The Unseen Obstacle in Reducing Any Deficit, Government or Otherwise

Everybody seems to have a plan for reducing the deficit.  President Obama created a National Commission of Fiscal Responsibility. There is the Bipartisan Policy Center’s Debt Reduction Task Force and the Peterson-Pew Commission of Budget Reform. All have put forth ways to reduce the deficit. Not one of the task forces and commissions think it will be easy to achieve all the changes they are recommending. The Co-chairs of the National Commission produced a list of 58 concrete proposals to eliminate over $200,000,000 of Federal spending from a budget that is in excess of $2,000,000,000. While this is a good start, it turns out to be less than 10% of the budget. For a clear visual understanding of the impact of just 10%, I encourage you to view this short video  on Wimp.com.

There is not a citizen outside Washington who believes there is only 10% unnecessary government spending.  In some circles this would be considered “chump change.” I must say that all the suggestions sound reasonable and there is considerable agreement on many of the ideas across committees.  Why then should it be difficult?  As we say in the South, many people “have a dog in that fight.” Incomes and jobs of thousands will be affected.  All those affected will be putting forth justification for exempting them from the cuts.  You can expect to hear, “I know we need to cut but cutting my job will not save money and my job provides a necessary function.” Turning this discussion to business for a minute, one of the biggest failures in corporate downsizing is that organizations rush to cut jobs and fail to cut work. This means that the remaining employees have more work, so everyone gets punished.  It is common in these downsizings that when the work unit falls behind, which it almost always does, or when customer service is reduced, which it usually is, old employees are hired back on a temporary basis or private contractors are hired to help catch up, yet they rarely do!  It is not all that unusual for people to have temporary jobs for years.

Unless there are positive consequences built in, the savings from down-sizing will be short lived. It is often the case that in only a couple of years, the current organization looks strangely like the pre-down-sized one.

Art Buchwald, longtime columnist at The Washington Post, had what some would say was a radical idea about reducing the size of government.  He suggested that since the cost of keeping someone on the payroll is several times the salary when offices, equipment, maintenance, supervision and supplies are considered, why not pay anyone who can figure out how to eliminate his/her job their full pay for life. Although he suggested this tongue-in-cheek, I think there is a lot of merit in such a plan and it should be given serious consideration by those in charge of cutting spending. Let’s face it; our current problem is a spending problem as the government revenue in 2009 was in excess of $2,500,000,000. If there is not some incentive to government employees to save or cut, someone will always find a way to spend whatever is available.

Here are a few ideas that, if properly implemented, will motivate Federal employees to reduce spending without a disruptive effect on their families and essential government services:

1. Provide incentives to employees to eliminate waste and fraud. Use a gain-sharing plan that rewards employees with a portion of the savings.
2. Reward the people who leave – Be generous with financial and benefit packages.
3. Reward the people who remain – Set up performance bonuses for the employees who remain after the organization has been re-sized. Maintaining the savings after the rightsizing has been completed is a common struggle faced by organizations.
4. Cut departments when appropriate – This might seem drastic but the National Commission has some departments on its hit list, and there are likely others the commission hasn’t yet considered. Even with a modified Buchwald Plan, people will be coming out of the woodwork with ideas and justification for elimination. Financial rewards don’t have to be for life but should be substantial because savings will be substantial.

When employees are properly motivated to reduce unnecessary work, I am convinced that permanent savings can be realized far in excess of the 10% proposed by the National Commission. When they are not properly motivated, government will continue to grow in spite of current efforts to shrink it.