A budget system designed for deficits

Once upon a time in America, a progressive couple discovered they were in dire financial straits.  In hopes they could change their slide toward insolvency, they sought guidance from their successful conservative neighbor. 

The neighbor asked if they had a budget and they happily replied they did - but that no matter how hard they worked to stay on their budget, they always wound up having to borrow more on their credit cards.  Intrigued, the neighbor asked if they would show him a copy of their budget and explain their budgeting process. 

A copy of the budget was provided -- and the couple explained the process they used as being what the government refers to as Current Baseline Budget Process, e.g. it is based on what they spent last year.  They then add extra to off-set the inflationary loss in value of their money -- and a little more extra for population growth, i.e. pets, visitors, etc.  Once the final amount is determined, it is apportioned to cover the bills -- leaving the un-earmarked balance for use in improving their standard of living.  

The neighbor was stunned!  He explained to the couple that their Current Baseline Budget Process was not tied to their income.  But the more he tried to encourage them to convert to an Income Budget Process, the more defensive and irrational they became, e.g. they could not relate to a budget that did not immediately "improve their standard of living."  In the end, all the neighbor could do was walk away, shaking his head and muttering to himself. "I guess Ron White is right - you really can't fix stupid."

The above story has to be fiction - right?  Nobody could be that stupid!  Well unfortunately, it does appear that we American's are just that stupid - because the progressive couple's Current Baseline Budget Process is the actual process used by our US Federal Government when preparing the annual budget. 

For clarification, our slide into senselessness began back in 1974 with the Congressional Budget Act of 1974. This legislation mandated the Executive branch's Office of Management and Budget (OMB) prepare a projection of federal spending for the upcoming fiscal year based on a continuation of the existing level of governmental services. In addition, the Act required the Legislative branch's newly established Congressional Budget Office (CBO) to then prepare a five-year projection of budget authority, outlays and revenues -- and identify the resulting surplus or deficit.  Unfortunately, while the CBO projections include revenues, they are never used to "mitigate" the OMB's projected spending -- so even if the budget does eventually balance, it does not balance against income.  Instead, actual expenditures are balanced against the projected spending, e.g. the OMB's number of what was spent the prior year after being increased for inflation and population growth.  Therefore, even a balanced budget grows the government -- even if money must be borrowed. 

Are we really that stupid? 

"If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State." - Joseph Goebbels

"The great masses of the people will more easily fall victim to a great lie than a small one." -- Adolf Hitler, Mein Kampf.

"There are two ways to conquer and enslave a nation. One is by sword. The other is by debt." -- John Adams, 1826