Bonus Incentives in the private sector have been very effective. They are designed primarily to increase profits.
But in the US Government, every department is a cost center. Thus, if you want the US Government to take actions to reduce the US Debt, the US Government must spend less, and still very successfully fulfill its mission. It's that simple.
How best to do that?
Well, I think the focus should be on designing very robust, effective Bonus Incentives to every sub-Department of every Department in the US Government.
The end result would be something like total bonuses to all US Government employees in a given US sub-Department which spends in a fiscal year a total amount which is less than what it has been authorized to spend by the US Congress.
But there must be excellent controls designed in this very robust Bonus Incentive system that doesn't permit US Government sub-Department personnel to game the system.
And there have to be clear objective metrics designed that clearly show that this US Government sub-Department reducing its annual Budget in a given year has also very successfully fulfilled its overall mission in that same year.
The prevalent US Government strategy now is "Use it or Lose it". When a sub-Department of a US Government Department is authorized to spend a certain amount each year, it spends it all, because if it doesn't spend it, it loses it.
And when you study US Government spending, there is always a huge amount of spend in September, the last month of the fiscal year. This shows just how extensive this "Use it or Lose it" strategy exists all throughout the US Government.
In my recent US Fiscal Cliff Trade-off #20, I recommended cutting the US Defense Department spending by more than $500 bil over the next ten years, as a down payment, just to solve the current US Fiscal Cliff. The main focus here was on both reducing the number of military personnel in support groups and also reducing the amount spent on US Defense Contractors.
This post expands that to include not just the military, but all parts of the US Government.
Let me illustrate with numbers how a wisely-designed US Government Bonus Incentive system can do wonders in reducing the US Debt.
Let me use a simple Bonus Incentive plan.....just a 10% Total Bonus Incentive of Budget Savings each year.
Let's say a given sub-Department of a US Government Department has $10 bil of spending authorized by the US Congress in a given fiscal year. And then let's say that it spends only $9.5 bil in this same fiscal year.
The Total Bonus Incentive given to this sub-Department in this fiscal year would be $.5 bil Savings X 10%, or $50 mil, a very nice chunk of change that the US Government sub-Department can share, in a fair manner, with the US Government employees of the sub-Department.
But still, this US Government sub-Department has saved the US Government in the current fiscal year $450 mil plus the US federal income taxes and payroll taxes on the $50 mil Bonus Incentives given out.
And as strong patriots, these US Government employees can also feel very good because what they have also accomplished is to increase US national security by reducing the US Debt.
It's taken a long time, but most US citizens have finally figured it out. The key to strengthening US national security, at this point in time of an already extremely strong US military but with a very weak US financial status, is clearly on the side of reducing the US Debt. When you are already spending $700 bil per year on US Defense Spending, the decision to spend another $100 mil may or may not increase national security, but at the same time, it will increase the US Debt by $100 mil, which will reduce national security.
Money talks. US Government workers will be highly incentivized to earn these annual cash bonuses.
From a review of the current Proposed US Budget, the Total Budgeted Security Costs are $8 trillion and the Total Budgeted Nonsecurity costs are $4 trillion for the next ten years, for a total of $12 trillion of Budgeted Discretionary Spending costs for the next ten years.
If this proposed Bonus Incentive Plan can reduce Total US Government Discretionary Spending overall by 2% in the next ten years, the US Government would be able to reduce the US Debt by another roughly $220 bil.
Once the CBO assesses the overall percentage US Government cost savings from this Bonus Incentive proposal, it will be easy for them to compute the dollars of CBO-scored US Government spending savings in the next ten years, such a critical ingredient in solving the current US Fiscal Cliff negotiations.
Frankly, with all the fluff there has been in the US Defense Department Budgets, and really in all the US Government Department Budgets, the overall ten-year cost saves will be substantially more than 2%, I think perhaps somewhere in the range of 5% to 10%.
Offsetting this fair Bonus Incentive economic bonanza to US Government employees, I would also require all US Government employees to pay a higher portion of their US Government Employee Health Insurance and their US Government employee pension, both of which are just incredibly choice employee benefits to have.
All of the money raised from all of the above recommendations should be used to reduce the US Debt.
