Because as you can understand, they were accused of not caring about people. Remember now, the government is seen by many people as the single source of not just prosperity, but of income, lifestyle, survival. If the Republicans are seen as shutting it down, they are seen as starving children, denying Social Security to old people, kicking people out of their houses, polluting the air.

All of this stuff is what they are accused of because all of these great, wonderful things are what the government does. The government feeds people; it clothes people. The government does roads and bridges. "You didn't build that! The government did. You didn't do anything." The government does everything, and if the Republicans shut it down, then politically they're gonna be destroyed by the media and by the Democrats.

But, see, what you instinctively know is that we are so out of control on this spending side, if we don't start making really serious cuts of major size in areas where we're wasting money, redundant spending -- if we don't do this -- then every prediction Obama's making today about sequester is going to happen for real. We are gonna become Greece someday. We're gonna become Greece and Spain. We're gonna become Europe someday soon, within 20 years, if this stuff isn't reversed. All of these things Obama's saying are gonna happen next week will happen for real because of his policies if they're not reversed.

RUSH:  So the Republicans are faced with the usual dilemma:  Do they agree with Obama and the Democrats and be seen as compassionate, big-hearted, understanding, and loving of people. Or, do they, in their effort to try to save this country from destruction, are they seen as the equivalent of heartless killers?  Because that's how they're portrayed.

CALLER:  Yeah.  Well, I thank you for your answers.

RUSH:  Well, did it help?

CALLER:  Well, I don't know.

RUSH:  See, you're not satisfied on how the budget can expand when there's not a budget.

CALLER:  Yeah, I have a real hard time understanding how those one-time items, you know, like a new roof on my house, how does that get into the annual spending, especially when we don't have a budget.  And I understand the continuing resolution --

RUSH:  That's why it's hard to understand.  You couldn't budget your life this way.  There is no bank that would ever give you a loan. You'd be put in jail --

CALLER:  Right.

RUSH:  -- if you ran a business this way.  Once they spend something at the government, it is considered an annual expenditure the next year.  So we had the stimulus, not a one-year thing.  As far as the government budget, that money's now gonna be spent every year.  Whether there's a budget or not, they're gonna find a way to spend it.  Have you ever seen a budget get smaller?

CALLER:  Not their budget.

RUSH:  No.  You haven't.  It always gets bigger, even when there isn't a budget, they find a way to spend. They're spending money they don't have.

CALLER:  Yeah.

RUSH:  They're borrowing. They're printing.  This is irresponsible.  If any business ran itself this way the people in charge would be in jail.  They'd be brought up on charges so fast they'd be in jail multiple terms, life sentences, no parole, because of the people they'd be ripping off in the process.  Using your example, let's say you repair your roof this year.

CALLER:  Yep.

RUSH:  Let's say it costs you a thousand dollars to fix your roof, just picking a number. If you're the government, you are gonna spend that thousand dollars next year no matter what it's on.  You spent it once, it's available next year.  Maybe not for your roof, but a new car or what have you.  It's just the way they do things.  That's the baseline.

CALLER:  And that's how they're adding all these new people to the government rolls -- I mean, contractors --

RUSH:  You know, the simple explanation, there's nobody to stop them.  There's nobody to stop them.  Ann, you ask how they can do it, there's nobody to stop them.

CALLER:  And that's what concerns me. 

RUSH:  There's no morality.  They're not stopping themselves.  There's no self-restraint.  There's no discipline whatsoever.

CALLER:  Yeah.

RUSH:  It's not their money.  They're spending yours and mine and everybody else's.  They're not spending their own.  They don't run their own lives this way.  You remember the House even had at one time its own bank.

CALLER:  Right.

RUSH:  The members could write checks for money they didn't have, until we blew the whistle on it.  So it didn't matter what their salaries were.  They could write checks for thousands of dollars that they didn't have.  They could take a $10,000 donation check to the House post office and buy a 25 cent stamp and get the change in cash.  Now, you can't do that.

CALLER:  Nope.

RUSH:  There's nobody to stop them.  And they don't have the discipline to stop themselves, either party.

BREAK TRANSCRIPT

RUSH: Ann, I know you're still out there listening.  Folks, Ann is a high-information voter and she's having trouble getting her arms around this, and anybody would.  Understanding baseline budgeting the first time you hear it is difficult because it doesn't make sense in the way you understand the way you spend money and earn money in your own life.  So it's very hard to grasp and get your arms around it the first time you hear it. 

One more aspect of baseline budgeting.  The current services baseline is every year's final amount of money spent.  So the current services baseline next year, the next budget year starting in October, is gonna be $3.7 trillion. Whether all that money mattered, whether it made sense to spend, doesn't matter.  We spent 3.7 last year or this year, that becomes the current services baseline on which we budget the next year.  And of course every item must be expanded.  There are more needs.  There are more people. There are more people, compassionate needs and so forth.  So we up it from there.  So we don't look at what we spend and how much we didn't need to spend and then reduce it the next year.  The current services baseline is what was spent every year and then increases are automatic the next year. 

