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Press Release

A New Charge Against Fraud and Waste

07/24/2003

With government spending up to $2.2 trillion a year, there’s more room than ever for waste, fraud, and abuse. Three cheers, then, for Representative Jim Nussle, who as Chairman of the House Budget Committee has launched a war to expose the rotten or unnecessary parts of the federal government.

First, the sheer size of the federal government makes it hard to monitor fraud. The FAA alone spent $5.4 million on improper credit card purchases, according to Congressional testimony by US Comptroller David Walker. And second, the pork projects are multiplying, like the $202,500 for the National Peanut Festival, $540,000 for urban horticulture, $100,000 for drainage improvements, and $400,000 for the Pennsylvania Trolley Museum—all items from the latest Citizens Against Government Waste pork list. This money is earmarked in certain bills so politicians can get votes from very specific constituencies. The only way to cut this pork is to take money away from the government so it will be forced to be responsible with what it does have.

Traditionally, cost cutting movements have focused on “discretionary” spending, ignoring the 54 percent of spending involved in “mandatory” programs like Medicare, Social Security, and Food Stamps. Chairman Nussle’s oversight bravely includes a look at waste in mandatory spending programs. The Office of Management and Budget estimated that our government lost $35 billion to “improper payments”, which includes duplicate payments, miscalculations, bad claims, and fraud. Because these government programs often cover millions of people each, it is inevitable that costly errors will be made.

Even the most effective oversight will not make these colossal bureaucracies efficient. Government will only be cost-effective when it is reduced to a manageable size, and when more private competition is introduced to Medicare and Medicaid. (Indeed, the US Comptroller estimated in his testimony that Medicare pays 35 percent more than private providers for at home health care and 19 percent more for skilled nursing.)

Chairman Nussle has allies in the war against waste, but it’s not clear that the majority of Congress supports him. Nussle’s strong ally, Representative Patrick Toomey (R-PA) tried to pass an amendment banning NIH from spending $2 million on studying the sexual habits of old men, San Francisco prostitutes, and American Indian transvestites, but was turned back by other Representatives.

Even if Chairman Nussle manages to reduce improper payments and cut pet projects, sheer bureaucratic incompetence presents other problems. Thanks to the public employees unions, it is all but impossible to fire federal employees. The Cato Institute reported that only 1 in 5,000 non-defense workers are fired for poor performance a year. The State Department, which is notorious for poor management of everything from visas to secret documents, has fired only 6 people in their 28,000 person Department since 1984. Firing rates are so low because, according to the Office of Personnel Management (OPM), employers are afraid of decisions being overturned and being accused of discrimination. Most bureaucrats cannot get fired, giving them no incentive to perform.

Bureaucratic ineptitude is not just a result of the inability to fire. Government offices do not usually reward good work either. Federal workers automatically move up the pay scale, and the OPM reported that most bureaucrats do not believe performance has anything to do with pay raises. Even the way government employees are rated is not based on performance. Just 1 percent of federal workers were rated below “fully successful.” Talk about grade inflation! With this lack or either reward or punishment, government bureaucracies will never be as efficient as the private sector. The most cost-effective way to provide services is to take them out of the hands of government.

Chairman Nussle is heroically fighting for the rights of taxpayers with his hearings on waste, fraud, and abuse. While his efforts may be valiant, Nussle’s goal of an efficient government will not come without fundamental reform of America’s fiscal system. Only lower taxes, limits on borrowing, and a smaller bureaucracy will allow fiscal conservatives to win this battle. The only way for Americans to have truly cost-effective governance is to restrict the size of government and the amount of money it takes in.