In years past it was relatively more common for Congress to consider legislation that eliminated entire federal departments. For example, during the 104th Congress, Members drafted bills to eliminate the Departments of Education, Housing and Urban Development, and Commerce. While the current Congress includes legislation to terminate smaller agencies such as the National Technical Information Service and the Economic Development Administration, there are no bills that would target an entire cabinet-level department. Now, such proposals are largely restricted to presidential candidates. How would eliminating a federal department actually work? How much taxpayer funds would it save? The Congressional Budget Office (CBO) recently looked into this question in its latest Budget Options report.
While it may at first seem logical that eliminating a federal department would result in savings of that department’s previous year’s budget, such a measure would overstate actual savings. Some 70 to 84 percent of the budgets of all federal departments combined are made up of “grants, subsidies, insurance benefits, and interest payments.” Much of this funding would simply be passed on to the state governments instead of being eliminated entirely, thus limiting overall savings. However, this percentage varies greatly depending on the department in question.
The CBO’s report looks into three of the federal departments most often put forward as good options: the Departments of Commerce, Energy, and Education. Based on 2015 funding levels, the table below looks at the likely amount of savings if each of these departments was shut down and its grant funding sent to the states.
Department | Total Budget for Direct Obligations (billions) | Funds Sent to States (billions) | Taxpayer Dollars Saved (billions) | Percentage of Department Budget Saved |
Commerce | $15.6 | $1.3 | $14.3 | 91.7% |
Education | $71.8 | $69.2 | $2.5 | 3.5% |
Energy | $22.2 | $1.7 | $20.5 | 92.5% |
Total | $109.6 | $72.2 | $37.3 | 34.1% |
The amount of funding saved by eliminating a federal department may not be as large as the entire department budget, but it would be substantial (though programmatic reforms of the underlying grant and aid programs could achieve additional savings). This is particularly true in the case of the Departments of Commerce and Energy, each of which would yield savings of over 90 percent of their budgets. Even for the Department of Education, savings of $2.5 billion in taxpayer dollars is not insubstantial, and federal tax funds that are being used to perform a task that could easily be performed by states are wasted. The incoming President’s business background might prompt a detailed, necessary, and overdue line-by-line review of the federal government and reduce the overhead charged to taxpayers.