The Real Meaning of the GSA Scandal

What accounts for the different treatment? Why is a million dollars of waste at the GSA a scandal but not tens of billions of dollars at the FCC-NTIA? I believe public ignorance and apathy are the immediate cause of blame.
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The public's fixation on a scandal involving negligible waste is misplaced.

On April 2, 2012, the inspector general of the General Services Administration released a report highly critical of GSA management for spending $822,751 on a convention at a Las Vegas hotel for approximately 300 GSA employees. The report's release led to the resignation of the GSA's administrator and a bipartisan outpouring of rage by the American people and members of Congress. Front page media coverage of the rage was extensive. Four Congressional oversight hearings were held. On April 25, the House of Representatives passed legislation to address the scandal. It is supposed to save taxpayers $65 million a year.

What does this scandal teach us? Despite the GSA's critics, it may teach us more about the failures of America's citizenry than its government.

In relative terms, the sums involved in the scandal were negligible. For example, the GSA has an annual budget of $66 billion. The scandal involved less than .0012 percent of its budget. Most of the outrage focused on a few easily ridiculed expenditures, including a clown, a mind reader, and commemorative coins.

Why so much rage over such small sums? Consider four factors: First, the public has trouble distinguishing between a million, a billion, and a trillion dollars; to it, all such sums tend to sound similarly large. Second, unlike most government failure, which involves obscure and contestable sequences of cause and effect, the misuse of public assets was easy to understand; for example, the public could readily understand that $44 per person was excessive for a breakfast paid for by government. Third, the public servants involved in the scandal, rather than third parties, benefited at public expense; the public abhors its public servants living high off the hog. Fourth, no powerful special interests would be hurt and seek revenge against elected officials for exposing this type of government waste; members of Congress from both political parties could attack the waste without fear of retribution.

The public policy rationale for devoting so much attention to a scandal involving a tiny fraction of an agency's budget is the assumption that the scandal is not an isolated phenomenon but indicative of a more general problem of Federal government fraud, waste, and abuse. But this assumption is highly dubious, as reflected in the resulting Congressional reforms expected to save a mere $65 million a year. Problems that catch the public fancy and lead to effective reforms may be relatively trivial.

Consider two Congressional scandals competing for the public's attention in the early 1990s. The check-kiting scandal involved members of Congress writing checks on their personal accounts at the House bank without funds to pay for them. Not only didn't members of Congress have to pay fees for the bounced checks, they also effectively got an interest free loan from taxpayers, albeit a tiny one. The cost to taxpayers was negligible and, to my knowledge, has never been authoritatively estimated. Nevertheless, of the 22 top check kiters, 11 lost their seats in the next election.

The savings and loan scandal involved bailing out federally insured banks that made bad loans. This cost taxpayers an estimated $124 billion. Although three of the five members of the U.S. Senate implicated in the scandal chose not to run in the next election, no member of Congress was credited with losing an election as a result of the scandal.

A more direct and timely analogy involves the government's management of its tangible versus intangible assets. The GSA manages tangible public property, mostly buildings and land, worth about $500 billion. This includes public property both used by federal agencies and leased to commercial entities.

The two largest Federal agencies responsible for managing intangible public property on behalf of the American public are the FCC and NTIA. The FCC manages public airwaves, also known as "spectrum," used by commercial providers; the NTIA manages public airwaves used by Federal agencies such as the departments of Defense, Homeland Security, and Transportation. The FCC and NTIA together manage public assets worth about $1 trillion -- about twice as much as GSA manages.

Which has wasted more taxpayer assets: the GSA or FCC-NTIA? In my judgment, the FCC-NTIA wins hands down. The GSA could never get away with giving away tens of billions of dollars of worth of government buildings to mega-corporations and billionaires. Nor could it get away with having most of its government building space lie empty and unleased. To my knowledge, no credible source has ever suggested the GSA has engaged in such behavior.

But for decades it has been a commonplace to observe that Federal spectrum assets have been grossly underutilized. For example, after FCC Commissioner Michael Copps retired from office last December, he observed on C-SPAN's Communicator series: "There is a lot of spectrum out there, and I don't think anybody in the United States has very much of a clue exactly how much spectrum is lying fallow... I'll bet you there is a whole bunch of [spectrum] lying fallow that could fuel a whole lot of devices and fuel a whole lot of technology."

I've estimated that since World War II the Federal government has embarked on a licensing scheme that has given away, at taxpayer expense, as much as $480 billion of public spectrum assets.

What accounts for the different treatment? Why is a million dollars of waste at the GSA a scandal but not tens of billions of dollars at the FCC-NTIA? I believe public ignorance and apathy are the immediate cause of blame. The public is scientifically illiterate and doesn't understand the physical properties and economics of spectrum, which also appear to bore the public silly. Thus, if you're a normal person, your eyes have undoubtedly already started to glaze over at the mention of spectrum in this blog post.

To the extent the public is to blame, little can be done, except perhaps to wait until the wireless generation currently in their teenage years reaches adulthood and political power. But I'm not confident that even adept and passionate spectrum users are capable of understanding the allocation of spectrum assets.

Here's one solution, which I offer only partly tongue in cheek: remove the control of spectrum from the hopelessly corrupt NTIA and almost as corrupt FCC and add it to GSA's real estate portfolio. However wasteful the GSA might be, it is orders of magnitude less wasteful than the FCC-NTIA.

More seriously, Congress should hold oversight hearings on FCC-NTIA corrupton modeled after its recent GSA hearings. This has never been done, probably because Congress itself is heavily implicated in the FCC-NTIA corruption. Congress would have to ask tough questions affecting the interests of some of America's most powerful, generous, and incumbent friendly special interest groups. Nevertheless, such oversight hearings are long overdue.

If the public expects its visceral complaints about government waste to be taken seriously, it should fire every member of Congress responsible for FCC-NTIA spectrum oversight who fails to take this responsibility seriously. Unfortunately, the odds of the public doing this are probably less than the odds of Hell freezing over.

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