Government Stupidity Continues with Shutdown Looming
The federal government won't have money to pay its workers come Tuesday but it'll spend like a drunken sailor on Monday.
The federal government won’t have money to pay its workers come Tuesday but it’ll spend like a drunken sailor on Monday.
WaPo (“As Congress fights over the budget, agencies go on their ‘use it or lose it’ shopping sprees“):
This past week, the Department of Veterans Affairs bought $562,000 worth of artwork.
In a single day, the Agriculture Department spent $144,000 on toner cartridges.
And, in a single purchase, the Coast Guard spent $178,000 on “Cubicle Furniture Rehab.”
This string of big-ticket purchases was an unmistakable sign: It was “use it or lose it” season again in Washington.
All week, while Congress fought over next year’s budget, federal workers were immersed in a separate frantic drama. They were trying to spend the rest of this year’s budget before it is too late.
The reason for their haste is a system set up by Congress that, in many cases, requires agencies to spend all their allotted funds by Sept. 30.
If they don’t, the money becomes worthless to them on Oct. 1. And — even worse — if they fail to spend the money now, Congress could dock their funding in future years. The incentive, as always, is to spend.
So they spent. It was the return of one of Washington’s oldest bad habits: a blitz of expensive decisions, made by agencies with little incentive to save.
This is, of course, not a new phenomenon:
“We cannot expect our employees to believe that cost reduction efforts are serious if they see evidence of opportunistic spending in the last days of the Fiscal Year,” President Lyndon B. Johnson wrote to underlings in May 1965. Even then, Johnson said an end-of-year binge was “an ancient practice — but that does not justify it or excuse it.”
Given that this is one of those “everybody knows” situations, one would think that Congress would have changed government accounting rules decades ago to fix the problem. Why not just let agencies keep unspent monies and apply them rationally to cover unexpected expenses or shortfalls the next year?
That said, it’s quite possible that the Soil Conservation Service actually needs a lot of toner cartridges and buying them now will give them some flexibility next year that they’ve earned through good managed. For that matter, it’s not inconceivable that the Coast Guard has enough dilapidated cubicles that spending $178k fixing them is warranted and that spending half a million dollars on artwork at the VA can be justified. But the optics are certainly less than ideal in an era where workers are being furloughed to cover budget shortfalls caused by sequestration and look likely to be sent home Tuesday.
Then again, the waste caused by the “use it or lose it” practice is nothing compared to that of the shutdown itself. We’ll never know how many man hours have been wasted coming up with contingency plans for a looming shutdown, not to mention the lost productivity that came with the previous rounds of furloughs.
We should be doing the exact opposite of this: rewarding agencies that manage to carry out their mission while spending less money than was allocated; or establishing “rainy day funds” if they have a crisis of some kind. Only in Washington is not spending money you don’t have a bad thing.
So, these people who get fur-lowed…don’t they just get time off with delayed pay, or are they using vacation days with deferred pay?
First, this isn’t “unspent monies”. It is unallocated budget authorities. All the “monies” are in the Treasury, not the departments or agencies. That includes the cash in the Imprest funds, which are local cash accounts to pay for purchases, theoretically, made in accordance with the spender’s budget allocation. Event though your local cashier has say $10,000 in her fund doesn’t mean her agency can spend a dime. The fact that people can’t keep this separate, even trained political scientists, is a big part of the problem.
So the question is, why not let agencies keep unallocated budget authority. And some agencies, except those prohibited by the Constitution, do have multi-year budget authorities, at least for some projects. But that doesn’t solve the problem because these end-of-year purchases are done lower down and at some point someone higher up is always going to sweep up the spending authority at the end of the year to spend it themselves.
It seems odd to people who don’t understand how to manage but you keep a bit of budget set aside to cover unexpected events, and also, on occasion some project or purchase comes in below the budget allocated to it. At the end of the fiscal year, you tighten up the allocations and “spend” the contingency funds on lower priority items. Of course, the “late” spending is perverted because it has to be something that can get through procurement and obligated before Sep 30 and so depends on the volatility of the trimmed projects on when you can safely tighten them up. Also, unfortunately, few government managers are actually good budget managers so when the budget officer reports x number of dollars for late obligation, they aren’t prepared and go for pie in the sky rather than rational forethought.
