Breaking Bad – Avoiding the Fiscal Cliff

A shorter verison of this column appeared in the Washington Examiner

http://washingtonexaminer.com/breaking-bad-avoiding-the-fiscal-cliff/article/2512227

The impending “fiscal cliff” is the most thoroughly predicted disaster since the end of the Mayan Calendar. The problem is no one is willing to design and implement a real solution that has any chance of bipartisan support.

The cycle of dysfunction has existed for decades. The Federal Budget Act of 1974 created what was supposed to be a rational process for planning, approving, and implementing government spending. It quickly became an empty paper exercise as appropriations ignored the Budget Resolutions. When the difference became embarrassingly stark, the Senate simply gave up on passing one at all. Additional budget reform legislation was passed and immediately ignored. Gramm-Rudman-Hollings, Budget Reconciliation, and the Government Performance and Results Act (GPRA), all gather dust. Annual budget deals, and continuing resolutions, put off the day of reckoning. Reagan’s 1982 budget deal resulted in more revenue and no spending cuts.

Administrations annually create a new budget. Hidden inside the hundreds of pages is the “Current Services Budget”, or “Baseline”. This outlines how much it costs to maintain existing services at current levels. It factors in various cost drivers - cost of living increases, escalation clauses in contracts, etc. Budget battles are fought over the increase above current service levels. When officials propose budget cuts they are talking about cutting the increase, not cutting current service funding levels. Therefore, there is a built in “ratchet effect” to expanding government spending.

The latest looming cliff is supposed to wrench the Washington policy players out of denial and avoidance, forcing them to actually do something real. This will not happen unless certain things change.

Start with the basics – Use the “Current Service Analysis” levels as the budget framework. Administration and opposing budgets can be aspirations compared against the true baseline. That will level the playing field and keep everyone honest about what is really an increase and what is really a reduction.

Rise above ideology - Both Democrats and Republicans contributed to the cliff. Both sides spend like there is no tomorrow. Both sides embrace “sacred cows”. Both sides live in a world where their people are angels and their opponents are demons. A good first step is to admit that each side has some good ideas and each side has looney ones.

Democrats need to understand that even their most cherished domestic assistance programs are riddled with waste and inefficiency. Republicans need to realize that the Departments of Defense and Homeland Security are just as bloated and dysfunctional as the liberal programs they assail.

Make Inspector Generals and the GAO “rock stars” – The Government Accountability Office (GAO) has 3,100 employees. There are also 73 Inspector General Offices embedded in Cabinet Departments and major agencies. All these offices are filled with highly trained, dedicated, objective civil servants who document waste, fraud, abuse, and inefficiency as well as recommend actions to eradicate and prevent future squandering of public resources. They document over $650 billion in waste annually. That is $6.5 trillion in cost avoidance and direct spending reductions over the ten years everyone uses to discuss the fiscal cliff. Except for a rare instance, these reports, and their detailed recommendations, are universally ignored.

The next Congress will be as grid locked as the last few. Partisan votes in the House will die in a Senate unable to muster sixty votes to move legislation. Then there are possible White House vetoes.

Therefore, why not check ideology at the door and embrace stewarding public funds? One hopes overwhelming numbers of Members from both parties, as well as the White House, would agree that waste is waste. Pass budget bills that specifically mandate GAO and IG recommendations are implemented and corresponding amounts of documented waste, fraud, and abuse are cut from programs and agencies. Resurrecting effective Congressional Oversight is long over due.

Having everyone discover that they can all agree on something will shift from the culture of confrontation to a culture of collaboration. Beginning swimmers start in the shallow end of a pool and then move into deeper waters as their skills and confidence improve. Congress and the White House could move into more complex and contentious waters as their ability to respectfully and constructively disagree improves.

Allow for public input - “Crowd sourcing” is being successfully used in several European countries to harness collective wisdom for public policy. Using either an ongoing “crowd sourcing” process, or an annual referendum tied to tax returns (like the Presidential Campaign fund check-off), citizens could either identify what to cut or what to fund. Their input would initially be advisory and mature into binding guidance as seriousness and sincerity are displayed by all involved.

If Congress, the White House, the agencies, and the media, do not explore these ideas, America faces a crisis that will dwarf the chaos in Greece.

[Scot Faulkner was Chief Administrative Officer for the U.S. House of Representatives. http://citizenoversight.blogspot.com/]



Life after the Super Committee

My column regarding the Super Committee and what Congress can do now was published in the

New York Daily News on November 28, 2011.

http://www.nydailynews.com/opinion/fight-cut-debt-target-rampant-federal-waste-article-1.982076

The Congressional supercommittee’s failure to eliminate $1.2 trillion in federal debt has launched a new round of “blamestorming” as both Republicans and Democrats brace for the automatic cuts that are set to begin in 2013.

Some perspective and focus are desperately needed. For while indiscriminate cutting may be unwise, it is simply mythical to insist, as some do, that there isn’t room to massively reduce the size of government.

