The government outpaces and outspends itself, falsely inflating spending to maintain budgets, using excessive tax dollars. The government and its agencies and subsidiaries have an overblown and unnecessary budget. Individual departments are not rewarded nor incentivized to save money, only to spend what was allotted – and more.
Why is this a problem? I know someone who works for an electronics recycling company that routinely gets government contracts for scrapping old equipment. The problem is that many of the devices to be scrapped (computers, servers, drivers, etc.) are brand new, still in the packaging, worth thousands and thousands of dollars! Why, you ask? The department was given a budget for new equipment, and used it, whether needed or not. If the appropriation wasn’t used, the same amount wouldn’t be appropriated next year, and that is the only concern of the specific department. This is a major problem and issue that is not solved easily. Just think, if you have $50 for lunch one week and only spend $40, do you make sure you spend $10 at the gas station on the way home? No, that money is instead saved. The government does not operate this way.
The Solution: One way to support spending reductions is to provide a shared-savings program. For example, if a department has a budget of $1,000,000 and only spends $500,000 throughout the year, the government would keep 50 percent of the savings and the department would be gifted the additional 50%. So, the department would then have $250,000 to spend how it sees fit, either saving it for next year, purchasing new equipment, giving bonuses, etc., and the government would have an additional $250,000 that it did not expect to have in the coffers. This provides money for emergency measures and means. Once this is built up enough, it’s possible to reduce tax revenue, meaning tax rates, since it is not needed as much with the lowered costs.
Quick Takeaway: Government institutions must be incentivized to save money, not incentivized to maintain spending quotas. Providing reasons to save money is imperative.