But let’s look at this from a Constitutional perspective. It is quaint now, but the idea was that the elected representatives, more so for the House of Representatives, would control the government, thus giving the People a say in the government supposed of, by and from them. Now assuming you don’t have your own army of thugs, the best way to do that is through the power of the purse. Your purse loses a lot of power, if you just leave it lying around open and never snap it shut, even symbolically. If you roll the budget authority over, then how do you control spending? (I ask the latter ironically)
@HelloWorld!:
In the past, after a shutdown, Congress has made the furloughed employee whole, by authorizing them to be paid for the furlough days. It is not assured.
Essential employees will end up with delayed pay if the furlough crosses a pay period as the payroll clerks are usually in the non-essential category.
@HelloWorld!: There are two separate furlough issues.
First, because of sequestration, most agencies had to furlough civilian employees for a certain number of days. Employees were not allowed to take paid leave for those days, since the whole point was to cut spending. There are lawsuits underway arguing that these furloughs are an illegal breach of contract–which I think they are. We shall see.
Second, we have the probable furloughs of “non-essential” personal during a probable government shutdown. As @JKB notes, Congress has always made these people whole in the past. But the last time that happened was almost 20 years ago. I don’t see this Congress doing that, given the bizarre ideology of the Tea Party.
Is the VA allowed to sell artwork?
If so, they did just create themselves a saving account.
(Not that “thousands” really matter. Even the VA purchase at 0.5 mill probably doesn’t matter in the scheme of things.)
Actually, the “drunken” binge as James styles it,is preceded by self limited consumption by the organization in the months preceding the End of the Fiscal year, to ensure they can deal with any unforeseen expenses without having to drain someone else’s budget within the agency to fix a problem and thus compound a budget issue. Once that last week of September hits, you’re making expenditures you WOULD have spread throughout the year had the system been structured differently. In other words, it’s pent up demand being released. You do realize how much small businesses count on this yearly phenomenon don’t you? Not to mention, mass purchases of office supplies yields bulks discounts. Many orgs buy all of their supplies for the year with EOY money. Nor do I find rehabbing furniture to be stupid. It’s cheaper than buying new furniture and the furniture they are rehabbing in probably better than 5years old. I guess the government should stop providing reasonable working environments to its employees. Maybe if they made you bring your own IT and had lawn chairs setup at card tables for workers….they could finally draw those smart/efficient geniuses from private industry that makes the commercial side such a paragon of virtue.
@Pharoah Narim:
Perhaps there was just no better “government is bad” meme available this morning.
It’s a tough weekend to on (functional) government as the problem.
JKB and James, thanks for answering my question.
If government agencies were provided with multi-year (as opposed to the current fiscal year only) budgets, they could properly plan for expenditures without these annual exercises in starving and spending. And this doesn’t even take into account the now annual lack of real budgets and the need to be in constant CR without any real planning being done.
@Pharoah Narim:
To that point, this is not remotely limited to Government. This type of behavior happened in both the major corporation I worked for (and others I can name) and in an academic institute I’ve taught.
In fact, many of the funds spent at the last minute were typically held with the expectation that the organization would ask for them back before the end of the fiscal year. That only added to the last minute frenzy buying because no one was quite sure when it was “safe” to actually make the purchases.
I’m quite sure every legitimate organization on the planet engage in end-of-fiscal-year purchases that may seem unwarranted or frivolous to an outsider (by the way, yes, artwork can be a proper purchase – unless True Conservatives have decided that all public buildings must use only East German Stalinist construction. Why is it that quality is only appropriate for the private sector, never the public?).
In the modern American corporation, all of this money would simply go to high senior managers. At least these purchases give non-nobles some business.
There are a lot of agencies and departments that we can function perfectly without. Few people would even know their existence, including Congress.
Here are few that we can do without: IRS – citizens division, intelligence department, NEA (Arts), Wild Horse and Burro Agency (how could we ever get along without it?), Dept. Of “Education” (more schoolhouse meddling bureaucrats that you can shake a yard stick at), Energy Dept., Freddie Mac & Fannie Mae (the folks who brought us the recession), Wages and Hours Div., Bureau of Western Hemisphere, HUD, Office of “Protocol”, Delaware River Commission. There is still an office that is giving out Civil War benefits! (Where can I sign up?) This is a good time for a study commission (no politicians) to take a look at all of the agencies and what they do. Recommend those that Congress should close. Of course, there are still many secret agencies that Congress does not even know about.
It would be easier to list the agencies that the country actually needs.
“Get ‘er done !”
@Pharoah Narim: @john personna: I’m a federal government employee and the son of a federal government employee. Granted, conservatives tend to treat DoD differently than other bureaucracies, but this isn’t a “government is evil” rant. Rather, it’s about the inefficiency of the process. It would make much more sense, as @Matt Bernius notes, to have multi-year budgeting and more managerial discretion on the color of money.
