A new study by two professors proves that federal spending is not just out of control — instead it is completely insane. The paper proves that federal agencies are in a mad rush to spend money even with the budget crisis and a government shutdown – and with the national debt at $16.7 trillion.
The rush is triggered by the federal government’s end of the fiscal year, the time when the new budget year kicks in on October 1. The months of August and September are affectionately known as “Use it or Lose It Season” in federal offices and amount to a spending spree, according to The Washington Post.
Use it or Lose it Season; Spend Now to Spend Later
What happens is that agencies rush to spend any extra money they before October 1 so their budgets won’t get cut the following year. They do this because, otherwise, they would have to return any extra money in their budget to the U.S. Treasury — then go begging to Congress for additional funding. Spending in the final week of the budget year is nearly 5 times higher than an average week the rest of the year.
Congress is responsible for this lunacy, US Senator Tom Coburn (R-Oklahoma) noted.
“The way we budget sets it up,” Coburn said in a recent speech, “because instead of being praised for not spending all your money, you get cut for not spending all your money.”
Every year use it or lose it season results in a wave of ludicrous federal spending. Some examples from this year’s government shopping spree and past seasons uncovered by The Washington Post include:
- The US Department of Agriculture (USDA) spent $144,000 on toner cartridges.
- The US Coast Guard spent $178,000 on “cubicle furniture rehabilitation.”
- The US Department of Veterans Affairs (VA) purchased over a half million dollars’ worth of artwork.
- The VA paid $27,000 for photographs of sunsets, mountain peaks and country roads to decorate a homeless veterans’ center in Los Angeles.
- An unidentified agency bought three years’ worth of staples.
- National Guard units bought so much ammunition that that they couldn’t use it all.
- Another unidentified agency purchased generators that were never used.
The Washington Post’s David A. Fahrenthold captured the bizzaro world created by “Use It or Lose It” season perfectly when he wrote:
“This is not normal math. But this is not a normal time in Washington. You didn’t save money to spend it later. You spent now, to spend later.”
Salespeople for government contractors are well aware of this insanity and know exactly how to take advantage of it. Fahrenthold noted that a company did $16 million worth of business with federal agencies on Sept. 30, 2013. The company normally has about $2 million a day in sales.
Professors Document the Insanity and Propose a Solution
“Use it or Lose Season” is now such an established phenomenon that two college professors, Jeffrey Liebman of Harvard and Neal Mahoney of the University of Chicago wrote an academic paper about it. They called their tome: Do Expiring Budgets Lead to Wasteful Year-End Spending? Evidence from Federal Procurement.
The two looked through $130 billion of federal contracts for information technology and made the following conclusion:
“We document that spending in the last week of the year is 4.9 times higher than the rest of year weekly average.”
The professors noted that federal agencies build up a sort of reserve fund to cover unforeseen costs over the year. Then as October 1 approaches they note: “If the demand does not materialize, they must rush to spend these resources on low quality projects at the end of year.”
There is a simple and very rational solution to this stupidity the professors and The Wall Street Journal noted: federal agencies could be allowed to simply roll unused funds over into next year’s budget. That would give the agencies an incentive to curtail spending and save taxpayers’ money.
Unfortunately, as Senator Tom Coburn pointed out, Congress doesn’t allow that to happen. So Use it or Lose season continues year after year to the delight of federal contractors and Washington-area Mercedes dealers.