Wednesday, April 13, 2011

The Budget Cuts Turn Out to be a Total Scam

As I have pointed out below, the only way you are going to get real cuts out of this Congress and this President is to do top down budgeting. Top down budgeting means the following:
You start of with the revenues in 2010, they were roughly $4.2 trillion. Since you want to be conservative, you assume revenues will come in for 2012 at 10% less, or $3.8 trillion.

Of this $3.8 trillion, you use 25% for deficit reduction, which leaves you with $2.9 trillion. Finally, you get to the spending side, which is where the $2.9 trillion comes in. Since the $2.9 trillion is a hard cap, you can divvy that up amongst government agencies anyway you please, but that's all that is available for spending. If additional revenues come in, you use it for further deficit reduction.

Now, I hasten to add that this budget is designed for those who actually think government's roll in the economy should be in the trillions of dollars. It is designed simply to show how a real budget is designed, versus the 10 year plans designed by Obama's wonks, or the 40 year plans designed by Ryan's wonks. It is designed to show that current budget discussions are a fraud.
The only question that should be asked in any of these budget discussions is what is the hard cap number above which there will be no more spending, if there is no hard cap, top line number, the budget is a scam.

Tell me what the hard cap number is and tell me it is lower than previous revenues and I will be impressed. Otherwise it is all smoke and mirrors about projections here and projections there. If you tell me what the hard cap is, it doesn't matter what the bogus projections in spending are. The money could after a hard cap all go to Goldman Sachs, but as long as the hard cap is decreasing and decreasing aggressively, it doesn't matter.

On the other hand, the non-hard cap budget cut nonsense coming out of Washington is nothing of the kind. In fact, even most recent budget, turns a total scam relative to cuts. Uncovered just days after its passage, it turns out there are no cuts. At this point the budget is neutral, but in all likelihood more cut charades will be exposed in the weeks and months ahead.

Here's Henry Blodget reporting on the current scam:
Originally the deal between The White House and Congressional Republicans was touted for delivering $38 billion in cost savings.

Then, yesterday's analysis showed that the savings were probably just half that, since a lot of the savings came from not spending money that was never going to be spent.
Turns out, the spending cuts are even more minimal than that.

According to the CBO, via National Journal, the total savings come to a whopping... $352 million. With an M...So yeah, total joke.
Washington is about confusion and obfuscation so that the crooks can work in the dark. Hard top line caps begins to put an end to that. But it is only a beginning, and we aren't even close to that.


  1. When I read this kind of stuff it just makes me want to wind down my small business, retire and pay as little taxes to the government as possible. This makes me sick. The government class always takes care of its own it seems.

  2. As the CEO of a company, I went to Washington, paid the fees, and shook the hand of the President.

    As I made the rounds in the House and Senate, I was told "We don't do that here, you need to get a lobbyist", which is Washingtonese for "Show me the money".

    I realized that the system was corrupt beyond my wildest expectations and have not been back since. There is nothing for any of us in Washington.

    Anyone that still thinks the DC snake pit is representative government has obviously never been there. It is government to the highest bidder.

    You think this is a scam? Just wait...