So the current services baseline says that, let's say Department of Health and Human Services, their percentage of the $3.7 trillion budget is X and they are budgeted for an 8% increase next year.  And let's say that as the final budget is agreed to, they get a 4% increase instead of the 8%, because that's what's agreed to.  It's possible.  That is when you hear Democrats say, "Draconian cuts!"  Because if you'll notice, no budget ever gets smaller in Washington.  There is never a budget that's really cut.  When you hear budget cuts, what you're really hearing is exactly that example.  A line item expected to get an 8% increase, and they only got a 4% increase, they had a 4% cut.  They had a 4% cut!  When in truth they're getting 4% more than they got the last year.  But since they wanted 8, they look at it as having gotten a budget cut. 

BREAK TRANSCRIPT

RUSH: We had a nice lady call from Colorado Springs, curious about how the budget just expands and grows even though there hasn't been a budget. The short answer is, "There's nobody to stop them, folks." They don't have any self-discipline. They're not spending their money. They have an endless supply. Most people in Washington, obviously, are not concerned with the annual deficit every year.

Obviously most people in Washington, as of yet, are not concerned with the growing national debt. Otherwise they wouldn't be doing this. More likely the explanation is, they don't think anything drastically bad is gonna happen any time soon -- and when it does, they won't be here. They won't be in office anymore, so they won't catch any heat for it. But they don't have any discipline. They don't limit themselves. It's not their money.

They don't have to earn what they're spending. They get to spend your money. It's Monopoly money to them. There's absolutely no effort expended in earning it or producing it. From the moment you're old enough to understand, if you've had good parents, they tried to teach you the value of a dollar. They taught you about earning money. If you got an allowance, the purpose was to teach you how to spend it. It was to teach you how to use it, how to conserve it.

It was to teach you about it. When you got your first job, that was to teach you how hard it is to earn money and that it's up to you. Now, some people didn't get that lesson. But none of that applies to the members of Congress who did, because this isn't their money. Something called the tax code collects that money for them, and even money that isn't collected they get to spend because countries like the ChiComs and Japan lend it to them. As far as they're concerned, they're doing great things.

They're buying your health care. They're giving you food. They're buying you telephones. They are giving you your retirement. They're doing wonderful things. In the process, they're making you totally dependent on them. As time has gone on, they have become -- the government, members of government have become in many cases -- the dominant provider in people's lives, not the people themselves. So all the lessons that you got growing up and that they got don't matter now.

But in your personal life, they do.

I doubt that most members of Congress... Now, everybody spends more than they earn. That's done by borrowing and some people are irresponsible about it. Some people aren't. But nobody handles their own money the way elected officials handle ours, no matter how in debt they are. They may even file Chapter 7/Chapter 11 bankruptcy but they do not handle their own money the way they handle ours, and it's no more complicated than nobody's there to stop them.

If you don't have leaders who are disciplined and understand the importance of proper budgeting and making sure that we don't spend too much more than we take in, we're gonna have situations like this. Now you can make it even worse. If you have leaders who think this country was unjust and immoral as founded -- and if they believe that the rich in this country are rich because of secret deals that they had as powerful people with previous leaders in government who saw to it that they got all the spoils -- then you see your role as making sure that this country is knocked down in size a couple pegs, 'cause it hasn't really earned superpower status.

That's where we are now.

We have a president who doesn't believe in the legitimacy of this country as founded. He thinks 99% of the people in this country have been screwed and given the shaft by virtue of the kind of country this is since its early days. His job, as far as you're concerned... What he wants you to believe is that he is making it fair now. He's gonna take all that money that these rich people grabbed from government for all these years, and he's gonna redistribute that money back to you and give you what has rightfully been yours all along.

In the process, he's going to inflict pain on these powerful rich people who've benefited from the rigged game and the stacked deck. He's gonna inflict pain on them. They're gonna suffer now. That's what he wants you to think, and then he wants you to think you're gonna get some of what they had. You're really not, but that's what he wants you to think. So that's where we are, and as far as the current president is concerned, obviously he couldn't care less about debt.

Deficits, budgets, whether the country has the money to do the job? He couldn't care less. In fact, the more we spend and the more irresponsibly we spend it, the better, as far as his plans for the for the country are concerned. The Current Services Baseline was set up to allow government to have a guaranteed mechanism to grow every year. The government's budget year begins October 1st.

So beginning October 1st, in the days that we actually governed ourselves with a budget, the Current Services Baseline for the next year, starting October 1st, will be whatever we spend this year, with automatic increases for inflation and population growth, however those are calculated. In addition to those automatic increases, there are built-in increases of anywhere from -- and these are arbitrary -- 4% to 10% on each line item in the budget.

You say, "How can they do it?"

They just can. They just did!

"Well, why does one department get 10% and one get 4%?"

