How Wasteful Spending Leads To a Sluggish Economy Near You
The first step to breaking a bad habit is to admit you have one, and the U.S. has a big problem: wasteful government spending. Unfortunately we have a hard time admitting it. The problem with wasteful government spending is that is has a tendency to rapidly increase, unchecked, without anyone realizing it. Most saddening is that it is a waste of hard-earned taxpayer money. So how does one combat wasteful government spending?
For starters, the government is a business, and like any business it needs proper planning and management. Too often do our elected legislators lose sight of the business aspect, and focus primarily on how they can benefit their specific communities and donors. The government is in desperate need of high-level business planning and management.
There is a delicate balance between appropriate government spending on needed programs and overspending that can actually harm the economy. Some government spending is necessary, including expenditures on the military, police, fire, courts and infrastructure. However, wasteful spending in any of these areas can result in an economic slowdown. At some point, a government can become too large resulting in misallocation of funds.
Wasteful government spending can have a major impact on our economy. First and foremost, as we saw last year, our nation’s credit rating can be downgraded due to our inability to control excessive spending. There are only thirteen states that hold a AAA credit rating, the highest possible credit rating. Delaware is among those thirteen, but its rating is falling.
Additionally, as government spending becomes more controlled and less wasteful, less revenue is required to offset the expenditures, which means fewer taxes. If citizens have to pay fewer taxes, they have more money they can spend in their local communities. Whether it’s buying more locally grown produce or visiting the local movie theater more often, putting money into the local economy helps spur economic growth.
There are a few steps any government can take to help reel in wasteful government spending. The first step is to ensure there are qualified, knowledgeable and educated legislators in office. Additionally, states need to assure that they have a qualified state auditor. Specifically, an effective leader that has undergone the rigorous requirements to become a CPA (including a Master’s degree in accountancy, passed the CPA Exam, and has experience working as a CPA). While a non-CPA may do a great job, auditors that are CPAs are specifically trained to spot erroneous entries and unreconciled payments and expenses.
Hiring a regulator to audit the books is just a first step however. The information the auditor uncovers needs to be presented to the public and legislators. This increases the transparency of the government and encourages citizens to get involved in the process. A transparent report on government spending will also help citizens hold their elected officials accountable.
Other areas of wasteful spending can often be found in the state auditor’s report and can include over-payments to contractors, refunds for unused travel tickets and government-issued credit card misuse. One simple way to tackle wasteful government spending is to conduct a full analysis of the programs and services offered. In many cases, over years and years of government history and intervention, duplicate programs have been established, providing the same or similar programs. Anyone in business can tell you that there is a cost of doing business, or overhead. If a government has two programs that serve the same purpose, that government is spending twice as much on overhead. Websites, emails, business cards, phone systems, office equipment and furniture, the expenses may have already been incurred, but future costs can be mitigated through the use of proper government spending and concentrating on the leadership skills of government officials.
Overall, it is important for any state or municipal government to ensure they are properly spending the citizens’ money. There should be a qualified individual, such as a CPA, in place to study and oversee spending, and have the ability to directly combat any wasteful spending that is occurring.
This guest post was written by Jason Monaghan with University of Notre Dame Executive Online Education. Jason works with the faculty and staff at Notre Dame Online to develop skill sets for the leaders of tomorrow in Negotiations, Leadership and Management and Business Administration.
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