The United States federal government is an enormous bureaucracy, and the common analogy is that a big ship is slow to turn. To extend the analogy, the ship isn’t going to turn itself. As Ronald Reagan famously said, “The first rule of the bureaucracy is to protect the bureaucracy.”
What does a department head do with leftover money at the end of a fiscal year? He spends it! On whatever. Not doing so might result in a budget cut next year. Nobody, save the taxpayer, wants that.
Here are a few numbers regarding the federal budget you might find interesting. In fact, all American voters should be familiar with them.
In 2016, there were 18 regulations issued by the executive branch for every law passed by Congress and signed by the President.
Regulatory compliance costs American businesses $1.9 trillion annually. That’s $1.9 trillion of a $19 trillion GDP or 10%. We all know who ultimately pays this cost, and its not the businesses. Undoubtedly, these regulatory compliance costs of doing business are past along to customers and are reflected in the prices customers pay products and services.
It cost the federal government $63 billion to administer this regulatory state. This is $63 billion of a $4 trillion annual budget or about 1.5%. We know who pays this, too: the taxpayer.
And then there is government waste.
The Treasury Inspector General for Tax Administration reported the IRS paid out $3.4 billion in 2015 to individuals not legally authorized to work in the United States.
Social Security improper payments are estimated to be about $3 billion per year.
According to GAO report, “the amount of SNAP benefits (formerly known as food stamps) paid in error is substantial, totaling about $2.2 billion in 2009.” The error rate of SNAP payments has reportedly improved in recent years.
Overall, and according to GAO reports, government wide improper payment estimates totaled $105 billion in 2013, $125 billion in 2014, $136 billion in 2015, and $144 billion in 2016.
We’re headed the wrong direction, aren’t we?
Regarding revenue, the net tax gap, defined as the difference between what the government is owed and what it never receives, is $406 billion. The voluntary tax payment compliance rate is 81.7%.
(This is a reason, by the way, we should replace the income tax with some form of a national sales tax. We would broaden the tax base to include those who currently do not pay and decrease the tax gap.)
So how do these numbers affect the 126 million American households? Let’s do the math.
$406 billion of the annual tax gap + $144 billion of annual overpayments = $550 billion
$550 billion / 126 million = $4,365 per household per year.
Here is another way to look at it: “(Social Security) benefits would need to be cut by about $150 billion per year to make the program solvent.”
Or you can look at it this way: The current deficit of the United States budget is $585 billion.
The bottom line is this: The most important improvements the Trump Administration can make for the sake of the American economy are regulatory reform, the elimination of improper payments, and tax reform aimed at eliminating the net tax gap.
These changes need to be a top priority and should come before any other domestic agenda items, including tax cuts. Efficient operation of the federal government is a primary responsibility of the executive branch.