Wednesday, January 29, 2014

A Modest Proposal To Reduce The Deficit

If the SCOAMF currently wasting oxygen in the Oval Office truly wanted to offer solutions instead of spouting nonsense during last night's State of the Union address, there is one simple change he could make to the federal budgeting process that would be of immense value in trimming the deficit.

Most of you who have experience with how the federal government administers its budget are probably way ahead of me. For those of you blissfully ignorant, in a nutshell here's how it works.

Next year's budget is to a large extent based on the current year's budget. If an agency doesn't spend all of its budgeted funds in Year A, its budget for Year B is reduced by the amount of the unspent funds. This creates what economists call a 'perverse incentive' - that is, an incentive that produces an undesirable or adverse consequence as a result of the actions undertaken to receive the incentive.

Here's the budgeting process perverse incentive in action.
All week, while Congress fought over (the 2014) budget, federal workers were immersed in a separate frantic drama. They were trying to spend the rest of this year’s budget before it is too late.

The reason for their haste is a system set up by Congress that, in many cases, requires agencies to spend all their allotted funds by Sept. 30.

If they don’t, the money becomes worthless to them on Oct. 1. And — even worse — if they fail to spend the money now, Congress could dock their funding in future years. The incentive, as always, is to spend.

So they spent. It was the return of one of Washington’s oldest bad habits: a blitz of expensive decisions, made by agencies with little incentive to save.

Private contractors ... brought in food to keep salespeople at their desks. Federal workers quizzed harried colleagues in the hallways, asking if they had spent it all yet.

“The way we budget [money] sets it up,” said Sen. Tom Coburn (R-Okla.). “Because instead of being praised for not spending all your money, you get cut for not spending all your money...”
Seems like an easy fix, no? So why hasn't it been changed by now?

Maybe because the fatcats in congress and heading up all those federal agencies are getting their backs scratched by the large corporations who are getting fat at the government trough.

And my wife wonders why I drink so much...


Old NFO said...

Yep, ironic isn't it... And with CRs instead of a REAL budget it's even worse... Especially when the administration does a $$ dump 1 Sept...

jeff said...

Use it or lose it. What a horrible and backwards concept.
Try that in the private sector and the company and the jobs that go with them would be gone.

CenTexTim said...

NFO - "ironic" isn't the word for it. "Insane" comes pretty close...

Jeff - The more you spend, the more you get. Backwards indeed...