If you listen to Larry Kudlow, you know that he believes that baseline budgeting contributes only as much as 4 percent to the annual increase in spending built-in to the process.
Many others assert the number is more like 7 percent.
Let's see what 7 percent does to a budget over ten years.
Obama submitted a budget for fiscal year 2012, which was defeated in the Democrat-controlled Senate 97-0 in the spring. It called for $3.729 trillion in spending for the fiscal year 2012, set to begin in October 2011.
Let's assume his spending proposal had passed both houses of Congress without objection, and then add 7 percent to the total spending to get the next year's budget, also passed without objection, and so on for ten years.
Here are the ten annual increases, in billions of dollars: 261, 279, 299, 320, 342, 366, 392, 419, 448, and 480. The built-in new spending after ten years totals $3.606 trillion. (Coincidentally, to keep the AAA bond rating from Standard and Poor's, its Sovereign Ratings Committee was looking for $4 trillion in spending cuts today as a first step. It didn't get them.)
That gives you a total budget in 2022, ten years later, of $7.335 trillion, just $123 billion shy of a doubled budget in 10 years, and just what you should expect under the rule of 72.
This kind of doubling is fairly typical for actual spending for any ten year period you pick in the last forty or fifty years, and explains how we got into the pickle in which we presently find ourselves.
So spending increases are built-in at about 7 percent, and Kudlow is underestimating.
Growth to pay for these increases, however, is not built-in, and can never be. It's highly unpredictable and for that reason alone baseline budgeting should be abandoned.
But there's another reason. There hasn't been a single decade since the 1930s where average real growth has come even close to 7 percent, as Louis Woodhill has shown here. Our best decade was way back in the 1940s, when real growth measured 5.57 percent. We haven't done as well since.
There's only one word for what passes for America's spending policy: insanity.
We haven't ever been able to afford what we've been doing.
Growth to pay for these increases, however, is not built-in, and can never be. It's highly unpredictable and for that reason alone baseline budgeting should be abandoned.
But there's another reason. There hasn't been a single decade since the 1930s where average real growth has come even close to 7 percent, as Louis Woodhill has shown here. Our best decade was way back in the 1940s, when real growth measured 5.57 percent. We haven't done as well since.
There's only one word for what passes for America's spending policy: insanity.
We haven't ever been able to afford what we've been doing.
