CBO Director Underestimates Public Sector Waste

At a meeting of the Supercommittee Tuesday, Congressional Budget Office Director Douglas Elmendorf cautioned that ferreting out waste, fraud and abuse would have a negligible impact on the panel’s work. “There is no evidence that suggests that this sort of effort can represent a large share of the $1.2 trillion or $1.5 trillion or the larger number that some of you have discussed as being the objective in savings for this committee,” Mr. Elmendorf said. The Washington Times story goes on to say that Vice President Joseph R. Biden is touting his efforts to find $1 billion in wasteful government spending here and there.

$1 billion dollars of waste in a federal budget that for 2012 alone is estimated to be $3.729 trillion? By my math this amount represents 0.027% of the budget. And that assumes that the Vice-President is looking at only one year’s savings. Such a pittance is hardly worth the bother.

My experience with the private sector suggests that there is in the neighborhood of 25%-40% waste in any organization which hasn’t applied Lean Six Sigma or any similar technique. This is well documented by research. The public sector certainly has at least this much room for improvement. At the low end of the estimate this represents a potential savings of $932 billion in the 2012 budget alone, or about 85% of the projected 2012 deficit. The fact that the CBO Director believes that public sector waste reduction opportunities is negligible indicates that he is completely unaware of the reality of the situation. It is unfortunate that he is spreading his ignorance to the Supercommittee charged with finding real savings. The implications for true reform and for eliminating non-value added activities rather than value-added activities are ominous.

The Operational Excellence community of professionals in the Quality, Six Sigma, Lean and Lean Six Sigma fields know from experience that the amount of waste is huge. This presents governments at all levels with the opportunity to eliminate deficits completely while not cutting value for the beneficiaries of programs. The question is, when will our political leaders begin to take this seriously? There is currently some work being pursued by the folks at Strong America Now to make this happen. Some Presidential Candidates, such as Newt Gingrich, are speaking out. The comments of Mr. Elmendorf and Mr. Biden’s efforts indicate that the current leadership has yet to understand the magnitude of the opportunity before them.

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Author: Thomas Pyzdek

Consultant, author, owner of The Pyzdek Institute