OPINION:
Spending $17.9 trillion is hard work. Dispensing cash at a rate of $1 million per hour would require 2,040 years to rack up a sum as large as the national debt. It’s not that big-spending bureaucrats are lazy, but that their hard work has created their own special expertise at wasting money.
Every year, they’re blowing billions in the last few weeks of September, not for a newly discovered end-of-summer need, but with the approach of the end of the fiscal year it’s the “use it or lose it” season. At every level of the federal government bureaucrats know that if they don’t spend every last nickel in their budget, they’ll get less to spend next year.
The Mercatus Center at George Mason University studied the “use it or lose it” phenomenon and found strong evidence of year-end spending surges in many agencies. The researchers are reluctant to conclude that the money is always spent on useless things, but they find lots of anecdotal evidence that that’s what happens.
In the last two months of fiscal 2012 and 2013, for example, the U.S. State Department had extra money to spend, so it bought a million-dollar piece of granite artwork. Just before the 2013 government shutdown it spent $5 million on handcrafted wine glasses. The thought of diplomats sipping a La Crema pinot noir from a Dixie cup is enough to make a citizen cringe.
This is a “problem” ingrained in the budgeting system, because the spending pattern never changes, regardless of whether Democrats or Republicans have charge of the purse. The average spending in September, across all federal departments from 2003 through 2013, was almost 17 percent of each agency’s budget. That’s more than twice what it would have been if the money had been spent evenly throughout the year.
The Department of Justice found a way to address the “use it or lose it” problem by putting in place a “carryover” program, in which unused appropriations are added to the department’s working capital fund, instead of being returned to the U.S. Treasury. This stops the rush to spend at the end of the fiscal year, and presumably cuts down on the incentive to spend cash on frivolous items. Unfortunately, it encourages a perverse incentive to hoard funds. The result is that operating the agency still requires more money than actually necessary.
A proper fix for this mess requires accounting systems to be more accurate and appropriations more precise. External auditors must oversee spending, and budget decisions must not be centralized. The Mercatus study’s authors recommend, and we agree, that a limited rollover of perhaps 5 percent of unused funds might work, along with a mid-year review to ensure that spending levels are realistic.
Just about any change to the perverse “use it or lose it” scheme would be a welcome improvement. A bureaucrat holds his budget as his most sacred object. He will defend it to the death (not his own, but of good sense). Breaking this cycle is the only way to escape from under the Rocky Mountain of federal debt.
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