How to Cut Federal Spending 101

ANALYSIS | The congressional debt "super committee" faces its toughest challengers: lobbyists. Add those to the mix of partisan handlers with a tight grip on the reins, and it will be miraculous to have debt talks result in viable federal spending cuts totaling $1.5 trillion. Now what?

The super committee and its deadline

CNN identified the sitting members on the congressional debt super committee as Democrats Patty Murray, Max Baucus and John Kerry for the Senate; Xavier Becerra, Chris Van Hollen and Jim Clyburn are the Democratic House members. Republicans Pat Toomey, Jon Kyl and Rob Portman represent their side of the Senate while Dave Camp, Fred Upton and Jeb Hensarling make up the House members.

Debt talks must bear fruit by Nov. 23; Congress expects to see federal spending cut bills up for vote by Dec. 23.

First rumors of savings

There are rumors that the super committee is taking a closer look at dually eligible benefits recipients, who qualify for Medicaid as well as Medicare. Reuters suggests that streamlining their healthcare into managed care organizations has the potential benefit of saving $125 billion. Any measure to cut federal spending in these departments would affect approximately 9 million Americans who are both sick and poor. Estimated annual spending -- by both Medicare and Medicaid -- on this group of people totals $300 billion.

Hey, is anyone looking at the USPS?

While cutting Medicare and Medicaid is most certainly a laudable endeavor, why not look a bit closer to home and take a good hard peek at the U.S. Postal Service? The Government Accountability Office (GAO) considers the USPS to be "high-risk." The postal service registers year-end debt notations of approximately $10.2 billion with cash shortfalls of $1 billion.

To blame are outdated union contracts that stipulate tomorrow's benefits at yesterday's postal use rates. Since more consumers are looking to electronic means of communication -- and private delivery carriers for packages -- it was only a matter of time for this fiscally precarious house of cards to topple. Then again, could the "largest civilian federal agency" be considered too big to fail? With 633,000 career jobs and 94,000 non-career positions on the line, something has to give.

Since compensation eats up 80 percent of available funds, the congressional debt super committee has the opportunity to restructure the USPS to become leaner, meaner and in step with modern technology. Of course, the unions do not want to hear the USPS mentioned in debt talks.

By the way, why not also place these government workers into the cheaper managed care plans the dually eligible segment of the population may have to go into?

Do you know that you could own the building?

Frequent visitors to the GAO website may also be surprised to learn that the federal government leases quite a bit of real estate it does not need. The agency explains that the federal government has a real estate portfolio consisting of approximately 900,000 structures. Giving credence to the adage that the federal government pays three times the going market rate for a hammer, the GAO found that leases frequently favor private-sector building owners and total "costs that would exceed what the government would pay for ownership."

If you consider that owning -- rather than leasing -- the FBI offices in Chicago could save an estimated $40.3 million in the course of 30 years, it stands to reason that all 900,000 properties -- and applicable leases -- need to be looked at for consolidation, purchase or outright elimination.

Audit the IRS!

Everyone's least favorite federal agency, the Internal Revenue Service, is charged with collecting an estimated $2.3 trillion each year. Yet the GAO explains that the IRS is plagued by internal control problems that lead to collection errors and missed revenues. Then there is the problem of increased program costs. The IRS' financial statements ending in September 2009 and 2010 respectively show that while account service costs have gone down, taxpayer assistance -- and tax credit-related administrative costs -- have increased.

Even so, collection of individual income tax has gone down from $2,036 billion to $1,989 billion. At the same time, corporate income tax collections have increased from $225 billion to $278 billion. Refunds increased from $438 billion to $467 billion.

In addition to modernizing the rather byzantine tax code, streamlining the behemoth that is in charge of collecting the funds might be a worthwhile money-saving idea.