A recent report by the Government Accountability Office, or GAO, identifies areas where we can save money by eliminating or combining duplicative or fragmented programs. The report is a great addition to our nation’s effort to improve government efficiency and reduce waste. We can use it as part of an ongoing endeavor to streamline government operations and trim the deficit.
Most Americans agree that cutting government waste should be a top priority as policymakers look for ways to rein in the federal deficit. Too often, however, politicians and pundits who decry “waste, fraud, and abuse” do not make the effort to root out actual inefficiencies. The Center for American Progress started the Doing What Works project to help in this regard by developing a comprehensive system to review government programs and guide future budget decisions.
GAO recommends nine concrete actions that will save the government an estimated $15 billion to $20 billion over time (see box). Many of these reforms have already begun. The Department of the Interior, for example, launched a process to save $1.75 billion in oil-and-gas royalty revenues with a 2011 study on how to improve leasing policies.
Elsewhere, President Barack Obama has set his sights on a target savings of $3 billion by supporting federal agencies in disposing of unneeded property. And the Transportation Security Administration, or TSA, seeks $470 million in savings by replacing or modifying baggage screening systems, starting with 250 airports that currently possess inefficient screening systems.
Additionally, the administration has already taken steps to make reforms and begin to realize savings because many of these recommended savings were in prior GAO reports.
GAO’s proposed cuts to improve government efficiency
- Realign the Defense Department’s military medical command structures: $281 million to $460 million annually
- Eliminate duplicative tax breaks for ethanol production: $5.7 billion annually
- Reduce farm payment programs: $800 million over 10 years; $5 billion annually
- Revise essential air service program: $20 million annually
- Improve management of federal oil and gas resources: $1.75 billion over 10 years
- Dispose of unneeded federal real property: $3 billion by the end of FY 2012
- Increase TSA baggage screening systems: $470 million over five years
- Clarify availability of customs fee collections: One-time savings of $640 million
- Improve Social Security data on pensions from noncovered earnings: $2.4 billion to $2.9 billion over 10 years
It may come as a surprise that GAO recommends only nine specific actions to save a definite amount of money out of a 340-page report identifying 81 different areas for further scrutiny. This is because, in the vast majority of identified areas, GAO states that additional information is required to determine if savings are really possible and to establish the actions necessary to achieve those potential savings and calculate their value.
There are two reasons why GAO is unable to list cost savings for most program areas. The first is that the bar for establishing real duplication is high. Programs that seem similar on the surface may actually be quite unique. The other reason is that consolidating duplicative programs does not always result in savings.
Multiple programs serve the homeless, for example. But these programs provide a diverse range of services including housing assistance, health care, job training, food assistance, and substance abuse treatment. There may be savings and service improvements if the programs are providing the same services to the same populations.
GAO’s recommendation to identify real duplication is to take steps to increase coordination between agencies partly by developing a common data standard the agencies can use to compare their efforts. GAO provides similar recommendations for many other areas where not enough data is available to determine whether overlap exists between programs.
GAO emphasizes, though, that even if we determine that two programs are duplicative, consolidating them may not necessarily result in savings. For one, the costs associated with consolidating or terminating programs may exceed the amount spent on overlapping programs. Additionally, in some instances the only way to save money would be to reduce services. For example, the authors specifically note that simply eliminating overlapping programs “may not reduce spending on benefits unless fewer individuals are served as a result.”
For many other areas cited in the report, we will require more analysis to know how—or even if—we can save money without cutting services. CAP’s Doing What Works project is working on this analysis right now. They offer specific ideas on how to determine where the most savings can be found.
It is clear, however, that more savings are to be found even if we consider the limitations GAO acknowledges in their report. Two areas especially ripe for additional scrutiny are defense spending and tax enforcement. In fact, more than one-third of GAO’s recommendations involve either consolidating defense spending or improving Internal Revenue Service tax collection.
The bulk of spending in areas GAO identifies as overlapping falls in defense programs. CAP has suggested several ways the United States can save money on defense spending. We spend close to $250 billion annually on Department of Defense programs that GAO believes could be streamlined. In particular, GAO estimates that realigning DOD’s military medical command structure to consolidate common functions would result in annual savings ranging from $281 million to $460 million. And DOD could save billions of dollars by incorporating a cost-benefit analysis of overseas military presence options prior to realignment and construction.
The potential for savings from eliminating wasteful spending on defense programs far outweighs the potential for savings in other areas. Figure 1 illustrates how potentially overlapping or redundant defense spending compares to such spending in other areas the report outlines.
GAO also believes we can save by eliminating duplicative tax breaks and improving the IRS’s ability to collect taxes already owed to the government. Specifically, the report recommends the United States can enhance revenue collections by:
- Improving debt collection. The IRS recovered only $6 billion of $129 billion in tax debts in 2008 using written notices. Tax debts not recovered through inexpensive written notices must be collected through more expensive phone or in-person methods.
- Improving outreach to reduce revenue losses due to overstated real estate tax deduction. Nine million taxpayers overstated their federal deductions for local real estate taxes in 2001 by an average of $85. This resulted in a $2.5 billion loss.
- Improving tax compliance of self-employed owners of unincorporated businesses. The IRS estimates that $68 billion of the $345 billion gross tax gap can be attributed to underreporting by sole proprietors.
- Identifying businesses not filing tax returns. The IRS can save by using third-party data to find businesses not filing required tax returns.
- Improving tax compliance of S corporations. Sixty-eight percent of S corporations misreport net income. The IRS estimates that $85 billion in taxable income is not correctly reported as a result.
- Strengthening enforcement of tax evasion. Creating an agencywide strategy to enforce tax evasion can help close the tax gap.
In all, GAO identifies 18 ways the Treasury and IRS can improve tax enforcement. The findings make clear the critical importance of maintaining a strong and effective IRS—an effort that will likely require more resources for enforcing tax laws but could pay enormous dividends. The IRS estimated in 2011 that its new initiatives would cost $237 million while increasing revenue collected from noncompliant taxpayers by $2 billion.
To be sure, improving government efficiency and reducing unnecessary spending will be an ongoing and challenging project. It is not merely a matter of finding two programs that sound like they do something similar and eliminating one of them. We need to approach the problem in a systematic and thoughtful way.
The GAO report is a valuable starting point for moving forward with a coordinated, committed effort to root out government waste. We can begin with the $15 billion to $20 billion in concrete savings that the report identifies. The report acknowledges that more information is needed to ferret out wasteful spending in other areas but it’s clear that our next move should be reducing the billions spent on wasteful or overlapping defense programs and the billions in revenue lost to inadequate enforcement of tax laws.
Sarah Ayres is a Research Associate at American Progress and Michael Linden is the Associate Director for Tax and Budget Policy.