Frugality for dummies

NO ONE wants to pay taxes, and collecting them is not the easiest thing in the world. So it stands to reason that a gap will yawn between the amount of money Americans owe and the amount the government gets. What is remarkable, however, is the size of that gap, which reached a whopping $450 billion in 2006, the most recent year for which data are available from the Internal Revenue Service (IRS). That is quite a chunk of change to go missing from the national till. The IRS reckons it can recover about $65 billion of that. The remaining $385 billion will simply line the pockets of tax dodgers.

The IRS is hardly alone in its ineptitude. Plenty more egregious examples have been chronicled by the Government Accountability Office (GAO) in its annual “Government Efficiency and Effectiveness” report, presented to the Senate earlier this month. Though lawmakers tussle over how to reduce spending and increase revenues, simply trimming some government fat “could lead to tens of billions of dollars of additional savings”, says the GAO.

The report makes distressing reading, not least because it seems addressed to persons of Very Little Brain. For example, the GAO suggests that if the IRS spent less time examining “less productive groups of tax returns” and more on “more productive groups” it might recoup more than $1 billion in extra tax revenue every year.

Another striking idea is for Congress to prevent tax dodgers from getting new passports. The government issued about 16m passports to people in 2008, 1% of whom collectively owed more than $5.8 billion in back taxes. But really (the GAO helpfully notes) anything the IRS can do to improve its collection efforts would make a difference, as even a 1% improvement in the net tax gap would generate almost $4 billion in revenue collections each year.

Another problem area involves entitlements. Critics have long complained that these programmes are financially unsustainable, particularly as spending on Medicare, the government’s health-care scheme for the elderly, tends to grow faster than the economy. But what few seem to notice is that the government’s generosity also exceeds its mandate. The GAO found that “improper payment estimates” reached nearly $125 billion during the last fiscal year—a $19 billion rise from the year before—mostly because of misplaced generosity to recipients of Medicare, Medicaid and the Earned Income Tax Credit.

Here, too, the report’s authors offer some handy penny-saving tips. Besides suggesting more audits and better systems for reviewing and approving some of this spending, the GAO points out that Medicare cards still come stamped with the Social Security numbers of their beneficiaries, which makes them easy targets for fraud. The agency mentioned this years ago, the report’s authors add. One can almost hear the sigh.

The GAO has few kind things to say about the government’s approach to information technology (IT), on which it plans to spend $79 billion in this fiscal year. Fragmented data storage and needless duplication have wasted billions of dollars. For example the Department of Defence—which accounts for around half of federal discretionary spending, and so may well not notice when billions of it vanish like loose change between sofa cushions—and the Department of Veterans Affairs are both now developing, from scratch, two separate electronic health-record systems, even though they will basically serve the same people. But the most common problem with the government’s IT ventures is a mix of grand ambitions and incompetence, as the launch of Healthcare.gov in 2013 handily showed. One of the most elaborate IT schemes involved a tri-agency weather-satellite programme, which after 16 years and almost $5 billion was at last put out of its misery in 2010. Among the GAO’s recommendations for better IT decision-making, included in a report in February, is the employment of workers who have “the necessary knowledge and skills”.

Federal agencies take the GAO’s advice seriously. Past suggestions have already saved the government roughly $20 billion between 2011 and 2014, according to GAO estimates. Yet of the 440 improvements recommended between 2011 and 2014, fewer than a third have been acted on. Meanwhile, Uncle Sam’s profligacy goes cascading on.