Where Does Wasteful Government Spending Stop?
In testimony before the House Committee on Oversight and Government Reform, posted this month at George Mason University’s Mercatus Center, Veronique de Rugy, senior research fellow, points out, “wasteful spending does not stop at earmarks and overpayments.”
She says: “In fiscal year 2010, the federal government spent $3.6 trillion dollars, or 24.6 percent of GDP, well above the historical average. The consequence of this spending was $1.3 trillion in budget deficits. A large part of this overspending was improper spending or spending that never should have happened at all.” However, she adds:
“But these debt numbers pale in comparison to unfunded liabilities. According the Financial Statement of the United States, in 2010 the net present value of the promises made to the American people for which the United States does not have the money to pay is roughly $75 trillion.
“The harsh reality is that if the country does not deviate from its current path, the majority of future federal spending will finance the spending of the past.”
What is important in de Rugy’s testimony are the three questions she says that Congress should be asking about all future spending. She writes:
“In the face of ballooning government spending, Congress must focus on where and when the federal government should spending money. To do that it should consider three questions: federal spending on functions that should be reserved for the states, federal spending on functions that should be reserved for the private sector, and federal spending on things that government has no business doing in the first place . . . .”
To pursue just one of those questions, she points out that federal spending should not replace state spending, adding:
“This confusion over federal versus state authority extends to area such education, transportation, and homeland security. For instance, Congress allocates most of homeland security spending to pay for things that are local in nature such as hazmat suits and first responders’ radios.”
For example, she writes that “federal grants to state and local governments spur wasteful spending.” Why” Because:
“The incentive structure of aid programs encourages lawmakers at all levels of government to overspend. These programs allow lawmakers to claim credit for spending on a program without the responsibility of collecting the entire tax bill necessary for the funding.”
“Also, grant design often gives states an incentive to increase their spending on these programs. A funding formula based on “matching” provisions for instance means that for every dollar the state spends the federal government will shoulder some of the total amount, thereby lowering the states’ burden of the cost, and hence giving states an incentive to increase its provision. Under a 50-50 matching rule, for every $1 a state spends on a program, the federal government chips in $1. Matching reduces the consequences of increasing spending, thus prompting the states to expand programs.”
If you need proof of that statement, take a look at any of Arlington County’s Comprehensive Annual Financial Reports (CAFR) or budget documents that are available at the county’s Department of Management & Finance website. I’ll growl about this more in a future posting.
So when talking about wasteful federal spending with your favorite Congressmen, be sure to determine if they have their spending priorities in order.