The Corner

There Will Be Waste

Pres. Barack Obama promised to expose to public ridicule any official who wastes funds from the massive stimulus package he signed into law. He also promised a full accounting online of where the money goes.

And yet, Earl Devaney, chief auditor overseeing spending of the $787 billion stimulus funding said at a House Oversight and Government Reform Committee hearing Thursday that some fraud and waste is inevitable. In fact, according to Indiana Republican Dan Burton the industry standard level of fraud is 7 percent. That would mean $55 billion in stimulus dollars wasted.

Devaney explained that, “The problem will be aggravated by a lack of federal workers needed to oversee the spending. Federal agencies will have difficulty hiring enough skilled workers ‘to minimize the risks associated with moving this amount of money quickly.’” So let me see if I understand: We will have waste because we can’t hire enough bureaucrats to watch what the state and local governments are doing with our money?

What happened to, the website the administration set up to publish reporters on stimulus spending? First, the administration has yet to produce the guidelines for the states about how to spend the stimulus fund. Second, the stimulus bill Obama signed into law requires states and cities to provide receipts for the money they spend down to the project level. In other words, “the money disappears after it changes hands twice,” says Greg LeRoy of the watchdog group Good Jobs First.

The federal government will disclose how much money it gives to a state, and the state must report back on the way the money is distributed to a private company or to local government. Beyond that, there’s no requirement for disclosing where the money ends up, LeRoy says.

So what we need is to make sure that the state and local governments and contractors they hire should have to report and justify every dime of our money they spend.

How do you do that? My colleague Jerry Brito has a solution. Read his testimony here.

By the way, Brito crowd-sourced his written testimony.

Also read David Freddoso’s piece.

— Veronique de Rugy is an economist at the Mercatus Center at George Mason University.


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