Too Much Money, Too Little Time

Gretchen Hamel
By Gretchen Hamel | July 19, 2013 | 10:50 AM EDT

Imagine you're given a credit card with a rather large limit, which you can spend freely within a given period. The only catch is that, in order to get a card with the same amount next year, you have to spend every penny. Is this a dream? Are you the next contestant on "Supermarket Sweep"? No, it's just another day in the life of a government bureaucrat.

It's hard to fathom that our federal budgeting process is so broken and that it has created a perverse incentive to waste money in order to receive more money. Given that we are already $17 trillion in debt, federal agencies are making news constantly for waste and scandals, and we have had years of trillion-dollar deficits, shouldn't the policies in place promote fiscal responsibility and reward saving and smart spending? The government wastes money well enough without the extra incentive.

And so, there is a spending craze that comes at the end of the fiscal year.

Government Spending Soars at Year's End Under Spend-It-Or-Lose-It

Take, for example, the Defense Information Systems Agency (DISA), whose budget officer wrote in an email that it was critical to spend 100 percent of the agency's $2 billion dollar budget. The news of the email broke the same day that Defense Secretary Chuck Hagel sent his own letter to Congress pleading for more money, and the same week that hundreds of thousands of Defense Department employees were set to be furloughed.

The IRS also defended money wasted on extravagances like motivational speakers and parody videos, explaining any funds not spent that year would have lapsed.

This isn't a new phenomenon. "Spend it or lose it" has been festering in Washington for more than 30 years and lies at the root of the culture of waste that plagues the federal government. How can we begin to address the inefficiencies, duplication and lack of oversight in government spending if we have in place policies that promote waste as a means to an end?

That's why Bankrupting America is launching a petition to urge Congress to take action to fix the broken budgeting system and reform these backward incentives. Among these are three steps that we want to see enacted which include: create government-wide reporting standards that will increase transparency and accountability, allow agencies to rollover taxpayer savings so the funds don't lapse, and appoint full-time Inspectors General to increase oversight.

Leaders in Washington on both sides of the aisle have acknowledged concerns over "spend it or lose it" budgeting but have yet to take any meaningful action to fix it. Harvard Kennedy School Professor Jeffrey B. Liebman analyzed the phenomena and noted the resulting dramatic drop in the quality of investment.

And, a Bankrupting America analysis of total procurement spending from fiscal years 2010-2012 shows it skyrocketing in the last week as agencies look to clean out their budgets.  Clearly, these agencies are just looking to spend without care or concern for what they are blowing the money on.

It's as if they have a gift card to Starbucks, and after getting the coffee they need, they start buying mugs, indie music CDs and weird coffee contraptions just to finish out the gift card.

The difference is that budgets aren't gift cards, they are hard-earned tax dollars from Americans who would much rather see that money in their pocket than a faceless bureaucrat's.

The "spend it or lose it" policies in place in our government are obvious, no-brainer targets for reforms that have somehow eluded lawmakers for far too long. If agencies want funding, they should demonstrate that they spent the funds already allocated in a responsible, efficient way that achieves their goals. We can no longer reward frivolous behavior or harmful incentives.

Lawmakers must live within their means and make do, just as Americans have to every day. And when all else fails, the old saying still holds true: Waste not, want not.

Editor's Note: Gretchen Hamel is executive director for Public Notice.