There are few things that put as big a smile on my face as pointing my finger at the U.S. government for its sometimes errant spending habits. I've been doing it for years with CEOs, so it's only fitting I turn my attention to the worst-run business of them all (from a loss perspective), the U.S. government. We know in hindsight that select government funds are wasted each year, but many of the ways that these funds get used often fall through the cracks, unnoticed.
Every year, however, Oklahoma Sen. Tom Coburn and his political team put together a summary of 100 ways the U.S. government has wasted taxpayer money in the previous year. Known as Wastebook 2013, Sen. Coburn's 177-page report (link opens PDF) for the past year outlines what is nearly $30 billion in wasted taxpayer funds of what he suspects could be as much, if not more than $200 billion wasted annually.
While this is just a fraction of the annual federal budget, and wouldn't make a big dent in our nearly $17.3 trillion national debt, it nonetheless represents an opportunity for the government to look more closely at ways to reduce its spending at a time when budget cuts are a primary focus. Maintaining a sustainable budget is also imperative to a growing U.S. economy, and the continued positive outlook of sectors dependent on U.S. spending, such as aerospace and defense.
With that being said, today we're going to look at the 10 dumbest ways the U.S. government wasted your taxpayer dollars last year.
1. Not to sugarcoat things
In what is perhaps one of the most perplexing industry props of our generation, the 2008 Farm Bill created the Feedstock Flexibility Program (FFP), which was aimed at increasing the use of ethanol and biofuels. The terms of this program require the U.S. government to purchase sugar from sugar producers in times of surplus and resell that sugar to ethanol plants to ensure that sugar producers remain profitable and that sugar prices remain higher than the rest of the world. Why?
According to Wastebook that's because sugar producers can use their sugar as collateral for loans from the government, which many producers simply can't repay. In 2013, the U.S. Department of Agriculture resold much of its sugar at a loss – a $171.5 million loss to be exact -- and estimates call for the FFP to cost taxpayers another $239 million over the next 10 years.
2. Solar D-efficiency
The U.S. government has made no qualms about its efforts to encourage green energy solutions throughout the U.S., but clearly some of those projects aren't well thought out.
In 2012, federally funded solar panels were commissioned to be placed on Manchester-Boston Regional Airport's parking garage. More than a year later, one-quarter of those solar panels sit under a tarp because glare from the sun makes the runways difficult to see for the control tower.
What's even more interesting is that the solar panels were anticipated to have a life of 25 years, and save around $100,000 annually in electricity costs, yet the overall project cost was $3.5 million. Feel free to ponder the math on that one.
3. Facebook moves the IRS into its inner circle
While many of us loathe tax time, social media giant Facebook (NASDAQ:FB) is licking its chops because it'll likely get another whopping refund this year thanks to a corporate tax law that allows it to use employee stock options as a tax deduction. Because Facebook grants options to its employees, it's thus far been able to claim a whopping $3.2 billion in federal and state deductions.
The end result is that the IRS wrote Facebook a $295 million refund check in 2012 despite the company earning $1.03 billion in net profit. With $2.17 billion in carryover deductions left for fiscal 2013, Facebook is unlikely to pay any taxes again this year, and will most likely get another refund check from Uncle Sam.
4. A 'taxing' problem
There are two certainties in life, according to Benjamin Franklin: death and taxes. I'd contend the third certainty is that there will always be tax cheats (i.e., people who don't pay their taxes or use illegal loopholes to subvert them).
According to Wastebook, some 312,000 federal employees and retirees were delinquent on their federal income taxes, including $1 billion from federal employees, about $2.1 billion from military and civilian retirees, and more than $300 million from active military. Combined, that's roughly $3.5 billion in uncollected taxes. If that weren't problem enough, Wastebook shows that many of the still-working delinquent citizens are still employed by the federal government, which is "inappropriate for any individual in violation of the law."
5. Happy wife, happy life!
A study conducted by the National Institutes of Health -- which, may I add, conducts thousands of important clinical trials annually -- wandered off course a bit with a $335,525 study grant that it used to research the behavior of 82 married couples. Specific to the NIH's findings was that "marriages that were the happiest were the ones in which the wives were able to calm down quickly during marital conflict." I'm not married, personally, but I have a strong suspicion that telling your wife to "calm down" isn't the holy grail of argumentative solutions.
6. The not-so-Goodyear blimp
Every year quite a few defense budget flubs make it onto Sen. Coburn's wasteful spending list, and this year was no exception.
One unique "defense" mechanism was the Long Endurance Multi-Intelligence Vehicle (LEMV), which was nothing more than a football field-sized blimp designed to provide continuous reconnaissance of Afghan battlefields. The proposed advantage was that it could carry around a 2,750-pound payload across a 2,000-mile radius for up to 21 days while being unmanned.
The one snafu with the project was that the Government Accountability Office (GAO) found numerous technical problems with the LEMV that eventually led to the blimp getting scrapped before it ever saw those Afghan battlefields. The total cost of the project was a cool $297 million and the Army resold the LEMV back to the original building contractor for a bargain basement price of $301,000. Just your standard 99.9% discount!
7. Weapons? We don't need no stinkin' weapons!
If you thought the $297 million lost on the blimp was abysmal, you may want to just skip ahead to No. 8 now.
Because the Department of Defense has a habit of over-ordering when headed into conflict, the military wound up destroying 170 million pounds worth of usable vehicles and other military equipment in Afghanistan, according to Wastebook. In other words, 20% of all military equipment in Afghanistan, valued at $7 billion, was scrapped rather than brought home or sold to the Afghans because the costs of shipping them back home would be too high, and flooding the Middle East with used military equipment may have hurt defense companies domestically by driving down prices.
8. So nice, you'll see it twice
Given the bungled rollout of the Obamacare website, Healthcare.gov, taxpayers have been particularly keen on wasteful spending when it comes to IT programs. According to Wastebook, there's plenty of waste to go around with the federal government spending $82 billion on IT each year, and a recent GAO report noting that three agencies have spent $321 million on essentially overlapping IT programs over the past couple of years. Not surprisingly, the most costly overlap was accredited to the Department of Health and Human Services (yes, the overseers of Obamacare), which has four overlapping systems related to "Enterprise Information Security," which costs $260.4 million annually.
9. Giving credit where credit isn't due
To put it mildly, the Earned Income Tax Credit (EITC) – a refundable tax credit designed to help lower-income working individuals – is difficult to understand. The dollar caps surrounding the law and the people who qualify can change on a year-to-year basis, making the job of giving the right funds to the right people daunting for the IRS.
According to an audit conducted by the Treasury Department Inspector General for Tax Administration, the IRS paid out $13.6 billion in false EITC claims in 2012, and averages $11 billion in false claims each year, compared to an average annual EITC payout of $55 billion. Worse yet, Wastebook claims that the IRS has made no genuine attempt to implement a plan to reduce the payouts of these false claims.
10. NASA goes to Congress
Last, but certainly not least, we have NASA, which is known for exploring strange new worlds, announcing that it'll be spending a cumulative $3 million over a five-year stretch on allowing its employees to better understand how Congress works. As Wastebook describes, this funding will allow attendees to "look at how Congress is organized, the key players and their roles, how the legislative process really works, and how Congress directly affects the daily operations of every department and agency in the Executive Branch." Somehow, I just don't see this $3 million expense is helping us get to Mars any faster.
Ultimately, these 10 wasteful programs are but a snippet of the 100 listed in Wastebook. Which wasteful program stands out the most to you? Tell me and your fellow Fools in the comments section below.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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