Wednesday, April 18, 2012

A Principled Approach to the Budget - Rationale

Over the next several posts (hopefully over the next week or so), I'm going to take on the budget from scratch with a very different orientation than in the norm.  My posts are, except for comparative purposes, going to ignore all of the various baselines and all of the plans that have been advanced.  The reason for this is simple.  I've concluded that there is no possible solution to our budgetary issues until such time as we move to a principled discussion about taxes and spending.  So today's post will be a bit of description of where I'm going, the second post will cover spending, the third will cover taxes, and the fourth will put numbers to the principles, starting with today's budget and make the case for a radical but maybe possible solution.

What would a principled discussion look like?

It would start with stating the rules that one thinks should govern the budget.  Not the actual expenses by category but the rules that would determine those expenses.  It would also not make reference to any spending beyond today's spending.  Today's spending is certain.  Forecast spending is anything but.  Forecast taxes are similar.  It would then do a similar thing on taxes and lead to a solution where the actual rules are an outcome of the application of the principles.  A discussion that starts with the outcome simply put masks any principles that might be behind the outcome, as the various parties angle to explain why their solution is the only solution without ever explaining why the solution works.

Why is a principled discussion necessary?

I've referenced this a bit above but a principled discussion is necessary because it's the only way out of the current nondiscussion we are having about the budget and about taxes.  One cannot possible enter into the discussion without a lot of knowledge and research.  By contrast, a principled discussion is something that anyone can engage in.

Second, a principled discussion takes us out of the debate about winners and losers, at least for the moment.  We can discuss the principles without knowing how they will affect results.  Indeed, as of this moment, I'm not sure what numbers are going to result from what I am proposing.  I have some gut instincts since I know what the principles are but I actually haven't done the math yet.

Finally, a principled discussion more clearly helps us see the areas of disagreement than a discussion around the numbers.  It is probably possible to start from the current budget and tax structure to infer principles but, particularly on taxes, it would be difficult to clearly define them.  When we disagree on the principles, we open ourselves up to a discussion of why we disagree.  When we argue the numbers, there tend not to be good "why's"

So where do we go from here?

Let me be clear.  My intent in doing this really is to propose a budget and a tax structure.  The end game is to get us there but also to be totally transparent on how I got there.  I'll also point out that when I get to the numbers, it will be done at a fairly high level since I don't have the time to do it at a more detailed level.  That said, a more detailed approach would be both feasible and beneficial.  As a minimum, I'll find out a lot more about what I think.  At a maximum, maybe it will create a blueprint for a new way for us to both talk about and to set the budget and the tax code.

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