Wednesday, February 23, 2011

Committee Investigates Causes of the Federal Spending Binge

Washington ( – Government contracts. DOD Weapons Acquisitions. Tax loopholes. Medicare and Medicaid. Corporate subsidies. Unused or underused federal property. Agriculture business subsidies. $700 billion TARP funds. $862 Billion Stimulus Package.

They all have something in common. They all contribute to the massive federal spending binge.

And, with the exception of the stimulus for which most of the money has been spent, the recent panelists at the latest Committee on Oversight and Government Reform meeting have a near-consensus that they all should either be cut, de-funded or reformed.

At the panel, witnesses and committee members rallied on the point that waste, fraud, and abuse in government must be addressed.

Comptroller of the United States Gene L. Dodaro, relying on the GAO’s 2011 High-Risk Series Report, testified that the GAO found over 30 areas where billions of dollars could be saved; and first on his list was Medicare and Medicaid.

“These are complex programs that are highly susceptible to billions of dollars in improper payments” Dodaro said. “When we first put these programs on the high-risk list, there really were no measures of improper payments” he continued.

Because of recent administration initiatives and legislations, such as the Improper Payments Elimination and Recovery Act, there are estimates to improper payments but “there is a long way to go” to bring these costs under control and provide the accountability that the GAO is searching for. For example, for Medicare Part D there is no estimate for improper payments.

Government contracting remained one of the biggest targets for reform as the day went on. Senator Claire McCaskill (D-MO) noted that while some claim that the federal government is shrinking, ultimately those claims are deceptive because work done by federal workers is shrinking but work done by federal contractors is growing.

As problematic as waste, fraud and abuse is, Dr. Veronique de Rugy, Senior Research Fellow at the Mercatus Center, testified that current congressional spending patterns overshadows those three areas of concern.

“Fraud, waste and abuse are indeed problems worthy of congressional attention. However, the $125 billion in overt waste that comes from improper payment pales in comparison to the waste that exists in current congressional spending patterns and economic damage caused by the misallocation of capital and the creation of perverse incentives” de Rugy said.

De Rugy had her own three of areas of concern: federal spending in place of the private sector (“corporate welfare” to Amtrak, farmers, small businesses and energy companies), federal spending in the place of the state spending (federal grants to state and local governments), and fruitless federal spending (American Recovery and Reinvestment Act).

To combat these problems, de Rugy suggested avoiding budgetary gimmicks and having honest accounting that show the real fiscal situation; putting all spending on the table; and immediately putting in place budget rules that “tie Congress’ hand” and restores fiscal discipline.

One of the programs that both Democrats and Republicans on the committee could agree was the Market Access Program managed by the Department of Agriculture. Formerly known as the Market Promotion Program, a name change that suggests that even foreign companies will benefit from the deal, the program sends taxpayer money to well off corporations and agricultural producers such as Sunkist Growers, Inc., Welch Foods, Inc., and the American Forest & Paper Association to promote U.S. products overseas.

The $1.7 billion that goes to the operation of unused federal property and underutilized property also is a costly expenditure that virtually the entire panel agreed remains a problem, -- although the GAO report noted that recent corrective measures failed to address root causes of long-standing problems, such as budget limitations which leads to an increasing reliance on leasing.

Neither the panel nor the GAO report mentioned the war in Afghanistan or Iraq as being part of the federal spending binge, although the wars have collectively cost American taxpayers $1.21 trillion since the 9/11 attacks, according to the September 2010 “The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 9/11” report from the Congressional Research Service.

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