Government Spotlight: Cutting Waste

Cutting Waste

Every new Administration promises to cut government waste, and nearly every year politicians argue over how to do it. They look at programs and functions to eliminate and seldom if ever mention the things that drives government workers crazy and costs billions in pure waste, the year-end spending incentive, and over reporting, also referred to as red tape.

Across nearly every agency, Directors of Financial Operations and other officials with budget authority are incentivized—formally in performance plans and informally through managerial culture—to spend down nearly every dollar they are given, usually to within one percent of their total annual budget. This isn’t corruption; it’s conditioning. These individuals operate under a double bind: on one hand, they must not overspend or obligate more than their appropriation. On the other, they are acutely aware that turning money back in at year’s end can lead to future budget reductions, and worse, poor performance reviews or missed bonuses. So they hedge. They hold back some buffer funds in case of unexpected costs. Then, in the final weeks of the fiscal year, that buffer becomes a firehose.

The result? A nationwide bureaucratic sprint to obligate every last dollar before September 30. Office furniture upgrades. Software licenses with dubious urgency. Training trips. Contracts that serve little strategic value beyond their timing. It is one of the most entrenched, expensive, and least-discussed inefficiencies in government operations.

And yet—the solution is not difficult.

Step one: fund agencies fully. When agencies have stable, predictable budgets, they don’t need to cling to end-of-year buffers. Volatility creates hoarding.

Step two: change the incentive structure. Make it explicit from OMB and agency leadership: returning funds to the Treasury is not a mark of failure—it is good government. Agencies must be told clearly that future funding levels will not be reduced for unspent balances. Build this into budget guidance, and  mean it.

Step three: reengineer fiduciary performance standards. Require that performance plans for employees with spending authority do not reward full spend-down. Instead, they should reward operational sufficiency plus returned funds. Employees should be praised, promoted, and incentivized for thoughtful underspending that maintains full agency functionality. This should be written directly into performance plans.

Step four: monitor, measure, and reward strategic savings. Publicize savings. Tie them to individual and team recognition. Offer monetary and non-monetary awards.

The result? Agencies would be free to operate with intelligence rather than fear. Performance plans would align with real stewardship. And year-end fire drills could fade into fiscal memory.

This cultural shift alone could save tens of billions annually. Even modest voluntary returns of 5% or more from agency discretionary accounts could return $80 to $120 billion per year to the Treasury—with zero harm to operations. In fact, the more trust that is built into the system, the higher the return. As culture shifts and employees begin to trust that they will not be punished, savings will rise.

And this is only the beginning. True reform must go further: repeal the Government Performance and Results Act (GPRA), that costs billions and improved nothing. Eliminate the convoluted maze of reimbursable agreements among agencies. And perhaps most urgently, reduce the massive volume of redundant and meaningless reporting requirements across the federal enterprise. Overreporting not only cost billions in staff time and contractor support—they also degrade morale and reinforce the public’s most cynical ideas about government as red tape. They are a hidden tax on productivity and a deterrent to the next generation of public servants.

This is what change looks like when it’s performed by a surgeon—not a showman. By someone with awe for the life and function of the patient. By someone who knows exactly what can be safely removed, and what is keeping the organism alive.

Disincentivizing year end spending as a start point requires not a single budget cut. Just better government.