How Bureaucrats Could Solve the Budget Mess—Seriously

An Improbable Solution: Incentivizing Bureaucrats to Trim the Federal Deficit

The Congressional Budget Office projects the 2023 federal deficit will be $1.4 trillion and will average $2 trillion from 2024 to 2033. How we can solve this federal budget mess in our current political environment is a mystery. In such situations, we might be best served to follow Sherlock Holmes’s maxim: when you eliminate the impossible, whatever remains—no matter how improbable or outlandish—is the solution. For us it is the bureaucracy.

The Unknown Bureaucrat

Democrats and Republicans agree on only one thing when it comes to closing the budget gap: “someone” must bear the brunt of the sacrifice—someone’s taxes should go up; someone’s spending should be cut. Naming this “someone” publicly, however, is all but politically impossible.

Since increasing taxes on the middle class and cutting Social Security and Medicare spending both poll exceedingly poorly, democratic and republican approaches to fixing the budget fall victim to public opinion. Is it possible for us to delegate the responsibility to the administrative state, as we have delegated so many other politically tough decisions?

In the case of increased revenues, we cannot. No taxation without representation is one of the principles that kindled the American Revolution, and it was enshrined in Article I Section 7 of the Constitution. But there is no equivalent constitutional restriction on decisions not to spend.

At first glance, it seems absurd to delegate cuts to bureaucrats. Unless their units are directly cut, bureaucrats never reduce their budgets. They spend every dollar budgeted in one year to justify an increase in the next. They are a force for bigger, not limited government.

At least they are now. But like the Founders who sought security against the gradual concentration of governmental power in one branch by connecting the interest of the man to the constitutional rights of the place, so too we must connect the interest of bureaucrats to their duty to the taxpayers. It’s simple: we need only pass a single law that freezes federal spending and adds the following two provisions to each department’s budget.

First, any departmental budget surplus at the end of the fiscal year will be divided equally between the taxpayers and each department’s employees. Second, the next year’s budget will be reduced by the amount the taxpayers save.

The first provision is necessary to connect each and every civil servant’s pecuniary interest to the cause of limited government. When faced with the choice between unnecessary and wasteful expenditures or providing a bonus to their employees and themselves, it is very likely that managers will choose the latter. And they will scrutinize every decision throughout the year to see how necessary it is to accomplish the task at hand.

The second provision is the most important from the standpoint of reducing long-term spending. Having demonstrated that they could fulfill their mission with less, the departments in question would have no demonstrable need for budget increases. Reducing the departmental budget by the taxpayer savings portion (50% of the total not spent) preserves both the ability of a department to increase spending when actually needed to fulfill its mission and the bonus pool that incentivizes savings. Year after year, this procedure would reduce spending, while ensuring that these reductions would not adversely affect service delivery. Eventually, the budget will reach a point where only necessary services are provided at the best cost; all the fat will have been trimmed. 

By connecting the bureaucrats’ pecuniary interests to their duty to provide effective and efficient services to the taxpayer, meaningful reductions in overall spending can be brought about even in our polarized political situation. In the final analysis, following the logic of Mr. Holmes, our absurd situation is revealed to have an absurd solution.