Use it or lose it. I am referring to “the habit of [U.S.
Government] agencies spending all surplus funding at the end of the fiscal year
in order to avoid budget reductions the following year.”[1]
By spending the entire amount allotted for the budgetary year, a federal agency
can avoid a lower base-line for the following year’s allotment from Congress.
The incentive in this system is to spend every dollar in the budget, whether
efficiently or profligately. The challenge is how to replace that incentive
with another—one that results in efficient public budgeting. Unfortunately,
relying on an incentive presupposes discretion, and one person can never be
sure what lies behind another person’s use of it.
In May 2015, a bipartisan group of U.S. Senators proposed to
“give agency inspectors general the ability to grant $10,000 bonuses to federal
employees who identify surplus or unneeded funding at their agencies.”[2]
According to one the senators, “the bill helps combat the perverse incentive to
spend leftover money by offering employees a positive incentive to help IGs
save money.”[3]
That perverse incentive is what made the U.S.S.R. so inefficient economically,
as state-owned (i.e., socialist) and controlled (i.e., regulated) enterprises
(as well as government agencies) operated likewise. In that political economic
system, quotas both in budgets and widgets were the currency by which the
system operated. Such bloat, inefficiency and mismanagement that weakened the
Soviet Union from within also hampers good government at the federal level in
the United States.
The proposed law would amend the 1974 Congressional Budget
and Impoundment Control Act, which gave Congress more authority in the budget
process. “The Act was inspired by Richard Nixon’s refusal to disburse nearly
$12 billion of congressionally-appropriated funds in 1973-74 through the
executive power of impoundment.”[4]
Nixon cited the impact of the federal budget deficit on inflation as the reason
for refusing to spend appropriated funds. The rationale is problematic prime
facie because the U.S. president is tasked with enforcing the law rather than selectively
enforcing it. Not contradicting the law would have meant going back to
Congress with a recommendation that a law be passed withdrawing the surplus
funds.
Even though the proposed law in 2015 would place the
discretion with civil-service employees rather than politicians, a Democratic
U.S. Senate aide said “that the amendment’s language may [allow] federal
government administrators to defund key agency functions for ideological or
political reasons.”[5]
Civil servants are human too, and, besides, they can be subject to pressure
from politicians higher up the food chain. In other words, we are back to the
same problem—that which is inherent to discretion. Sen. Mike Enzi can have all
the faith in the world in “the people holding the shovel who really know how to
solve problems”—that “the folks responsible for administering individual
programs know where the money is, what is needed and what is being wasted”—but
all this does not necessarily mean that the civil servants would flag a budget
item as “surplus” because it really would be wasteful to spend the money. Even
a bureaucrat holding a shovel could provide an efficiency rationale for cutting
one budget-item so as to get out of having to do a boring ideologically-objectionable task or program.
The bonus would be, well, a bonus. That is to say, a perverse incentive.
[1]
Andy Medici, “New
Bill: Point Out Surplus Funds, Get a $10,000 Bonus,” Federal Times, May 21, 2015.
[2]
Ibid.
[3]
Ibid.
[4] Regional
Oral History Office, “1974
Congressional Budget and Impoundment Control Act,” The Bancroft Library,
University of California-Berkeley, March 7, 2011 (accessed May 23, 2015).
[5]
Daniel Marans, “Rand
Paul Amendment Would Increase Executive Branch Power,” The Huffington Post,
May 22, 2015.
