NCPA - National Center for Policy Analysis

Federal Spending Expecting to Increase Dramatically

March 4, 2011

Fraud, waste and abuse in the form of improper federal payments are undoubtedly problems worthy of congressional attention.  However, improper federal payments are only a small component of government waste in this country, says Veronique de Rugy, a senior research fellow with the Mercatus Center.

Federal entities estimate improper payments totaled $125.4 billion in fiscal year 2010, about 5.5 percent of the $2.3 trillion in reported outlays for the related programs.  This $125 billion in overt waste, however, pales in comparison to the pervasive waste that exists in current spending patterns, and the economic damage caused by misallocation of capital and the creation of perverse incentives such as moral hazard.

  • In fiscal year 2010, the federal government spent $3.6 trillion dollars, or 24.6 percent of gross domestic product (GDP), well above the historical average.
  • The consequence of this spending was $1.3 trillion in budget deficits.
  • A large part of this overspending was improper spending or spending that never should have happened at all.

According to the Congressional Budget Office's alternative scenario budget projection -- the scenario under which widely expected policy changes occur, including legislators' concessions to interest groups such as physicians and senior citizens -- at its current trajectory, spending will increase to 25.9 percent of GDP in 2020 and to 32.2 percent in 2030.  The harsh reality is that if the country does not deviate from its current path, the majority of future federal spending will finance the spending of the past. 

Three types of systemic spending waste that must be addressed, says de Rugy:

  • Federal spending on functions that should be reserved for the states.
  • Federal spending on functions that should be reserved for the private sector.
  • Federal spending on things that government has no business doing in the first place.

Source: Veronique de Rugy, "Wasteful Spending Does Not Stop at Earmarks and Overpayments," Mercatus Center, February 17, 2011.

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