Government waste is like the weather. Everyone talks about it but no one really does anything about it. I suspect that no one does anything about it because what constitutes wasteful government spending is such a subjective thing. Just as the old saying goes, one man’s trash is another man’s treasure, so it is that one man’s wasteful spending is another man’s necessary investment. As with so many things, the definition depends on your point of view.
This is not to say that government spending couldn’t be done more effectively or efficiently or that it isn’t possible to get more bang for the buck. Without doubt, our government could certainly get more bang for the buck in many cases.
But let’s examine a concrete instance. Let’s take Medicare Part D as a starting point. It was enacted as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) and went into effect on January 1, 2006. (I’ll leave it to you, the reader, to figure out who controlled Congress in 2003.)
By the design of the program, the federal government, by law, is not permitted to negotiate prices of drugs with the drug companies, as other federal agencies do in other programs. The Department of Veterans Affairs, which is allowed to negotiate drug prices and establish a formulary, pays 58% less for drugs, on average, than Medicare Part D. For example, Medicare pays $785 for a year's supply of Lipitor (atorvastatin), while the Veterans Administration (VA) pays $520.
From the point of view of the tax payer, the difference between what the drug companies are charging the government Medicare program and what they charge the VA could easily be defined as wasteful spending. However, from the point of view of the drug companies who lobbied for the provision and the congressional legislators who supported the measure, it’s extremely important to protect the profitability of the drug companies. So, whether or not Medicare spending $265 more than the VA for the same medication is wasteful is a function of which side your on … the tax payers’ side or on the side of corporations.
That spending difference was enacted into law and, because it is the law passed by Congress, no one in the administration of Medicare can do anything about it without breaking the law. However, those in the administration of the Medicare program certainly get the blame for being inefficient and ineffective and wasteful.
The $4 billion worth of medical-related fraud the feds recaptured in 2010 is presumably a fraction of the taxpayer-subsidized scams that the pharma and health care providers got away with. The Top Ten Federal False Claims Act settlements in 2010 involved health care, with pharmaceutical company fraud accounting for eight.
Was the $4 billion a waste of taxpayer’s money? Most people would agree that it was. However, the obvious solution to some is to cut the Medicare program with the consequence that fewer government employees are available to investigate false claims … because it’s paying government employees that’s the wasteful spending?
But there’s a even bigger point. When talking about wasteful spending people seem to argue from the point of view that what they consider wasteful spending is basically putting money into a rocket ship and blasting it off into outer space. The fact of the matter is that even “wasteful” spending is money that, through the government purchases of goods and services, gets circulated throughout the economy. The money that isn’t captured as corporate profits (think $600 toilet seats) goes to pay people to manufacture those products or perform those services.
All systems have waste. Waste cannot be eliminated. At best, it can be controlled.
When we talk about wasteful spending in government, it might be a good idea to ask “compared to what?” For example, the internal combustion engine that powers your car has an efficiency rating on the order of 18% to 20%. That means that between 18% and 20% of the energy released from .the burning of fuel in the engine is used to propel the car down the road. The remaining 80% of the energy is released as heat and is dissipated into the atmosphere, accomplishing nothing. By contrast, Medicare a government program, considered by some to be very inefficient, provides a decent standard of health care for approximately 45 million Americans with only a 3% administrative cost (that could be analogous to the useless heat from your car engine) while 97% of its funds go to directly to individual health care (excluding fraud as mentioned above, of course).
But that’s not comparing apples to apples. So lets compare the Medicare 3% administrative cost to the 15% to 20% administrative cost associated with private health care providers. Incidentally, you can add corporate wasteful spending on top of that (interminable staff meetings that accomplish nothing, for example, because someone has to pay all those employees who attend for their time).
The take away from all of this is that government waste is subjective. It is a favorite hobby horse ridden by those who oppose anything that resembles a government program … while they neglect to mention that they were the ones who created the waste.