Government Waste

How Congress Can Use an Obscure Law From the 1880s to Limit Wasteful Government Contracts

The federal government spent more than $477 billion on contractors in the last fiscal year, but not all that money is used wisely.



When the U.S. Army got caught spending $76 million on video games, recruitment tools, and promotional items instead of spending it on research and development, the only punishment was a written reprimand and a new officer training program.

That's small potatoes. In 2001, the Air Force exceeded its obligation in a single year by $300 million on intercontinental ballistic missile replacement without congressional approval. In 2004 the Department of Housing and Urban Development managed to exceed their commitments set by congress by more than $1.5 billion for a variety of projects, according to GAO.

The federal government spent more than $477 billion on contractors in the last fiscal year, according to a Bloomberg Government report. As recently as 1984 the feds were only spending $168 billion. With a budget that large it's inevitable that some of it is misused or wasted.

But Congress has a tool that could be used to reduce that wasteful spending: The Anti-Deficiency Act, an obscure law that's been on the books for over 130 years. Instead of being a mere afterthought, Congress could give the ADA some teeth and use it to target wasteful contractor spending.

The Anti-Deficiency Act in was passed in 1884 to curb inappropriate spending in the Bureau of Indian Affairs. The law made it illegal for bureaucrats in Washington to exceed their budgets by spending money Congress hasn't appropriated, or "employing personal services not authorized by law," except in emergencies. In modern times it's mostly used as an asterisk for wasteful spending that goes on in bureaucracies, like in the examples above.

Last amended in 1950, the law provided for potential penalties for violations including termination, a $5,000 fine and up to two years in prison. Unfortunately, it's gone relatively unenforced over the last couple of decades.

"The wrong it was intended to correct was federal employees entrusted with appropriated funds using a portion of those funds to hire others to help with their work—and in some cases do it entirely," says Robert J. Hanrahan of the Competitive Enterprise Institute, a free market think tank, in a new paper that argues Congress should take a more assertive role reining in the power of bureaucracies.

Hanrahan points to the National Nuclear Security Administration, where he was formerly employed, as a modern example. The NNSA has spent more than $100 million on contractors on its own, without any congressional approval.

This is common in the administrative state. Departments can effectively hire contractors when they run short of employees, outsourcing their own responsibilities to use the budget for program funds. In doing so, the departments can – and do – effectively bill the American taxpayer twice for the same administrative services, and avoid hiring freezes.

When the House Armed Service committee in 2014 began to question some of the practices within NNSA, it added in requirements for the agency to report on the use of contractors. This also meant making the Department of Energy include in its budget the number of its contractors and the source of funds used.

Hanrahan believes that if this were applied more broadly to all departments of the federal government, it would mean an important first step in enforcing the law and preventing the current misappropriation of taxpayer money. But it shouldn't stop there.

"Congress should establish a private civil cause of action for ADA violations, akin to standing provisions of the Sherman Act and Qui Tam provisions of the False Claims Act." Hanrahan writes.

If fiscal conservatives are serious about shrinking the size, scope and spending of government then they could use wield the Anti-Deficiency Act as a weapon of choice.

Instead of the GAO filing reports every year with a dozen pages or more of Anti-Deficiency Act violations, the bureaucracy keeping track of the bureaucracy would get smaller. And, who knows? In the process, taxpayers might even save some money.