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Common Cents

The Golden Fleece Award

Ralph Murphy

(9/2016) Senator William Proxmire (D-Wisc.) issued a monthly Golden Fleece Award from the mid 1970's to his retirement in 1989. In it he bemoaned program costs relevant to legislative debate over the national debt and annual budget. His concerns were for programs costing thousands of dollars. Today they would stand in the hundreds of billions. The United States Constitution Article 1, Section 9 demands "no money shall be drawn from the Treasury, but in consequence of appropriations made by law and a regulated account of receipt and expenditures of all public money shall be published from time to time". The law presumed there was money in the Treasury and deficit spending wasn't an option. No penalty was stipulated for non-compliance, but federal and private agents have recently pilfered that central storage bank, and by government admission there was no effective audit process to discern the account and spending sources clearly required of officials.

The Budget Accounting Act of 1921 was the first legislation that required the Executive body to present a budget proposal for Congressional review. It created the predecessor to today's Office of Management and Budget (OMB) that assesses spending requirements it perceives necessary for all federal programs. While not a Presidential prerogative - the budget proposal as it evolved does roughly approximate that approved by Congress, though in recent years it has been routinely higher. It amounts to a "political statement" for funding of desired programs, but Congress has the final say as the President doesn't have legal control of the budget process. That office doesn't sign the final bill approved by the House of Representatives and Senate.

This past February, President Obama presented a $4.1 trillion budget request to Congress. The House is currently working on its own version which now stands at $3.872 trillion and this has to be coordinated with the Senate for final approval. Again, once the budget is approved- the money is simply made available. There is very little scrutiny in the current review process and a balanced budget hasn't happened since the Democrats pushed economist Maynard Keynesís idea of deficit spending in the 1930's. There's very little competition in the current billing process. There is also no effective, legal requirement for a process where bills are compared with budget authorized expenditures. The result is a "blank check" process of program payment which surely would be curtailed- even ended- with any type of real competition associated with competitive bidding.

It's not just about a program being assessed as to demonstrated need, but the absence of a rigorous, billing review process once a program has been approved. Something that the framers of the Constitution did not foresee when they thought about the possibility of incurring Federal debt. The OMB is paralleled in many functions by the Government Accountability Office (GAO). The GAOís leadership is appointed by the President, but the office is housed in Congress. Considered non partisan- it serves to "audit, evaluate, and investigate" current spending. It is further involved in "all matters relevant to the receipt, disbursement, and application of public funds". That effort appears designed to afford "greater economy or efficiency in public expenditure". All agencies are supposed to be scrutinized by the GAO as it remains the only Federal audit agency that can conduct the needed reviews.

The GAO has failed to provide the needed audits since 2010 as, by its own admission, it is subject to "widespread internal control weaknesses, significant uncertainties and other limitations". The agency singled out the Department of Defense (DOD) as having presented obstacles that made financial statements for their whole budget "un-auditable". The DOD has the largest, discretionary bill. The DOD bill is also one of Congressís top expenses, but one where the GAO exercises little formal scrutiny. Defense spending is currently well over $600 billion annually. The materiel and personnel expenditures are not subject to real market competition.

The GAO lament as to DOD costs were echoed by the Defense Department's Inspector General who bemoaned "internal control weaknesses that affect the safeguarding of assets, proper use of funds, and impair the prevention and identification of fraud, waste, and abuse". The billing therefore continues, but it's not clear who gets the money as it can't be audited or traced under the current system.

If the system was audited, it would probably streamline spending. A balanced budget requirement would surely help this effort. The budget may actually be balanced because everyone is apparently getting paid. At least, recent press reports fail to indicate any large-scale claims of nonpayment for federal programs. Profit margins are, however, almost unchecked and interest on the national debt was about $223 billion last year with an annual deficit of $438 billon. That means almost everyone got their money from real assets such as taxes and fees that generated over $3 trillion in revenue. Much of that money, which is about 25% of the nationís earnings would have been better invested and subject to market influences and private sector demands.

The Constitution requires budget scrutiny. Congress assumed the appropriations role and the President can't even vote on the budget once it is approved. GAO is the only official organ of restraint or review in the current process. Given current policies, they can't perform this function. Even if they could- there is no real budget constraint beyond self imposed spending "caps" that are disregarded by the Congress almost every year. The budget comes due on 1 October each year. An effective, discretionary audit authority that would examine the real need for expenditures is long overdue and would be more effective if it just "refereed" spending needs based on real program competition and associated billings- in a balanced budget framework. An Executive veto option of the final Congressional Budget bill might help as well.

Ralph Murphy is a former member of the CIA Headquarters Staff in Langley, VA.

Read past editions of Ralph Murphy's Common Cents