During the 1980s, though a practicing physician, I decided to wade into the arena of small-business ownership by opening a franchised restaurant. Made confident by early success, I began opening additional stores as quickly as I could.
By the mid-’90s, I noticed that sales growth was great, but my cash and financial statements looked terrible. So what went wrong? Upon reflection, I realized that I had no tools to decipher where money was being wasted, how to price the products or even whether I was making any money!
And I discovered that the part-time bookkeeper who simply recorded numbers and reported them to my accountant was far too insufficient for the complexities of my business, which had grown to about 10 stores.
Though it was counterintuitive to commit to spend another $250,000 to hire an army of bookkeepers and equip the department, that is exactly what I did. With an accounting and operations staff in place, we began to set goals for costs and revenue, metrics to measure our success and a method to analyze the benefit versus cost for each line item in the budget.
We quickly identified waste. Within months, our operations and service improved, profits were established and efficiency increased, and we missed out on nothing. These trends continue today, though the company has quadrupled in size.
I see no evidence of this process in Congress today. Voters across the country are desperate for leaders in Washington, D.C., who will operate our government in a responsible, businesslike fashion. We must fundamentally change the process of spending.
In a broad stroke, here are the fundamental reforms that would make cutting spending rational and less painful.
First, each budgetary line item should be assigned a value reflecting a benefit-versus-cost ratio. Annually, such metrics should be reviewed and ranked. There are a number of decades-old programs costing billions of dollars that no study has ever shown a net benefit for.
Second, a Defense Base Closure and Realignment Commission-type panel should be established to evaluate agencies to delete overlapping and wasteful and unnecessary functions.
Third, future spending should have an automatic expiration placing the burden on future Congresses to justify its continuation.
In summary, reducing spending to balance the budget should begin with a continuous, rational process of cost analysis and discipline. Let’s begin this reform with the 112th Congress.
Rep. John Fleming, R-La., is a practicing physician and small-business owner whose medical practice and several nonmedical businesses provide jobs to more than 500 Louisianans.