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A penny misspent is a penny squandered
If there’s one thing that brings us together in the springtime, it’s the collective chore of filing our taxes. With Tax Day having come and gone, I need to relay this unpleasant truth: The government isn’t keeping very good track of how it’s spending your tax dollars. So far this year, the government has collected close to $2.05 trillion in revenue, primarily from income and corporate taxes, but chances are we’re not going to know for sure where that money actually ends up, and whether it was spent effectively. The lack of proper oversight and a broken federal reporting system have made it so the government’s often unable to answer the most basic questions about its spending. (And by basic, I mean really basic ... like “What was the money used for?”)
If we don’t have a good handle on where federal dollars are going, we have no way of knowing if that money is being distributed equitably. A failure to track spending end-to-end could mean that money intended for people who really need it, such as low-income communities and those historically marginalized from power, isn’t actually reaching them.
This isn’t just a (major) clerical error — it’s a matter of equity.
In this edition:
- Eyes (off) the prize
- The hidden costs of a lack of oversight
- Going back to the financial basics
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It’s been said that the government’s mechanisms for collecting and using data are nearly all broken. That means there’s no way of knowing whether money is being spent effectively. But government spending is to the tune of trillions of dollars every year — we’re simply dealing with too large a sum for that uncertainty to be acceptable. I chatted with POGO’s Senior Government Affairs Manager, Dylan Hedtler-Gaudette, to understand the problem.
But first, some context.
The trillions the government spends can be classified into a few categories, which you can explore here. The government actually does a fairly good job of tracking certain types of spending (specifically, spending on contractual services), but is severely lacking in how it tracks non-contract awards, which include everything from federal grants to loans to insurance payments. It’s with these awards that we encounter the black box issue of not knowing what’s happening to that money in any meaningful, organized sense. “And non-contract awards account for the majority of federal spending,” Dylan explained. “Over half the money the government spends has the least insight and least oversight. That’s a huge problem.”
Keep the change
Dylan also explained the chain of custody when it comes to federal spending. The money is first allocated by Congress through the appropriations process. That money then goes to federal agencies, who parcel out contract and non-contract awards to different entities on state, local, and community levels. He said, “It’s at the point that the money heads out the doors of the federal agency that we basically lose any meaningful insight into it.”
And that’s because our government’s systems for reporting data are broken. On our website, my colleague, Senior Policy Analyst Sean Moulton, explains how there are not only major quality issues with the spending data the government does collect (including errors, blanks, and essentially useless data), but they’re also failing to collect key data points that would provide necessary, useful, or sometimes even rudimentary insight. According to Sean, whole agencies and types of spending are missing from this data. “It is nearly impossible to adequately review whether emergency government spending — or any federal spending — accomplishes its intended goals,” he wrote.
Who pays the price?
When the government shirks oversight, we all face the consequences. Take, for example, the huge infrastructure bill the Biden administration passed last year. A lack of proper oversight over a project that expansive could easily result in funds being funneled unequally or ineffectively, leaving whole communities without the fixed roads or adequate broadband they really need. Inadequate data on climate change spending means we have no way of knowing if we are progressing toward a sustainable, livable future.
Federal spending oversight is a matter of equity. Grants and direct payments also pay for programs specifically designed to help low-income and underserved communities. These programs range from affordable housing to small business subsidies to social welfare programs. “The entire gamut is funded through federal dollars,” Dylan said. “So the problem is, if we aren’t tracking and monitoring what happens with those dollars, we just don’t know if these dollars are delivering the impact to the communities who need it most.”
A case study
To illustrate, here’s a troubling example that you may have heard about last year. In Mississippi, funds designated for welfare recipients were given instead to retired NFL quarterback (and multi-millionaire) Brett Favre, who used the funds to build a new volleyball stadium at the University of Southern Mississippi, where his daughter was a volleyball player at the time. But the more than $1 million given to Favre was only a small part of the scandal: The Mississippi state auditor found that $94 million in federal welfare grant funds had potentially been squandered.
There are countless other instances where a lack of proper spending oversight left people in need in the lurch. And it’s the taxpayers who are bankrolling these unethical swindles.
With great (fiscal) power comes great responsibility.
Spending money is just half the process. Tracking where that spending is actually going should be fundamental. Without proper oversight, the government could throw good money after bad, and we’d have no way of knowing.
“There’s always going to be issues, because the government is dealing with a lot of money,” Dylan reasoned. “It’s not always going to go smoothly. But if we don’t even know where the pain points are, it’s impossible to fix them.”
The federal reporting system needs a real overhaul to be truly effective. This task can be broken down into three steps: fixing current reporting, filling reporting gaps, and tracking new data points. To get into the nitty gritty details, check out a blueprint we released a few years ago on fixing federal reporting.