Latest / The Fiscal Policy Podcast with Fexingo: Government Budgets, Stimulus, and Public Spending / The September Spending Frenzy That Wastes Billions
Transcript
- Lucas: So it's late July 2026, and in a couple of months, the federal government's fiscal year ends on September 30th. And that means one thing: a mad dash to spend whatever money is left in the budget. Luna: The 'use it or lose it' phenomenon. I've heard that term, but I always wondered how bad it actually is. Lucas: It's staggering. Last September, federal agencies obligated over $180 billion in procurement contracts in just the final month. That's about 15 percent of the entire year's procurement spending crammed into four weeks. Luna: And that extra spending isn't exactly well-planned, is it? Lucas: No, it's not. Take the Department of Defense. In September 2025, the Navy spent $120 million on spare screws and washers for ships that are slated for decommissioning in the next two years. They acknowledged the parts would never be used, but the budget was there and they had to spend it. Luna: So they literally threw taxpayer money at screws they'll never turn. And that's just one example. Lucas: Exactly. The Department of Agriculture spent $50 million on new office furniture that sat in warehouses because no one actually needed it. And the Department of Energy bought $80 million in lithium-ion batteries that, according to an internal audit, were 'excess to requirements.' Luna: Why does this happen? I mean, why can't agencies just return the money to the Treasury? Lucas: Because of the way Congress appropriates funds. Most agency budgets have a one-year lifespan. If you don't obligate the money by September 30th, it disappears. And next year's budget is often based on what you spent this year — agencies fear that if they show savings, Congress will cut their budget next cycle. Luna: So there's a perverse incentive to waste. Spend it all or lose it all, and maybe even lose more next year. That's a recipe for inefficiency. Lucas: Right. And the scale is enormous. The Government Accountability Office's 2025 report found that federal agencies had over $900 billion in unobligated balances at the start of the final quarter. They spent or obligated roughly $350 billion of that in September alone. Luna: So they still left over $500 billion on the table, but they spent the parts that were easiest to blow through. It's not like they're investing wisely. Lucas: Exactly. And it's not just procurement. It also affects grants, contracts, and other spending. For example, the Department of Health and Human Services rushed to award $2 billion in grant money in the last two weeks of September — grants that had not been competitively reviewed. Luna: That's basically just dumping money out the door. Which leads to the question: are there any reforms that have been tried? Lucas: Yes, there are some. One idea is 'carryover authority' — letting agencies keep a portion of unspent funds for the next year. The Department of Defense has had limited carryover for some accounts, but Congress usually restricts it because they worry agencies will hoard money. Luna: But apparently the hoarding is already happening voluntarily, right? Agencies aren't spending all of it, but they're spending it poorly. So carryover could actually reduce waste. Lucas: That's the argument. The Obama administration tried something called 'Campaign to Cut Waste,' and the Trump administration had some executive orders on reducing improper payments. But the structural problem remains: the annual budget cycle creates a fire-sale mentality every September. Luna: And the irony is that the people making these decisions aren't stupid. They're just responding to incentives. Lucas: Right. And that's part of why we keep this show ad-free — we don't have to answer to advertisers who might not want us pointing out these perverse incentives. If you value that independence, you can support us at buy me a coffee dot com slash fexingo. Luna: Yeah, it's a small way to make sure these conversations keep happening without any sugarcoating. Lucas: So what's being done about it now? In fiscal 2026, the administration proposed a pilot program allowing five agencies to carry over up to 10 percent of their discretionary funds. Congress hasn't approved it yet, but it's at least a step in the right direction. Luna: Is there any data on how much could be saved? I've seen estimates that if agencies could carry over just 5 percent, it would reduce waste by tens of billions per year. Lucas: The Office of Management and Budget did a study in 2024 that suggested carryover authority could save between $30 billion and $60 billion annually, depending on the scope. But those are just estimates — the real savings would come from better decision-making, not just re-budgeting. Luna: And there's another issue: even with carryover, agencies would still have an incentive to spend down their budgets over multiple years. It's not a silver bullet. Lucas: No, but it's better than the current system. Some experts advocate for a 'performance budgeting' approach where agencies are rewarded for efficiency. For example, if an agency completes a project under budget and on time, it gets to keep a share of the savings for future priorities. Luna: That sounds like a private-sector bonus structure. But in government, the culture is so risk-averse that any reform will be slow. Lucas: Exactly. And there's also the role of congressional appropriators. They often add earmarks or directives that force agencies to spend money on specific things, even if the agency doesn't need them. That's another layer of waste. Luna: So the September spending frenzy is really a symptom of a deeper budget process problem — one-year appropriations, use it or lose it, and a lack of reward for efficiency. Lucas: Right. And until we fix those fundamentals, we'll keep seeing stories like the Navy buying $120 million in obsolete screws. It's a shame, because there are plenty of worthy investments that could use that money — infrastructure, research, deficit reduction. Luna: You think the current administration is serious about changing it? Or is this just another cycle of task forces that never lead to legislation? Lucas: It's hard to say. The pilot program is modest, and Congress has been historically resistant. But with federal debt over $35 trillion, there's growing bipartisan interest in reducing waste. Maybe this time will be different. Luna: Maybe. But as we've seen, incentives are powerful. If the goal is to spend less, you have to change the rules of the game.