To the contrary, Washington’s fiscal garden is overgrown from decades of negligence. In recent decades political gamesmanship from across the political spectrum has led our federal government to decline into a weed-infested jungle. The way back to proper public horticulture is not new taxes, which would only fertilize the culture of waste and dysfunction. It is also not through heavy handed cuts, as a general herbicide would kill even the fruit bearing plants.

The first step is to identify the weeds. The Government Accountability Office and 73 inspector general offices are filled with investigators and accountants who identify waste, fraud and abuse. Their exhaustive reports track to specific programs, offices and contracts and treasury account numbers — and identify billions of dollars in cost-cutting opportunities.

Yet they are routinely ignored. As a result of this neglect, the amount of documented waste has remained at a consistent 20% of the federal appropriated budget since first complied by the Grace Commission in the 1980s.

President Obama’s proposed appropriated outlays for FY 2012 are $1.34 trillion. That means $268 billion a year is potential waste. Ten years of eradicating waste and sustaining cost avoidance would result in $2.68 trillion in savings, more than double the savings mandated in this summer’s debt deal.

Instead of partisan bickering, our elected officials should review these GAO/IG reports and listen to the staff who wrote them. They should conduct “sweat the details” management reviews. Waste is waste no matter which party’s flag flies over the executive branch.

Simultaneously, Congress should do something it has not done in years, whether under Republican or Democratic control: conduct aggressive oversight and link funding to functionality. Zero-based budgeting has existed since 1969. Sunset provisions have been built into legislation since the 1970s. The Government Performance and Results Act, which holds programs and agencies accountable for actually doing something of value, was enacted in 1993. Eliminating programs and offices based upon audit findings can happen if the will is there.

America’s overgrown fiscal garden is also filled with a bloated bureaucracy. Walmart, the world’s largest corporation, has just five layers of management between its checkout clerks and the CEO. There are 12 layers of managers between a park ranger and the Secretary of Interior. There are 21 layers of management between the person handling TRICARE medical benefits and the Secretary of Defense.

The entrenched interests of Washington, including turf-conscious Members of Congress, play a cynical game of eliminating frontline service personnel and services instead of wiping out the many layers of people whose sole purposes are attending useless meetings and writing unread reports.

The front line is where voters feel pain. When the cry goes up, federal officials say, “see — that is why we can’t touch this program.” It’s a fallacy.

During my time in Washington, we proved budget cutting is possible. At the General Services Administration, a reform team cross-walked Inspector General reports to dysfunctional programs and offices, applied private sector logic to eradicating management layers and linked attrition, retirements and a hiring freeze to reduce the GSA’s workforce from 34,000 to 20,000 in three years. This was a 41% reduction — yet system integrity, processing time, and operational efficiency skyrocketed.

As Chief Administrative Officer of the House of Representatives, we reduced 12 layers of managers down to two and reduced my operations staff by 47.5% in 15 months. Again, services improved along with efficiency.

In each case, real sustainable management reform required hard work, not just issuing news releases. Like a gardener who gets his or her hands dirty by handling individual plants and pulling weeds, legislative and executive branch officials need to do the mundane, but vital, tasks of actually understanding operations and management.
The reason they do not do this is that it is laborious, not glamorous. Our current political culture does not reward results. Maybe enough voters will finally change this culture in November 2012.

[Faulkner served in executive appointments during the Reagan administration and as chief administrative officer of the U.S. House of Representatives.]

Read more: http://www.nydailynews.com/opinion/fight-cut-debt-target-rampant-federal-waste-article-1.982076#ixzz283pmTzKg

Indigestion

The Senate once again proved how much it is out of touch with reality.

On June 8 it finally voted to privatize its restaurants. Senate food operations have been losing money since the 1970s. More importantly, the restaurants have been costing American taxpayers up to $2 million a year to cover these losses. Senate staffers have also been “voting with their feet” by patronizing the House’s better run, and higher quality, private restaurants for years.

The House of Representatives privatized its restaurants in 1993. Privatization turned their operating losses into a profit center. During my tenure as the Chief Administrative Officer of the House, I met with my colleagues in the Senate and with Republican Senate leaders. I repeatedly asked them why they weren’t privatizing their restaurants. Their excuses were that “the situation wasn’t that bad”, “we can fix the problem internally”, or “we can’t get enough votes for privatization” (even in the Republican-dominated Senate!).

Thirteen years later, and after an additional $18+ million in taxpayer subsidies, the Senate finally did the right thing. It took Senator Dianne Feinstein displaying dogged persistence and some unprecedented intestinal fortitude to force this reality check through the Senate. A die-hard group of Senators opposed restaurant privatization to the bitter end. They explained that they opposed privatization efforts elsewhere in the federal government and did not want to look like hypocrites. This raises an intriguing question – why would anyone want to preserve obviously inefficient operations anywhere in government?

The bias for symbolic, dogma-based, decisions over management-based decisions has driven up the cost of government for generations. This does a disservice to taxpayers who pay the bills and all those who are the beneficiaries of government services.

