Tackling the Federal Government’s Spending and Financial Mismanagement
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Commentary

Tackling the Federal Government’s Spending and Financial Mismanagement

The national debt is over $23 trillion and the 2019 deficit alone was $1 trillion. We need significant and substantive reforms to deal with this growing crisis.

Taxpayers and businesses send almost $4 trillion to the federal government every year. As the $23 trillion national debt illustrates, federal spending isn’t constrained in any meaningful way. Nothing ensures taxpayers’ money is spent responsibly or effectively. 

Laws do not seem to constrain Congress or the executive branch, with supplementary money for wars coming largely outside the budget process, for example. Additionally, when Congress passes laws it may even exempt itself from following them. 

In thinking about the national debt and federal budget deficits, it seems likely that statutory spending limits or deficit-control measures may be the only long-term solution. Sure, millions of Americans are concerned about the financial state of our federal government and the failure of our elected officials to enact solutions, but, as Reason.com put it, “Calls to shrink the size, scope, and spending of government, or even balance its budget, have gone the way of the dodo bird.” 

Even the Tea Party, which once pushed for budget cuts and debt reduction during the Obama presidency, has been declared dead by one its most prominent members or supporters — Sen. Rand Paul, as the movement became largely silent about spending, debt and deficits rising under the Trump administration. To Paul’s point, in 2019, the Pew Research Center found “there is considerably more support for increased spending in several areas now than in 2013. Over the past six years, public concern about the budget deficit also has declined substantially.”

Pew added, “The public is split in their general preferences on the size and scope of government: 47 percent say they would rather have a smaller government providing fewer services while an identical share say they would prefer a bigger government providing more services.”

In late 2019, Gallup found Americans are less likely to prefer government solutions to issues when paying higher taxes are mentioned as part of the equation — as they almost always are in the real world. Gallup found:

A more active government would almost certainly result in higher taxes. However, relatively few Americans favor that approach when given the choice among 1) more government services and more taxes to pay for them, 2) fewer government services and lower taxes, or 3) keeping services and taxes as they are now.

In the latest poll, 25 percent would opt for increased taxes and services, 32 percent want no change and 42 percent prefer smaller government. While increased taxes and services is the least popular option, slightly more choose it now than did so in Gallup’s readings between 1993 and 2013, when no more than 20 percent favored it.

It’s easy to see why members of Congress, who are often focused on the short-term, don’t treat long-term debt from annual deficits as an existential crisis. But, Congress has authorized the federal government to spend more than its revenues in 67 of the last 79 years. During economic booms and busts, the federal government finds the need to spend.  Most recently, “The federal government budget deficit surpassed $1 trillion in 2019,” CNN reported while also noting the most recent deficit comes at a time of economic prosperity and low unemployment: “The widening gap comes despite campaign promises by Trump to shrink or even eliminate the nation’s deficit. Usually, big budget deficits typically widen during economic downturns — but the US economy is expanding and unemployment is at a 50-year low.”

America’s $1 trillion deficit in 2019 is more than the country’s entire gross domestic product just 47 years ago. And as the debt piles up so do interest costs, which will itself soon cost taxpayers’ over $1 trillion a year. 

Spending and deficits are a massive problem, but they’re not the whole problem. They are part of the federal government’s culture of waste and fiscal mismanagement. There are a variety of culprits, not limited to, but including:

  • the unmanageable 75,000 page of Internal Revenue Code that is so complex that one in five large, profitable U.S. companies, and a large percentage of citizens, are able to use the complexity as a way to find loopholes that allow them to pay no federal income tax at all;
  • 175,000 pages of federal regulations, many of which contain unfunded mandates that may not even be authorized in law;
  • the use of accounting methods that allow the government to massively understate its long-term liabilities, thus preventing a complete and accurate presentation of its true financial condition;
  • and costly, unsustainable entitlement programs, including Social Security and Medicare, that in the coming decades won’t be able to pay out the full benefits that workers, who weren’t able to invest the money they were forced to send into those programs, have been promised and are expecting.

Thus, finding an effective way to constrain federal spending is only part of the answer. Adding accountability, restraint on indirect expenditures like regulations, simplifying the tax code, closing off workarounds and budget gimmicks that are used to fund extraordinary events like wars, and better financial transparency are just some of the necessary steps.  Ultimately, reforms that seriously address the debt, deficits, waste, and mismanagement are likely going to need to broad, not incremental. That may even include amending the constitution, as has often been proposed in recent decades through a balanced budget amendment, for example.

As part of the ongoing effort to develop concrete policy plans for how to reduce government waste, inefficiency, debt and deficits, and to help build a coalition in support of these types of changes, John H. Ramsey has joined Reason Foundation as a senior fellow. After earning a master’s degree in business administration with distinction from Harvard Business School, Ramsey had a 40-year financial management career in business and government. He worked as the chief financial officer of Union Commerce Corporation and Sunsweet Growers and started two companies, Mark Stanley & Company and EMA Partners International. For three years during his decade of service in the US Air Force, Mr. Ramsey was a project manager in a multi-billion-dollar defense weapons system acquisition. He also directed a major analysis of return on investment and progress payments for Deputy Secretary of Defense David Packard and the Defense Department’s Industry Advisory Council in 1971-72.

Along with Ramsey and our team, we’re working to detail the need to comprehensively reform the federal budgeting process, explain how to install federal spending limits, reduce waste, increase transparency, and make the system more accountable to taxpayers.

Adrian Moore

Adrian Moore, Ph.D., is vice president of policy at Reason Foundation, a non-profit think tank advancing free minds and free markets.