Every year, Washington stages an elaborate drama. Politicians thunder about fiscal responsibility. Agencies warn of catastrophic cuts. News anchors breathlessly count down to government shutdowns. And then, somehow, the lights stay on and everyone does it again next year.

Here's the secret that makes the annual budget circus less confusing: almost none of it matters as much as it appears to. The real decisions happened long ago, the numbers rarely mean what they seem to mean, and the whole spectacle follows a script everyone pretends doesn't exist. Understanding this kabuki theater won't make you cynical—it'll help you see where the actual choices get made.

Washington has a vocabulary problem. When a politician announces they're 'cutting' a program by $50 billion, you might reasonably assume the program will have $50 billion less to spend. You would be wrong.

Government budgets use something called baseline budgeting. The baseline assumes every program will grow automatically—usually by inflation, sometimes by projected need. If a program was set to grow from $100 billion to $120 billion, and someone 'cuts' it to $115 billion, that's officially a $5 billion cut. The program still gets $15 billion more than last year. Both sides exploit this relentlessly. Spenders announce modest 'increases' that are actually doubling program growth. Cutters trumpet 'savings' while spending more than ever.

The real fun comes during budget negotiations. Agencies pad their baseline requests knowing they'll be trimmed. Legislators declare victory by cutting the padding. Everyone goes home happy. The actual spending? Usually pretty close to what everyone quietly expected from the start. It's an elaborate dance where the choreography matters more than the destination.

Takeaway

In government budgeting, words like 'cut' and 'increase' are measured against imaginary futures, not actual present spending. Always ask: compared to what?

Here's a number that should reframe everything: roughly two-thirds of federal spending happens without anyone voting on it each year. Social Security checks go out. Medicare pays doctors. Interest on the national debt gets paid. These are called mandatory or entitlement programs, and they run on autopilot.

Congress set the formulas years or decades ago. If you're 65 and paid into Social Security, you get your check. No annual vote required. The remaining third—called discretionary spending—includes everything from fighter jets to national parks to food inspectors. This is what the annual budget drama is actually about. The fierce battles over 'the budget' concern roughly 30 cents of every federal dollar.

This split explains why budget debates feel so disconnected from reality. Politicians argue furiously about foreign aid (less than 1% of spending) while the programs that actually drive long-term fiscal challenges sit untouchable. Reforming entitlements means telling voters they'll get less than promised. Few politicians survive that conversation. So the kabuki continues, focused on the parts small enough to fight over safely.

Takeaway

Most government spending runs on formulas written by previous generations. Annual budget fights are really arguments about the margins.

If normal budgeting is theater, crises are when someone throws out the script entirely. The 2008 financial crisis produced $700 billion in bank bailouts in a matter of weeks—spending that would have been unthinkable months earlier. COVID-19 unlocked trillions in emergency spending with almost no normal debate.

Crises work differently for a simple reason: they change what counts as possible. Normal budget rules exist partly to prevent any single year's legislators from making dramatic changes. But emergencies create permission to ignore those rules. The same Congress that fights for months over a few billion suddenly finds agreement on hundreds of billions. This isn't necessarily bad. Sometimes emergencies genuinely require emergency responses.

The implementation lesson is subtler. Smart policy advocates wait years for the right crisis. Ideas that seem radical in normal times get pulled from filing cabinets when disaster strikes. The 2008 crisis produced financial regulations that reformers had sought for decades. COVID accelerated telehealth policies stuck in bureaucratic limbo. If you want to understand where policy actually changes direction, watch the crises—that's when the kabuki stops and real choices happen.

Takeaway

Crises don't just demand response—they create rare moments when political constraints temporarily dissolve and previously impossible policies become inevitable.

The annual budget process looks like democracy in action. In practice, it's mostly a negotiation over margins, conducted in a language designed to obscure more than it reveals. The real fiscal trajectory was set by past Congresses, and it changes mainly when crises force everyone's hand.

This isn't cause for despair. Understanding the theater helps you spot the genuine decisions when they happen. And it explains why the politicians yelling loudest about the budget often have the least to say about the spending that actually matters.