@Woody: I’ve worked in the government, private, and non-profit sectors. Government does this more stupidly than the others. Not because its employees are stupid or venal but because the rules under which they operate are stupid.
The offices and other facilities at CSC and MCU are austere compared to their counterparts in the private and non-profit sector, including state universities in Alabama where I’ve taught. But there are some Major League inefficiencies built into the system. After more than a month, I still don’t have an email address, access to the Internet, or a working computer in my office. That would be intolerable outside the federal government.
@DC Loser:
You assume said agencies have some ability to predict the future. On many projects, there is multi-year funding, which simply means the spending would happen every couple of year rather than every year. But unless that multi-year budgeting was extended all the way to the lowest level, there would still be end-of-year purchases. Even if not, the rule works the same inside the government as outside. Eventually, the higher ups will move to take savings from the thrifty to cover the deficit spending proliferate or for some vanity project. Usually governed by cronyism.
Those on the Left and in DC seem intent upon creating this effect in the economy as whole by the recurring “idea” of taxing wealth, i.e., savings. And it is the idea behind “excess” profits and their confiscation as often comes up when oil prices rise.
@john personna:
If the artwork has any real value, i.e., the purchase wasn’t just of a lot of cheap decorator “art”, then it comes under the control of the National Archives, eventually. It’s not like they keep up with this stuff. In any case, it would flag if it was excessed and that is the only proper way to dispose of property and the money goes back into some pot either at the department or Treasury level. Not to the agencies. Agencies are on the whole not permitted to “make money” as that would remove them from effective control by the elected representatives.
@James Joyner:
Looks like you got woody and me mixed up.
I totally agree that this is done in a dumb way. However I suspect that the reason for that has more to do with the size and complexity of the organization that anything else.
My point is that this is in no way unique to government.
@James Joyner:
Was this really a good day to stop and talk about $178,000 in office furniture?
Really?
@James Joyner:
In other words, keep it away from Congress.
Meh. As Matt notes, this happens in many large companies as well. You can try tweaking rules but there will always be some inefficiencies that crop up managing end of the year budget leftovers.
@john personna: I remember a friend who was in the Army telling me that they would buy new shelves and file cabinets instead of painting them. This reminds me of the stories that came out about the $150 hammers, $200 screwdrivers, and $1400 for a coffee makers that the military was paying for.. Later some people said those stories were false, I don’t know. Most Federal and state agencies have a purchasing system with certain contractors, so prices are usually higher and involves a maze of paperwork. But you could get some nice fossils and sharks teeth cheaper than you could at souvenir shops.
Now the USPS is raising stamps again. Our mail is about 85-90% junk and goes straight from the mail box to the recycling bin. They have reduced hours and days at the local p.p. and closed many of them. We are paying most of our bills on line now. I would say that the future of the USPS is going to be package delivery and registered mail.
@Matt bernius and several others: Hey, I taught Governmental & Not-for-Profit Accounting last semester, so this is right up my alley.
The process of end-of-year spending isn’t unique to government, but the accounting rules for governmental accounting effectively require it, while business accounting rules do not.
Governments are allocated a specific amount to spend in a given fiscal year, based on projected revenues. Expenditures of cash (rather than expenses – governments operate under an accounting regime that is called “modified accrual accounting” – part cash accounting, part accrual accounting) have to be matched to the revenues of the period. The makes Governmental GAAP quite different than US GAAP, and is due primarily to the fact that a government aims to be self-sustaining, but not to be profitable.
So unlike a business, a governmental area (program, division, office) is given an appropriation for a specific fiscal year that it must live within for that year.
This is how I describe the process on the first day of class when I teach this, the give the students an idea of how totally different it is going to be from the accounting they’ve been learning the past few years (Governmental Accounting is a 4000/5000/6000 level class, depending on the school – it really is *that* different!):
Imagine that your entire annual salary was dropped into your checking accounting on January 1st. But not only do you have to make it last until December 31, you aren’t allowed to save *any* of it for the future. So if you run out of money in October, you still have to show up for work as normal, but now you’ve got to go begging in the streets after hours. If you have money left at the end of the day on Dec 31, it magically disappears, and you’ll likely take a pay cut the next year.
So what do you do? You spend as little as you can throughout the year, deferring routine maintenance on your home, delaying buying clothing or replacing worn out furniture, minimizing your expenditures wherever possible so that if something unexpected happens – your car explodes, you have to get unexpected dental work, your computer dies – you’ll be able to fix it. Then, in December, you take what you have left and finally buy all of the stuff you’ve needed the entire year but couldn’t justify purchasing. So you buy lots of toner and new equipment for your office, remodel the kitchen that’s been outdated since the 1980s, take the kids clothes shopping, etc.
