Acton Commentary

The Washington Shuffle


Looking for work? How does a top management position sound that comes with a free Chevy Blazer and the power to distribute millions of dollars to your family and friends? Try calling the Baltimore public housing authority. Perhaps they’re hiring.

This is just one example of the fraud, abuse and mismanagement common to federal agencies according to a report leaked last week to the Washington Times . The study, conducted by the House Budget Committee and based on inspector general and General Accounting Office (GAO) investigations, shows billions of federal tax dollars lost in the Washington shuffle.

The Supplemental Security Income (SSI) program, for instance, is losing $1 billion a year to fraud. In one of the more egregious examples of abuse mass murderer William Bonin, California’s infamous “freeway killer,” received SSI disability benefits during his fourteen years awaiting execution on death row. Even though incarcerated felons are ineligible for SSI payments, Bonin collected enough money to allow his mother to pay off the mortgage on her home.

Medicare made “massive overpayments” totaling $12.6 billion in fiscal year 1998. U.S. Department of Health and Human Services Inspector General June Gibbs Brown called this “a truly remarkable improvement” from past years when nearly 15% of all claims were filed improperly, a rate unheard of in the private sector.

The Department of Housing and Urban Development (HUD), responsible for funding the Baltimore public housing authority, wasted $18 billion dollars and according to the report, let public housing neighborhoods “fester with crime and drugs.”

Each year new reports are released on government waste. And each year the amount of waste in most federal agencies seems to keep growing.

Last summer, the staff of Senate Governmental Affairs Committee Chairman Fred Thompson, working with the GAO, identified $210 billion of federal overpayments, erroneous payments, and wasteful practices. This figure is limited exclusively to the executive branch. But profligate spending is not unique to executive branch bureaucrats.

“Congress and the President have just set a new record for pork-barrel spending,” says Citizens Against Government Waste (CAGW) President Thomas Schatz. “This year’s appropriations bills contain hundreds of earmarks worth millions of dollars each. These people throw money around faster than Regis Philbin.”

Some of the more gratuitous initiatives in this year’s budget include:

  • $100,000 allocated to Vidalia Onions Research primarily for “developing pungency testing procedures” for Vidalia onions;
  • over $1 million allocated to assist Viticulture Consortium in wine cultivation;
  • a $60 million corporate handout, as part of the Overseas Private Investment Corporation (OPIC), for Rose Hall Resort Limited to build a hotel and beach resort in Jamaica;
  • a handout of over $4 million to Orient-Express Hotels, Inc., as part of OPIC, to finance the construction of its fourth safari camp in Botswana, which is expected to charge patrons a minimum of $300 to $400 a night;
  • $300,000 appropriated to conduct a needs and design study for a National Museum of American Music honoring Frank Sinatra;
  • $1.5 million allocated to Swine Waste Management and the Animal Waste Management Consortium to supplement research, demonstration, and outreach projects associated with animal waste, with a special emphasis placed on pig poop; and
  • $700,000 allocated to a Livestock Pollution Abatement Study on how to clean up cow pies.

Just for the record: these last two items have nothing to do with subsidies for the arts in New York City.

Citizens Against Government Waste estimates that trimming special interest giveaways like these would reduce the federal budget by well over four percent. But just as an absence of competition allows federal bureaucrats to get away with poor management of their agencies–something a company in the private sector could never do–a failure to hold members of Congress directly accountable for their own excesses allows pork-barrel spending to continue year after year.

One solution to the problem of wasteful spending is across-the-board budget cuts in all federal agencies. This would put pressure on federal bureaucrats to find and eliminate wasteful spending, and also put added pressure on members of Congress to choose between special interests and programs in service of the common good.

However, each time across-the-board budget cuts are discussed a political circus erupts. Shortly after taking office, for example, President Clinton ordered federal agencies to cut administrative costs by 25% over five years. A failure to clearly define administrative costs made this a problematic order for resistant bureaucrats.

Likewise, when the Republican Congress offered a similar proposal for budgetary restraint, one not limited to administrative costs but to about a one percentage point reduction in overall agency costs, the bureaucrats said impossible. Federal agencies and members of Congress hostile to the legislation pointed to the worst possible cuts, usually cuts disproportionately harming children and the poor. They then firmly stood their ground.

“The smart bureaucrat knows the best way to keep a program alive is to provoke the loudest political protests,” writes Hendrick Smith, author of The Power Game: How Washington Works . “[B]y underestimating the program’s cost, leaking bad news about budget cuts to friendly members of Congress, and then making the cuts that cause the most political pain–not the least–to the program’s constituents,” agency personnel easily resist efforts to diminish their funding and power.

Smith’s assessment of the “power game” in Washington is right in line with the understanding of Public Choice theorists like James Buchanan and Gordon Tullock. Just like the member of Congress who supports pork-barrel spending to gain favor with important constituents while others around the country are made to foot the bill, the federal bureaucrat is also largely driven by his own interests and others are made to bear the brunt of poor performance. The challenge to overcoming bureaucratic mismanagement and Congressional excess requires structural changes that take into account human motivations.

Just as the free economy harnesses individual self-interest for the common good, mechanisms are needed to do the same in government. Rodney Fort and John Baden have suggested creating a “predatory bureau” whose mission is to reduce the budgets of other agencies with its own income and power dependent upon its success in achieving this task. The natural human tendencies responsible for mismanagement and excess in government would then be turned on their head.

A second means for reducing the perverse incentives in government involves the devolution of political power. Federalist #10 proposed enlarging the orbit of the electorate in an effort to help the country avoid degenerating into a tyranny of the majority. The logic behind representative government was to elect persons to represent the many and diverse interests of a large constituency. Since each representative is accountable to many different people and represents diverse interests, faction is pitted against faction in the Congress and no one interest can run roughshod over any other.

But in the process of enlarging the orbit, every person’s interest in any single decision also diminishes. Public choice theory explains that the voter is largely ignorant of political issues and that this ignorance is rational. The more distant a decision is from his own interests and the less power he has to effect the outcome, the less interest he has in paying close attention to the votes cast by his representative or even in taking the time to cast a vote himself. Instead of a tyranny of the majority what has resulted is a tyranny of silence and apathy.

As both the population of the United States and the size and scope of government continues to grow, the attention any person pays to government programs–other than those programs which directly serve their own interests–continues to diminish as well. Only by returning power to states and localities will the power and influence of each individual grow. Then, representatives will increasingly be held accountable for their own actions as wasteful spending gains a whole new level of importance to the average voter. It is no coincidence that most government waste occurs at the federal level.