CBO can’t estimate savings in Paul’s cost-cutter bonus bill

By Brett Rowland
The Center Square

U.S. Sen. Rand Paul says his proposed Bonuses for Cost-Cutters Act would help tackle the national debt by paying federal workers to find waste. Congressional scorekeepers say they have no basis for estimating how much it would save.

When an employee identifies surplus or unneeded spending and funds, the agency could retain up to 10% for cash awards to employees who identify the savings and would send the rest to the Treasury for deficit reduction. Paul, who chairs the Senate Homeland Security and Governmental Affairs Committee, has introduced some version of the bill in every Congress since 2013. It has passed the House twice but never become law.

The Congressional Budget Office has analyzed both the House and Senate versions, and both times said it had “no basis for estimating” how much, if anything, they would save.

Paul’s office says the program pays for itself by design.

“It incentivizes federal employees to find and report savings by paying them a bonus of up to 10% of the money they save. The rest goes back to the taxpayers,” said Gabrielle Lipsky, the senator’s deputy communications director.

In announcing the bill, Paul said the pressure in Washington “to spend all you can before the end of the fiscal year so you can get even more in the future is enormous,” and cast the measure as a way to “push back against this status quo.”

A House companion sponsored by U.S. Rep. Chuck Fleischmann, R-Tenn., which would double the maximum award to $20,000, passed the House in June. A Fleischmann spokesman called it “a unique bill that will save taxpayers money.”

The Congressional Budget Office, the nonpartisan agency that estimates the fiscal impact of legislation, found it could not put a number on those savings. In its most recent estimate, released this month, CBO said it “has no basis for estimating” how much spending the bill would reduce. It estimated the bill’s administrative costs would be insignificant.

The agency was careful not to say the bill would save nothing. It said the savings simply cannot be measured in advance, and that the bill would reduce spending if it led to cuts beyond those that would occur under current law. Paul’s office made the same point.

“CBO is not saying the bill fails,” Lipsky told The Center Square. “It is saying government bean counters will not count savings until the bill is being implemented and the money is already back.”

Independent budget analysts say CBO’s inability to score the bill is not, in itself, a problem, but that the likely payoff is small. Jessica Riedl, a budget and tax fellow at the Brookings Institution, told The Center Square that CBO’s inability to quantify the savings is reasonable because the actual savings would be “infinitesimal in the context of a $7 trillion budget.”

Riedl called such measures “harmless” and “probably worth doing because small waste savings are better than nothing.” The risk, she said, is that symbolic bills like this one become “an excuse not to do the bigger, more difficult deficit reduction” work that would actually bend the debt curve.

Some researchers question whether cash bonuses change how public employees behave at all.

Obed Pasha, an associate professor of public management at the University of North Carolina who studies performance incentives, said he could not speak to the specific legislation, but that decades of research show monetary rewards are “generally ineffective at motivating public employees,” who tend to be driven more by a sense of public service than by pay.

Worse, he said, tying bonuses to identifying savings can invite gaming. Employees might overstate what they save, downplay the consequences of cuts, or even “allow costs to rise in inefficient areas over time so that subsequent reductions appear more significant and qualify for bonus payments.” Rewarding individuals, Pasha told The Center Square, tends to be a marginal lever for organization-wide savings.

For all the debate over whether it would work, the bill’s most striking feature may be its persistence. Some version has been introduced in every Congress since 2013. Support has thinned over the years: an earlier version drew 15 cosponsors from both parties in 2015, while Paul’s current bill has just one. It has cleared the House twice without ever passing the Senate.

Federal law already allows agency inspectors general to award employees up to $10,000 for identifying waste, fraud or mismanagement that results in savings; Paul’s bill would expand the program to cover surplus or unneeded funds. Whether the latest attempt fares differently may rest less on what it would save, a figure no one can yet calculate, than on whether it can finally clear the Senate.