It isn’t a healthy way to live. But it is absolutely the intelligent way to live if you are a rational actor living in an environment where (justifiably) expenditures need to match the fiscal period of the revenues that fund them.
We just bought toner cartridges with some of our end of year funds … holy cow those things are expensive … but we actually needed them.
In fact I can honestly say that everything we bought at the last minute was stuff we actually needed; and I agree, in a more rational world we would have purchased during the year. The thing is though, as others have noted, it’s not like we spend exuberantly throughout the year, and then this money just falls from the sky in September. It’s been my experience that there are only really two months of year when most government organizations feel like they have money … October (start of the fiscal year) and September (end of the fiscal year). In between, it’s usually somewhat harder to get big (but necessary) purchases approved.
@Gromitt Gunn: That’s how it works and has long worked. But it’s a stupid way to set things up.
@James Joyner: I agree that the end result can be perverse, but the underlying principle of “only spending the money you have” is sound. Business can always spend money today based on projections of future revenues, but governments don’t have that luxury.
(I should also clarify that Governmental GAAP refers specifically to State & Local Government standards, who by-and-large are not allowed to engage in any sort of deficit spending. The Federal standards are substantially similar.)
p.s. we might practice a mini version of this in our own family next month. While military paychecks are probably among the most likely in the government to actually get special funding, there is still a chance that our mid-month October pay may be delayed. If/when the government shuts down on Tuesday, I intend to implement austerity in our family budget. Then when we actually get paid, we will most likely go on a “spending spree” to purchase the things we put off.
This absolutely goes on in the private sector too. And I’m not so sure I see the alternative. Of course in theory we should be able to delay our purchases from one year to the next and retain funds. But the reality is that budgeting is done on a year by year basis, we are taxed as such and bottom line is that we need to close out our books. Does this lead to some waste? Of course, but I will wager it is less waste than the hours and non-productive time spent trying to decide what could be carried over and what couldn’t. So yeah, if I have money left in the budget at the end of the year I look ahead to what we will need in the next few months and buy it early. You can call it stupid but it just seems like a minor inconvenience to me.
Exactly what Gromitt Gunn said. I am in this position now as Department Chair. Certain low priority spending that can be deferred, are deferred (like buying toner cartridges). However, I find nothing wrong with saving money until the end of the fiscal year (because you are hedging against serious, unpredictable costs) and then using the savings to buy stuff you know you are going to use in the future.
Likewise, the end of the year is a good time to replace furniture. If you start out the year paying for lower priority issues, you end up having no money later for the essentials.
I do agree that being able to save budget authority saved from one year to the next makes some sense, although I am not sure that in most cases that the money would be spent on different items in most cases (again, toner has to be purchased at some point and cubicles do wear out). Now, does the end of the year deadline lead sometimes to spending on items that might not have been purchased? Yes. But would that money have been spent on something else if it could be kept in the budgets? Yes–so I am not sure that changing the practice would lead to savings. It would just change what the money was spent on.
@Tyrell: The economy cannot do without $1 trillion in spending. The output those dollars would have purchased will not be produced unless someone else increases their spending and it sure as hell ain’t coming from consumers, so doing without those agencies you list, while I’m not a fan of a number of them, will swell the ranks of the unemployed and disemployed if this shutdown goes on for weeks.
I’m having kind of a hard time seeing the “stupidity” attached to maintaining office furnishings and buying toner – things that are actually kind of important in an office setting.
What do you think James, are there fairies and gnomes that bring government workers the things they need to keep the wheels turning?
Government StupidityRepublican Assholery Continues with Shutdown Looming.FTFY.
Now they’ve put some anti-contraception language in the bill.
This GOP is a collection of terrible, stupid people.
@steve s: The party wasn’t enough of a disaster so they decided to put a turd in the punchbowl.
Pardon the late comment, I only just awoke from my weekend-long drunken stupor.
On behalf of my fellow drunken sailors, I must once again lodge a (hic) protest over this inaccurate and insulting analogy. First, the money we spend in port had been earned (hic) through hard work, not borrowed (or stolen) from other people’s unborn children.
Second, when we (hic) run out of money, we quit drinking and head back to the ship.
(Hic)
@ boyd
Ah, so taxation is theft? And what it is when Republicans refuse to pay for a tab they have already run up?
@anjin-san: Is it really that hard to read a tongue-in-cheek comment in the manner in which it was written?
