Batter Up! Move the Budget Baseline
For fans of the national pastime in Washington, D.C., it would be great if the Nationals could just start the new season where they left off last year. The District’s boys of summer would automatically be handed the 2013 National League East division title, and fans could spend carefree months without worrying about whether the team will make it to the post-season for the second time in 80 years.
But that is not the way that baseball works. Instead, every year, regardless of past performance, teams must start over from scratch, demonstrating through their talents that they deserve to be in the playoffs, based on their record during the current season. Then, when they don’t measure up, they face even greater scrutiny from management. Poor performance, with no promise of improvement, usually leads to paltry patronage by the fans. Revenues decrease. Business suffers. Franchises move. And the fans lose, well, a “service.”
On the other hand, the federal government just picks up everything where it was left off the year before, regardless of performance. On October 1, the beginning of a new fiscal year, the bureaucrats blithely assume that they should be automatically granted the previous year’s funding level, plus some “extras.” This, in a nutshell, is “baseline budgeting.” As the Congressional Budget Office defines it, “the baseline is a benchmark for measuring the budgetary effects of proposed changes in federal revenue or spending, with the assumption that current budgetary policies or current services are continued without change. The baseline includes automatic adjustments for inflation and anticipated increases in program participation.”
Of course, baseball and bureaucracies are not typical bedfellows. But a more judicious federal government might generate greater efficiencies and considerable savings if each department, agency, and program was required to justify its budget each year, starting at zero. Such an approach, more commonly referred to as either “zero-based budgeting” (ZBB) or “performance-based budgeting,” might encourage a more nimble and less bureaucratic public sector.
Representative Dennis Ross (R-Fla.) has introduced this issue into the 113th Congress with his bill, H.R. 239, the Zero-based Budgeting Ensures Responsible Oversight (ZERO) Act of 2013. As he asks, and answers, “So what can we do to stop government on auto-pilot? The answer – demand we start from zero – every year.” The ZERO Act seeks to accomplish a number of objectives.
First, as part of their annual budget request, every federal department and agency would be required to provide a description of each activity for which they receive an appropriation. Second, they would be required to cite the legal basis to receive an appropriation. Third, each must offer three alternative funding levels, two of which must be for less money than the prior budget year. Ideally, such a mechanism would allow agency leaders to assist Congress in cutting waste, in lieu of the much-maligned “across-the-board” approach exemplified in the recent sequester. Finally, and perhaps most importantly, the federal bureaucracies requesting funding would be required to summarize for taxpayers the cost-effectiveness and efficiency of funded programs. The bill currently enjoys 16 co-sponsors, all Republicans.
Alas, wasteful spending is not an issue relegated to one side of the aisle. Congressman Ross goes on to say, “…before we lay this waste and fraud entirely on the feet of departments and agencies supported by our liberal friends, I ask my fellow conservatives to remove the beam from our own eye first. As of 2008, more than $13 billion in Iraq aid has been classified as wasted or stolen. Another $7.8 billion cannot be accounted for. In addition to waste overseas, a 2008 GAO audit found that 95 Pentagon weapons systems suffered from a combined $295 billion in cost overruns.”
Interestingly, it was the Balanced Budget and Emergency Deficit Control Act of 1985 (known more commonly as the Gramm-Rudman-Hollings Act) that provided the first legal definition of baseline. If appropriations had not been enacted for the upcoming fiscal year, the baseline was to assume the previous year’s level without any adjustment for inflation. In 1987, however, the Congress amended the definition of the baseline so that discretionary appropriations would be adjusted to keep pace with inflation. Other changes to the definition of the baseline were enacted in 1990, 1993, and 1997.
Citizens Against Government Waste (CAGW) has previously referred to baseline budgeting as “one of the most sinister ways that politicians claim to cut spending when they are actually increasing spending.” Baseline budgeting tilts the budget process in favor of increased spending and taxes. For example, if an agency’s budget is projected to grow by $100 million, but only grows by $75 million, that agency sustained a $25 million “cut.” That is analogous to a person who expects to gain 100 pounds only gaining 75 pounds, and taking credit for losing 25 pounds. The federal government is the only place where this absurd logic is employed. Baseline budgeting is an issue that truly separates the deficit hawks from the budget chickens.
The first president to propose ZBB was Jimmy Carter in 1977. According to the Government Accountability Office, “its main focus was on optimizing accomplishments available at alternative budgetary levels. Under ZBB agencies were expected to set priorities based on the program results that could be achieved at alternative spending levels, one of which was to be below current funding. In developing budget proposals, these alternatives were to be ranked against each other sequentially from the lowest level organizations up through the department and without reference to a past budgetary base. In concept, ZBB sought a clear and precise link between budgetary resources and program results.” Despite some implementation problems, to include inadequate time for properly preparing the required alternative proposals, ZBB was credited with some success: “Some participants in the budget process as well as other observers attributed certain program efficiencies, arising from the consideration of alternatives, to ZBB. Interestingly, ZBB established within federal budgeting a requirement to present alternative levels of funding linked to alternative results—a requirement that lasted until 1994.”
Football coach Barry Switzer once said that, “There are many people who don’t know what real pressure is. Some people are born on third base and go through life thinking they hit a triple.” Coach Switzer could have been describing the federal government, with its use of baseline budgeting. Bureaucrats in Washington take for granted the starting point for annual funding, expecting ever-increasing, inflation-adjusted baselines for their funding, regardless of past performance. It is as if they assume that everything done by the federal government was completely error-free and unworthy of further introspection.
Senate Budget Committee Ranking Member Jeff Sessions (R-Ala.) articulated this mindset well, as Senate Democrats unveiled their fiscal year 2014 budget in early March: “Apparently, the federal government is perfect, requires no reform. That would explain why our Senate Democrats have refused to pass a legally mandated 10-year budget plan in four years… They say there is no problem with waste, fraud, and abuse; they say the problem is you; they say you are not sending them enough money; they say they have wisely spent every penny. So, you must just send them more. And, if you don’t? Well, they won’t stop spending, they’ll just borrow more.”
At some point, the feds must realize a fundamental truth about the budget; or, short of such an epiphany, the American taxpayer must hold them accountable. Success can only be achieved by producing something (a hit, for instance) in order to get on base. Otherwise, the batter (i.e., the federal program) should be retired to the dugout.
