Washington will probably stop short of letting the U.S. go over the fiscal cliff on Jan. 1, most likely with a temporary fix and a promise to work out a budget in the near future. That would only exacerbate a long-standing problem for the country: Procrastination has a price tag.
Since 1952, according to the Congressional Research Service, Congress has completed its spending bills by its own deadlines only four times—in 1977, 1989, 1995, and 1997. Year after year, lawmakers enact continuing resolutions to tide agencies over until appropriations bills pass. Fiscal year 2011—all 365 days of it—was paid for this way. Though a hyperpartisan year on Capitol Hill, it was by no means exceptional. According to the CRS, 178 days every year, on average, have been funded through continuing resolutions since 1977. Basically, half the time there is no budget.
The uncertainty creates all kinds of inefficiencies, according to a new report by the IBM Center for the Business of Government, a Washington think tank. Agency officials told the report’s author, University of Maryland School of Public Policy professor Philip Joyce, that federal contractors build a risk premium into their fees, charging back to taxpayers the extra uncertainty of potential funding disruptions. Agency leaders also have trouble staffing for new projects when there’s no budget. They have to resort to signing contracts on a monthly rather than an annual basis. Because every contract costs money to close, more contracts mean greater administrative and legal costs.
Joyce’s findings echo a 2009 Government Accountability Office study. That year, the Federal Bureau of Prisons told the GAO how it struggles to maintain its staff-to-prisoner ratios when Congress hasn’t made up its mind on a budget. The agency also said it had to pay out $5.4 million in additional construction costs at a prison in McDowell County, W. Va., after being unable to lock in prices under a continuing resolution. The FBI told the GAO that it had to delay $440 million in improvements to existing programs, including a counterterrorism data analysis system. The Veterans Health Administration said that it lost $1 million in productivity for every month spent under a continuing resolution. According to Joyce, the waste “has not gotten better. If anything, people talked about how it had gotten worse.”
Thomas Bowman, chief of staff to the secretary of the Department of Veterans Affairs from 2005 to 2008, recalls how distracting the constant state of indecision was for the agency’s leaders. “You never really can execute the way you’d planned to,” he says. And the inefficiencies don’t end when the appropriations finally come through. Contractors or hires with critical skills may already have found other work. Agencies have trouble spending what they then receive before the end of the fiscal year. “You’re saying ‘OK, guys, come up with good ideas, because we have to burn this money,’ ” says Bowman.
Exactly how much taxpayers lose in this process isn’t clear. Lawmakers don’t have much incentive to order up the numbers because that would only make them look bad. “The same members of Congress who talk about waste, fraud, and abuse in spending are responsible for a certain amount of waste for just not doing their jobs,” says Joyce.
George Voinovich, the former Ohio senator who requested the 2009 GAO report, also pushed for a two-year appropriations process, to give agencies some stability before starting the next round of funding requests, but the proposal never went anywhere. “This isn’t how you’d run your household or your business,” he says. “We shouldn’t be running our budget this way.” Now, along with a bipartisan group of former politicians called No Labels, Voinovich recommends a simple solution for Congress: no budget, no pay.