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Tuesday, May 26, 2015

Wasteful Agency-Spending: Employee Bonuses as a Solution

Use it or lose it. I am referring to “the habit of [U.S. Government] agencies spending all surplus funding at the end of the fiscal year in order to avoid budget reductions the following year.”[1] By spending the entire amount allotted for the budgetary year, a federal agency can avoid a lower base-line for the following year’s allotment from Congress. The incentive in this system is to spend every dollar in the budget, whether efficiently or profligately. The challenge is how to replace that incentive with another—one that results in efficient public budgeting. Unfortunately, relying on an incentive presupposes discretion, and one person can never be sure what lies behind another person’s use of it.

The full essay is at “Wasteful Agency-Spending.”

[1] Andy Medici, “New Bill: Point Out Surplus Funds, Get a $10,000 Bonus,” Federal Times, May 21, 2015.