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Alternative Economics 101: Chapter 3: What is a Budget? - TAX Your Imagination!

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Tax Your Imagination book cover by Steve Consilvio

3. What is a Budget?

We live in a budget-driven society, because of the desire to control revenues and expenses. Man is capable of remembering the past and predicting the future, and we use that ability to think abstractly to create budgets. A budget measures our hopes and expectations. It provides a standard of skill, often a definition of success and failure, a roadmap, and a topic of much discussion. Budgets exist in local, state and federal governments and provide the entire framework for government. Nothing is accomplished that is not in the budget. The squeaky wheel that gets its grease is looking for favorable inclusion in the budget process. Corruption uses the budget for personal gain rather than for the commonwealth. If you are not in the budget, then you are invisible.

Budgets also exist in the private sector. Wall Street is myopic in terms of budget expectations. Stocks fluctuate based on meeting, exceeding or failing to meet expectations. The expectations can be provided by the company itself or by self-appointed analysts. Expectations are not uniform from one political party to another, or from business to business, or even from person to person. However, expectations themselves are held in common. The wise stock-broker, like the weatherman, is credited with predicting correctly 50% of the time something over which he has no control. He is superfluous but highly regarded, because he is involved in the art of prediction. They provide a false sense of control. The same is true of budgets. The clouds will blow regardless of the accuracy of a prediction, and the prediction will be as quickly forgotten as the clouds themselves. Budgets are like old weather reports and old newspapers. They require a lot of effort to create and are instantly out of date. They do a terrible job of predicting the future, but an excellent job of documenting failures of the past.

Budgeting exploded with the rise of computers and programs like Visi-Calc and Lotus 1-2-3. Today, custom programs build budgeting directly into the business operations. Much like the vital signs of a hospital patient, managers can closely nurse the health of their numbers. Much like the patient, the workers get no rest from the constant vigil of number-watching. The definition of acceptable performance keeps moving. 

Businesses and governments both seek totalitarian efficiency. Slavemasters would like the slaves to run a marathon at the quick pace of a sprint. Everyone is expected to work harder and more efficiently, while inflation returns less reward for effort expended. This situation is reflected in the worries of the farmer who can feed others but not himself. The ability to collect data has fed the desire to predict and control data. Police-like states existed before computers, but they have blossomed with this new tool. The ability to measure is part of the corporate manager's demand for more results, even as the time spent measuring is a large component of inefficiency.

Managers set high standards for others, but low ones for themselves. Anything that they decide can be regarded as "essential' for the competitive situation of the market. A million dollars will be spent on a one minute television ad, while the workers in the warehouse are expected to increase their efficiency. The managers can waste money faster than the workers can create goods, the same way that lawmakers can spend money faster than it can be taxed. 

Advertising agencies and marketing departments have similarly adopted any new technological developments, like social media, to harangue potential clients for more revenue. In the same way, government's resort to fees and new taxes. The spending is all planned out in the budget to meet the budget goals. What started out as a single page with simple calculations has compounded into volumes of nonsensical organizational priorities. The purpose of the organization becomes less defined over time, and so a mission statement is added to the list of budget items. The dissonance can compound in parallel with the budget.


budget USA 2013 by unknown

While budgets are made from numbers, there is little analysis of the math. The process is based upon unreasonable expectations of disconnected numbers behaving uniformly. Seldom is the budget process itself regarded as the cause of unexpected consequences.

Budgets are used by businesses as a way to manage employees. Sales quotas, customer counts, client surveys, inventory turn-over, profit margins, gross and net sales, production rates, units sold, and cleanliness scores are just a few of the myriad of ways that the budget mentality is applied within a hierarchical business relationship. Anything that can be counted can be budgeted. Even things that cannot be counted, like quality, are subject to an attempt to be quantified. 

In the classroom, children and their teachers are subject to similar demands with tests and score expectations. This has resulted in huge battles between elected officials and teacher unions over contract stipulations. The taxpayer funds both sides in these battles. The strong battle the strong, while claiming to defend the long-term interests of the weak. Budget battles represent the dearth of commonwealth.

Statistics are commonly used to prove a claim. The bell-curve is not an observation, but is often used as a blueprint for the expected results. Conformity to a statistical anomaly is considered a worthwhile goal. Depending upon what is being measured, and how, the bell curve itself can represent a great inequality. When statistical formulations serve as a self-validating budget framework, management becomes trite and fascist. The goal is lost.

 The budget process moves from planning for the future, to predicting the future, and finally to creating goals. Numerical targets serve as an omnipotent idea. People are forced to obey the budget, even if it violates common sense. The budget has reduced entire organizations into slaves of numbers. Everyone becomes part of the supply, and the invented future is the demand. Man should be the master of his numbers, not its slave. Fear has replaced commonwealth. The banal has been elevated to the sacred.

Budgets also exist at the individual level. It is here that we can begin to understand the budget process as a mathematical phenomenon, rather than one of growing expectations. Personal budgets tend to be discussed as 1) a savings for a future expense, or 2) as an adjustment to ensure expenditures are less than income. For example, a small amount is saved from every paycheck and put into a separate envelope to be used "when the time comes.' In the second approach, personal budgeting mimics governmental or business management. It is an effort to increase revenue and decrease expense. Cash flow concerns are at the heart of budgeting. 

A personal budget does not require a consensus of unrelated players, obedience to authority, elaborate procedures to change your mind, or a constant chorus of blame or panic. These things only occur within organizations. Risk is personally assumed, and it is not assigned, diverted or shifted onto others. There is no outside analyst comparing your management to an invented ideal. The only consequence and expectation is the will to survive. However, because all money is collectively owned, and flows from one party to another, personal habits get a lot of attention in both economic and business research. Consumption drives production in the standard economic model. The desire everywhere is for budgets to expand. More revenue and less expense is the universal ideal. When individuals are thriving, this is regarded as burgeoning trade. 

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Steve grew up in a family business, was a history major in college, and has owned a small business for 25 years. Practical experience (mistakes) have led him to recognize that political rhetoric and educated analysis often falls short of reality. (more...)
 
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