Over the years I have conducted cost reviews of government programs. Universally, I have found at least 36 percent of government operating overhead to be avoidable waste. This is amongst programs that are considered “well-run”. As a staffer conducting Congressional oversight, and later as a government executive, I have uncovered federal programs that do not generate any tangible value at all! In other cases, I have found programs that provide some marginal benefits, but at ludicrously wasteful levels of inefficiency.

Overall, American taxpayers obtain an average of 26 cents of value for every dollar spent by their government. So, out of a $4 trillion federal budget, we are obtaining slightly over a trillion dollars in actual value with the other $3+ trillion ripe for cost-reduction. And we still have politicians and pundits asserting that they don’t know where and what to cut!

Tale of Four Audits

Rep. Bill Thomas (Chairman of House Oversight Committee) confers with John Lainhart (Inspector General)

When people “Google” my name, “Management and Financial Irregularities in the Office of the Chief Administrative Officer” pops-up. My supporters know the real story behind this report while my detractors use it as a handy device to dismiss everything I say and write.

This report was the third of four audit reports related to my tenure. It is a saga discussed in detail in my book “Naked Emperors”. For those who have not read the book, and even for those who are familiar with the story, a “SparkNotes” version of what happened is in order.

My book focuses on the forces for and against reforming the U.S. House of Representatives after the historic election of 1994. The four audits became battlegrounds for these forces to collide in shaping the reality of the moment.

Audit #1 – Price Waterhouse – Report No. 95-HOC-22, July 18, 1995.

This is covered on pages 237-238 in “Naked Emperors”.

This report was billed as the first truly independent audit of the U.S. House of Representatives. All prior reports were internal or heavily influenced by House Leadership and especially by the Committee on House Administration (CHA).

The report was an historic indictment of previous mismanagement of the Congress. Price Waterhouse found such a lack of policies, procedures, and documents that it could not render an opinion. This report would serve as the basis for the reform of the House and a validation of Leadership’s and my approach to strategic change. Surprisingly, Rep. Bill Thomas (R-CA) as Chairman of the new Committee on House Oversight (CHO) chose to suppress any release and media coverage of this major document.

House leaders and I thwarted Thomas’ subversion and got the story out to the American public. In retrospect, Thomas’ attempt at sabotage was about crippling the reform effort so that little or no change would actually occur. He had been forced by House leaders to finally acquiesce to some key reforms in June, his stalling tactics having delayed these reforms since March. Thomas was furious that the July audit proved his effort to preserve the status quo was ill advised.

Audit #2 – Price Waterhouse – Report No. 96-HOC-05, July 30, 1996.

This is covered on pages 270-273 in “Naked Emperors”.

This report was poised to give the House a “clean” audit. However, at the last minute, Thomas refused to update the CHO’s mass mailing procedures, thereby downgrading the report to a “qualified opinion”. Allies of the reforms considered this further sabotage by Thomas.

Thomas also tried to force Price Waterhouse to criticize the way the reforms had been implemented with specific attacks on my team and me. Thomas threatened to end the Price Waterhouse contract if they refused. This highly unethical and possibly illegal effort was exposed and the Speaker took Thomas to the “woodshed” during a meeting of the reform leaders. However, no other sanction occurred and Thomas continued his efforts to tarnish the reforms.

Audit #3 – KPMG - Report No. 96-CAO-15, December 31, 1996.

This is covered on pages 283-291 in “Naked Emperors”.

Thomas proceeds with hiring a more malleable group of auditors (KPMG) to attack the reforms and the CAO. KPMG is given the deadline of having their criticisms of the CAO and the reforms published in time for the House Republican Conference's consideration of House Officers for the 105th Congress. I uncover the plan and appeal to the John Lainhart, House Inspector General, to be an honest broker in the matter. The IG reports back to Thomas, who uses it as a way to remove me as CAO. The reason given for my removal was “inappropriate” ex parte contact with the IG, a minor version of what Thomas was caught at in August without any sanction.

I wrote a fully documented rebuttal to the audit report (available on www.scotfaulkner.com ). This rebuttal was never included in the report.

Audit #4 – KPMG - Report No. 97-HOC-12, September 24, 1997.

This is covered on pages 292-294 in “Naked Emperors”.

Thomas decides that purging me, and my inner circle, is not enough. In order to consolidate power in the newly revived Committee on House Administration (CHA), Thomas needs to completely revise history. He demands a special IG report describing the CAO and his allies as hampering House reform and portraying Thomas and the CHO as the true leaders of the reforms. Thomas also wants to erase my credibility in Washington, DC. Dozens of CAO staffers and reform allies alert Newt Gingrich to Thomas’s power play and his misuse of House resources for personal vendetta. Gingrich, once again, does nothing to curtail Thomas. While media accounts, and several books describe what really happened in the 104th Congress, the final IG report remains the first item found on some web searches.

Thomas achieved his goals, going on to be a major power in the House, and ultimately cashing-in for a lucrative lobbying position.