I don't know. There's no answer. It's just how it works out every year. In the days we did a budget, there were negotiations. It's like any piece of legislation. House and Senate committees would put together the budget. They would end up with their own versions. They'd have to combine the two, come to an agreement, and they'd say, "This department's gonna get X, and that department's gonna get Y." The president signs it; we're off and running.

So whatever that agreement is, that's the baseline for the next year. Now, if you happen to be in a department that you expect to get an 8% increase... Let's say Health and Human Services. You're expecting an 8% increase, but somehow the negotiators only give Health and Human Services a 5% increase. The way that is portrayed is a 3% cut. You were expecting an 8% increase and you only got 5%, so you got screwed. You got a 3% budget cut, when in reality you got a 5% increase.

I'm telling you, you can bank on this: Whenever you hear anybody in Washington talking about severe, drastic, Draconian cuts in food stamps, in -- I don't know -- school lunch program, whatever it is, rest assured it is not a cut at all. It is a reduction in the rate of growth that was expected. That's what sequester is, folks. There are no real cuts here in this sequester. When it goes into effect on March 2nd, we're not gonna spend any less. We're just not going to spend as much as was expected.

Thus, we're being told we're facing massive cuts. The government is going to spend, even with the sequester, more money this year than it did last. That is thanks to baseline budgeting, and thanks to baseline budgeting even with whatever "cuts" there are in the sequester, they're merely reductions in what was the expected increase (otherwise known as "the rate of growth"). But don't take my word for it. Go ask anybody you want, or if you have initiative, go to the Internet and simply do a Google search on the federal budget.

Find the numbers, and I will promise you: Within your lifetime, you will never see an annual budget smaller than the previous year. Not in toto. Not total government spending. You will not see it. Every year we spend more, despite all these Draconian cuts that you've heard about, despite all the massive cuts in child health programs, despite all the massive cuts in senior aid programs. There aren't any cuts, as you and I know cuts.

There are only reductions in the rate of growth. How does it manifest itself in your life? Very simply. You do it yourself, usually on the spending side. Let's say that you and the family decide you're gonna get a new car, and you look at what you can afford. Basically what you look at is the monthly payment you can afford. That's what you determine, not the overall price of the car. You want to know what the monthly payment is. So let's say you budget a monthly payment. You have a car and it's running. Everything's cool. You just want a new one.

So you budget. Let's say you can afford a new monthly payment of $500 that you're not paying now.  You determine you can afford that, so you go out and you find a car that fits.  And in the process you actually find a car you like that costs less.  You find a car that you can get for $300 new a month instead of $500.  What do you tell yourself?  You just saved $200.  But you didn't.  You're actually spending $300 a month that you weren't spending before you started the whole process of getting a new car.  But because you told yourself that you were gonna spend $500, you found something you like for $300, that you're actually saving $200.  You're not. 

The only way you'd be saving $200 is if you actually made the deal for $500 a month, started spending it and then found a new deal that reduced that $500 to $300, but you've never spent it.  Well, turn that around and that's exactly how these clowns in Washington do their own spending.  They're allocated X amount every year to spend, and if they get less than that it's still an increase. They tell themselves they just got a massive cut, when they didn't. 

Now, TARP's another.  TARP was a supposed one-time expenditure that was theoretically off-budget.  And it was for bailing out banks in distress and number of other things.  But it still ends up being added to the entire ledger. Whether it was supposedly off-budget or not, it's still what was spent. And as such, it does, in a very trickinology sort of way, end up in the baseline, even though it's off-budget and even though not all of it has been spent yet.  And even at that, folks, remember what TARP was, if we didn't do this in 24 hours, the world economy was gonna collapse.  That was the nature of that crisis.  This was August-September 2008, right before the election.  If we don't spend this money, if we don't bail out these banks, if we don't bail out these financial institutions, we're gonna have a world collapse of the economic system. 

Well, the Republicans initially opposed it.  They didn't agree to it for two weeks.  So a crisis that we were told would manifest itself in 24 hours actually went through two weeks with no pain.  Then the Republicans finally agreed to it.  We needed $800 billion to stop a world financial collapse.  We still haven't spent $200 billion of it.  Now, obviously there was no imminent world financial collapse.  That's just how we were frightened into supporting and agreeing with it.  And that's what they're doing now with the sequester and that's why I'm ashamed.  I'm ashamed that leadership in this country has devolved to Neanderthal-type insults to everybody's intelligence. 

I'm ashamed that we cannot honestly and intelligently, from government to citizen, deal with things honestly and straightforwardly. That we have to create these phony contrived rivalries and crises.  That we keep people in a perpetual state of fear and crisis, that leads to never-ending dependence.  And we're in the process of destroying the potential for greatness of the country, greatness upon individuals. We're destroying people's humanity, their integrity, their dignity, slowly but surely chipping away at all that.  Makes me ashamed. 

The greatest country in the history of humanity is devolving.  This TARP really was the first of this endless series of crises.  Maybe the budget battle of '95, or the Bork hearings.  I mean, you could go back and find a logical explanation for when this whole technique began, because it works. 

END TRANSCRIPT

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