@Tyrell: Why don’t you check to see why those agencies are still in existence before trashing them? I think I remember reading an article about why the Civil War agency is still in existence–we still have a handful of children of Civil War veterans alive. You can squawk about how much $$ is allocated to the agency bureaucracy, but the need is still there.
Dept. of Energy? Hell of a lot of good research gets done under their funding. Unless you think the US doesn’t have to have an energy policy or look at next-generation technology?
P.S. I find a mordant amusement in the Tea Partiers and others going DEFCON 11 over the US deficit and the supposed downfall of Social Security and Medicare as bringing on Armaggedon when not saying a peep about Global Warming and control of carbon dioxide. In a pinch, in the future, we can deal with lack of money: we just get rid of the payments. We’re not going to as easily deal with increases in world temperature of more than 2 degrees Centigrade: which is expected to also happen within the next 30 years and even sooner if we don’t get carbon emissions under control.
This is a $15 Trillion economy, and if you pull $1 Trillion in government spending (on wages goods and services) out, you’re going to cause a real decline in economic growth and an increase in unemployment.
Republicans are proposing to practice the equivalent of medieval medicine on the American economy – a prescription of leeches and bloodletting for a common cold.
@ Boyd
I have a severely disabled relative who needs his SS check – you will have to forgive me if the humor of this whole situation is lost on me.
Wow. Just…wow.
@Matt bernius:
@Gromitt Gunn: Yeah, that summs it up pretty nicely, but there is stupidty introduced as well.
I still remember my first “spending spree”, and not with fondness. I was tasked to order stuff we needed and could really use (you know, like technical books. ‘Cuz my boss wanted to buy his workers a clue) so I did. Then the bean counters went through and decided on their own what we needed and didn’t need. Didn’t bother consulting me … no one asked “hey, you need to drop 5k, what can you do without?”.
So we were left in the absurd position of having external floppy disk drives (remember those?) — and no computers to use them with.
I remember one March getting an expenses-paid trip to Toyota manufacturing plants in order to use up the money our organization had left in the kitty. All three of us going realized it was your standard Japanese government boondoggle but had a fun few days getting shown around and interviewing people. It think it was ostentatiously on the incorporation of robots and IT. (Nagoya has some delicious local specialities we pigged out on.)
I especially enjoyed the weird looks I got from the hordes of foreign MBA students on field trips traipsing through Toyota headquarters. (Look! It speaks Japanese! Eek!)
Am rather sorry I didn’t pick up offer of the the all-expenses-paid trip to Cuba, of all places. Offered by the US government, as I recall. (Sugarcane for fuel cells.) I don’t even know if they realized I was American. Bizarre.
@Tyrell: “Now the USPS is raising stamps again.”
Congress has been trying to destroy the US Postal Service for years now (in direct contradiction to the Constitution). The last thing that I’m aware of is that the USPS is required to pre-fund all retirements for the next 75 years. This mean not only that if you started this year, the USPS has to deposit all funds *now* for your retirement 30 years from now, but also that they’ve got to come up with the cash now for people who haven’t been born yet.
@Gromitt Gunn: “It isn’t a healthy way to live. But it is absolutely the intelligent way to live if you are a rational actor living in an environment where (justifiably) expenditures need to match the fiscal period of the revenues that fund them. ”
An excellent explanation!
James: “In a single day, the Agriculture Department spent $144,000 on toner cartridges.”
Assuming $30/cartridge, that would be 4,800 cartridges. From (http://en.wikipedia.org/wiki/United_States_Department_of_Agriculture), the DoAg had 105,778 employees in 2007. 105778/4800 = 1 cartridge per 22 employees. In my experience, that’s perhaps a couple of weeks of cartridges, at best.
This reminds me of and XKCD cartoon (http://xkcd.com/1131/): ‘Breaking: to surprise of pundits, numbers continue to the be the best system for determining which of two things is larger’.
@grumpy realist: “P.S. I find a mordant amusement in the Tea Partiers and others going DEFCON 11 over the US deficit and the supposed downfall of Social Security and Medicare as bringing on Armaggedon when not saying a peep about Global Warming and control of carbon dioxide. ”
I find it to be pure bullsh*t; there was no massive ‘Tea Party’ when the GOP ran the government, and honesty and fiscal prudence were not in evidence then. And I see the Tea Party as the part of ‘keep government hands off my Medicare’.
That’s why I figure that Obama has the edge here; the base of the GOP and the Tea Party overlaps quite heavily with the chunk of the US population which gets federal checks every month.