Chapter 35 A Disciplined Budgeting Process
November 22, 2015
The financial crisis that USAPonzi has caused in the U.S. and even throughout the planet is due to a lack of discipline in the budgeting process for the U.S. Government. We have a benevolent demeanor as a country and therefore we often make unaffordable commitments but we must also face financial realities. Our current budgeting and planning process can never work.
USAPonzi was launched by removing essentially all financial constraints in the budgeting process. We have basically said "spend whatever you want and the future U.S. taxpayer will pay for it". The U.S. Government has made irrational and unaffordable social benefit promises and did not fund a single penny of these promises. We have made $99.8 Trillion worth of promises that we cannot keep.
Defined benefit plans will have to be eliminated unless the U.S. Government accrues the money in a segregated and protected trust fund to pay for these promised benefits. Not funding the social benefit promises is the primary cause of USAPonzi. Our benefit plans will have to be able to flex with the revenue stream that is available to pay for them. But that is also true for all other aspects of U.S. Government spending. The days of a "blank check" budgeting process have got to stop.
Reverse the Budgeting Process
As I have said repeatedly throughout this book, we must convert to GAAP Accounting and commit to a balanced GAAP basis budget. This will set the boundary conditions for the budgeting process. Then a concept called Zero Based Budgeting (ZBB) must be called into play. We only have so much money to work with, how are we going to spend it. We have 536 people (actually 322 million) that all have an idea of how we should spend "the people's money" but when "push comes to shove" we only have so much money to spend.
The citizens must also recognize that even the U.S. Government has finite resources and is therefore constrained as to how much it can spend.
The unconstrained budgeting process that we use today is what has allowed healthcare costs to spiral out of control. We must adopt a defined contribution concept to healthcare cost and that defined contribution must also flex with budget affordability.
One of the problems we will face over the next couple of decades is that when USAPonzi implodes our GDP is going to drop significantly (See Creating Counterfeit Prosperity) which means that our tax revenues will drop significantly so even our defined contributions will have to adjust to the realities of lower U.S. Government spending on a dollar basis.
The role of the CBO (Congressional Budget Office) must change from "assess the damage" to that of "control the process". The CBO role should be changed to that of a CFO (Chief Financial Officer).
The House "ways and means committee" must set policy but that policy must pass muster with the CFO before it can be approved.
The U.S. Government has gotten much "too big" because of the undisciplined financial planning approach that the U.S. Government has taken in the past. The U.S. Government will have to be restructured and reformed to align with financial reality.
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