Paul Revere is in his 20s, and is concerned about the impact of the growing national debt on his generation. Not much younger than when his namesake made his historic ride, he works in the wake of a tea party to warn his fellow patriots of impending doom - unless they exercise the courage to act now. He will be posting regularly at ConservativeHome on spending issues to encourage his fellow patriots to find that courage.
The U.S. government is inefficient in the vast majority of things it does. Most Americans know this and can live with it to some degree. However, things have gone off the rails in recent years as inefficiency has grown to new heights. Just last year, the Office of Management and Budget estimated $125 billion in improper payments were made in 2009. This was 5.5% of the federal budget and, while the percentage wasted was less than in years past, the total money wasted was higher because Congress spent more than previous years.
Various think tanks, politicians and pundits on all sides of the political spectrum have shown ways to cut anywhere from tens of billions to hundreds of billions annually from the federal budget.
As a young person dedicated to elimination of the federal deficit, and diminishment and eventual zeroing out of the federal debt, I have come up with my own list of short-to-medium-term cuts and reforms to the federal budget. It’s more ambitious than what many “reasonable people” in Washington are debating, but it’s the reasonable compromisers who have caused our financial problems, as Peggy Noonan so adroitly pointed out last year.
Below is the first of three posts in which I will lay out a variety of spending cuts and reforms lawmakers could pursue to reduce spending significantly. In this first post I on getting rid of waste, fraud and the rest of the low-hanging fruit in the federal budget. In my second post next Monday I'll look at medium-term cuts and reforms, things that are likely to take a year or two to really implement. And in my third post after that next week I'll put out my “wish list” of items to cut, which will mostly include items no politician looking for re-election would ever address, which is of course why they need to be addressed.
But, for now, the short-terms spending cuts.
- A 2010 60 Minutes expose showed that over 10% of Medicare, about $60 billion last year, is lost to fraud. Additionally, Medicaid loses about 10% to fraud, equivalent to $30 billion, annually.
- The Department of Agriculture spent just over $15 billion subsidies to farmers in 2009, and between 1995 and 2010 spent $245 billion on subsidies. Additionally, hundreds of millions are wasted every year due to fraud and other mishaps.
- Eliminate tax subsidies to all sorts of markets — such as the mortgage interest deduction, which the Debt Commission tried to get rid of — that incentivize skewed decisions on everything from housing to energy to investments. Many Republicans currently support such subsidies, something that should anger any conservative. Not only will this help reset America’s economy from a political economy (to steal from a 2008 column by the Washington Post’s Charles Krauthammer) to a more market-based economy, it will save billions annually and over $100 billion just in the mortgage interest deduction alone.
- Non-competition contracts are prevalent in the Defense Department. Senator Tom Coburn (R-OK) tried to address this regarding a contract for 500,000 Army rifles in 2007 and yet again in a letter to the Deficit Commission in May of last year. Unfortunately, too few Democrats and Republicans are willing to risk the political backlash that would happen if fiscal responsibility struck the Pentagon.
- 10% of the $50 billion sent to Iraq for reconstruction in 2010 has disappeared without accountability. Additionally, according to a paper by Heritage’s Brian Riedl in 2009, more than $13 billion in Iraq aid has been classified as wasted or stolen. Another $7.8 billion cannot be accounted for.
- Washington spends $92 billion on corporate welfare.
- Washington spends $25 billion annually maintaining unused or vacant federal properties.
- Government auditors found that 22 percent of federal programs in the five years prior to the publishing of Riedl’s paper, costing taxpayers a total of $123 billion annually, fail to show any positive impact on the populations they serve.
- A GAO audit found that 95 Pentagon weapons systems suffered from a combined $295 billion in cost overruns.
There are a variety of ways to cut down on this waste. The Government Accountability Office (GAO) has a great bang-for-the-buck, according to Congressional testimony in 2008. A friend who works for the GAO has also told me that for every $1 invested in GAO, the taxpayer saves $1.6. Thus, expanding its scope and power over other agencies could prove effective, as well as diminishing the required time to enact GAO-recommended changes (currently, an agency or department has three or four years to initiate the changes). Simply competitively privatizing many of these programs would lower many costs as well.
Of course, when it comes down to it, electing politicians who want to keep the size of government affordable and within the scope of the Constitution is the first step in this process. Elimination of much of the aforementioned fraud and waste could happen by simply not including it in the annual budget. Unfortunately, members of both parties (such as Iowa senators Tom Harkin (D) and Charles Grassley (R)) with regards to ethanol continue to ask for wasteful spending to improve their odds of re-election.
Republicans often speak of “waste, fraud and abuse” as though eliminating it would be a windfall of ended federal budgetary inefficiencies. Unfortunately, even if we eliminated all of the waste described above we would still have a 2011 deficit of nearly $1 trillion. Part of this is due to the fact that we are almost halfway through the fiscal year, but the rest is simply that waste is not the greatest driver of our deficits and growing debt - health care is, and when combined with defense and Social Security, ends up being about about 64% of the president’s original proposed budget for FY 2011.
This is not to say eliminating waste and fraud as described above are useless efforts; saving between $200 and $250 billion (my back-of-the-envelope calculations, assuming elimination of 80% of the concrete numbers I touched on above) would certainly be a decent start to getting the budget balanced by October 2012.