How much government waste really exists and is easy to cut?

In a surprise move, Mayor Gray vetoed a budget measure that spends some of DC’s reserves to delay an upcoming bond tax. Gray wants some kind of income tax, like he had in his original budget. Kwame Brown insists he’s opposed to that, and wants to create commission to study further cuts.

This aversion to a very small income tax increase is silly. Many DC residents face smaller tax burdens than counterparts in Maryland and Virginia, and most importantly, people aren’t going to suddenly flee the city because some income is taxed 0.4% more.

People live in DC because it’s a great place to live, not because it’s the cheapest place around. If the revenue helps keep our fiscal house strong and blunts desperate poverty that makes the city worse for everyone, it’s a good tradeoff.

There definitely is some waste in the government. There is waste in all large organizations, though, even the best-run companies. If we can find some waste and cut it without cutting the useful functions, that’s worthwhile. Is that possible?

First, a quick recap of the long saga: Gray’s April budget proposal included a 0.4% tax increase on incomes over 200,000. Kwame Brown vowed to eliminate that, and swapped it out in favor of eliminating the tax exemption on out of state bonds, which no other state has.

The only reason the rest of the cuts-before-taxes councilmembers, like Mary Cheh and Jack Evans, agreed with the measure was because reinstating the exemption was on a list of priorities for spending future unanticipated revenue, at last some of which was indeed anticipated. But Tommy Wells wrangled an amendment to swap that item with restoring other cuts.

In any event, the next budget round had a bunch of spending pressures around Medicaid that pushed this item down the list. The replacement items aren’t funded either, yet, and so the bond tax buyout still wouldn’t have been had it stayed on the list.

Meanwhile, Mary Cheh said she would introduce an amendment to remove just the part of the bond tax for already-purchased bonds, and put back in an income tax, but only on incomes over $400,000. Yet she never introduced it, and instead passed a measure devoting some of DC’s reserve funds to delay the bond tax by one year and make it non-retroactive.

Some councilmembers say she never really meant for the amendment to pass, and withdrew it after Mayor Gray whipped votes for it; she says it’s because she feared Wells would round up support for some other change she didn’t want.

What Gray vetoed was the bill that delays the bond tax. Now, if the Council doesn’t act further, the bond exemption will go away even for already-purchased bonds, including on interest from 2011.

Kwame Brown still insists “people are tired of taxes and fees” even though a DCFPI poll found strong support for the original income tax increase.

Tim Craig writes,

Instead of a tax increase, Brown said he will probably push to establish a commission to explore potential cuts and savings to the city’s budget. Brown said the commission would include government officials and citizens who will work to ferret out “wasteful spending within the government.”

Say you were on that commission. How would you “ferret out” some waste?

It’s become a familiar trope to say there must be waste. And there indeed is. But it’s not so easy to just cut the waste, like most politicians pretend.

For one thing, some waste is an unfortunate byproduct of organizations. Even my former employer, Google, which constantly enjoys adulation from the press for being a great organization, has some people not pulling their weight. It’s not a lot, sure, but even without obstacles to firing people, getting rid of anyone is difficult, unpleasant, and bad for team morale (especially because there’s never unanimity about who the less productive people are).

In a private company, a lot of the waste is just hidden. That doesn’t make it right, but the popular belief that anyone with half a brain could just take an axe to government spending easily is a little too facile.

On the other hand, there are indeed some clearer examples of people who aren’t adding value to an organization. Most people I’ve spoken to in government agree and know who those people are; sometimes others share the same view, while sometimes the opinion varies from person to person.

Many agencies could benefit from strategic reductions in their staffing levels. Unfortunately, labor rules make it very difficult to eliminate people based on their performance. The standard procedure is a RIF (Reduction in Force), which has strict rules around removing the most junior people, or people based on their job category rather than their performance, and further rules requiring the agency to find new placements or rehire people if jobs open up.

As I’ve written before, I think it’s detrimental to unions in the long run to stand against the general principle of merit-based firings. Better to push for least arbitrary process for evaluating employees, so that the firings are as fair as possible, rather than opposing the whole idea.

If the Council doesn’t want to take this issue on, it may be very hard to find genuine opportunities to cut that haven’t already happened. It’s worth investigating. If Brown staffs his commission with thoughtful people who really are looking for good win-win solutions, it could come up with something. Though it’s hard to have a lot of faith in Brown’s ability to choose people on merit instead of for political reasons.

It would definitely not be helpful to have a Boehner-style commission that simply picks programs to axe. Most of the actual objectives the DC government pursues are worthwhile. If accomplishing them more efficiently is not really possible or not politically feasible because of labor issues, wholesale cuts are not the answer.

Such a commission also would not likely be able to find specific cuts between now and the beginning of the fiscal year in October. Brown may have to swallow the tax increase that most residents want, and then pursue longer-term efficiency gains for next year.