Government budgeting is backwards — agencies should be rewarded for saving, not spending
I write to address a systemic flaw in our federal budget process that exacerbates our national deficit, which has now ballooned to over $34 trillion. This flaw is rooted in the perverse incentive structure within our government agencies, aptly described in the insightful book "The Great Game of Government." It's a system that paradoxically rewards spending over saving, trapping departments in a cycle of fiscal inefficiency.
Under the current framework, if a government department does not exhaust its allocated budget by the end of the fiscal year, it faces the risk of a reduced budget in the subsequent year. This creates a "use-it or lose-it" mentality, where departments scramble to spend remaining funds, often carelessly, to justify future budget requests. As a result, the end of the fiscal year sees a surge in spending on potentially unnecessary goods and services, simply to maintain next year's budget allocations.
This practice is not only wasteful but also counterproductive. It discourages departments from seeking cost-saving measures throughout the year. Instead of being rewarded for efficiency and returning unused funds, departments are effectively punished with reduced future funding, which can hamper their long-term planning and operations.
The consequences of this spending culture are not trivial. For example, a 2018 report from the non-profit Open The Books highlighted that in the last month of the fiscal year, the federal government spent $97 billion in contracts, which amounts to a significant portion of the annual discretionary spending. This rush to spend contributes to a lack of accountability and diminishes the value received for taxpayer money.
"The Great Game of Government" underscores the importance of aligning incentives with desired outcomes. If the goal is to reduce the national deficit, then the budget system should incentivize savings and cost-effective management, not penalize it. Reform could involve several key changes:
Allowing departments to roll over a percentage of unspent funds to the next fiscal year, which would reduce the pressure to spend at the year's end;
Implementing a performance-based budgeting system where departments are evaluated on their ability to achieve policy goals cost-effectively, rather than just on their spending levels;
Creating a centralized "savings" account where unspent funds are collected and then redistributed based on need and performance, rather than simply returned to the Treasury.
Such reforms would shift the focus from spending to managing, with an eye toward fiscal responsibility and long-term planning. Moreover, they could help to slowly chip away at our growing national deficit by instilling a culture of savings rather than one of expenditure.
Our national deficit is not an abstract concept but a growing burden on our economy and a challenge for future generations. The interest payments alone on our national debt are projected to become one of the largest budget expenses, limiting our government's flexibility to respond to unforeseen events and invest in essential areas like infrastructure, education, and defense.
In conclusion, it is imperative that we re-envision our federal budget process to create a system that aligns with our fiscal goals. By adopting practices that reward efficiency and penalize waste, we can take a significant step toward a more sustainable and responsible fiscal future.
Please!
Jeremiah Trapp lives in Springfield.
This article originally appeared on Springfield News-Leader: Federal budget process needs an overhaul to address national deficit
