Never mind the "fiscal cliff."  America went bankrupt, technically, at midnight on December 31, 2012.  We hit the debt ceiling of $16.394 trillion.  Yet the U.S. government needs to borrow more money than is legally allowed.  So Treasury Secretary Timothy Geithner is now juggling federal accounts via questionable extraordinary measures to squeeze out perhaps two more months.  Uncle Sam has maxed out his credit cards.

More than ever before, America now faces national ruin unless political leaders cut federal spending.  However, Washington no longer understands what budget cuts are.

Simply trim a few percent from every program -- here a little, there a little.  Isn't that obvious?  Yet big spenders howl as if entire programs must be completely eliminated -- all or nothing.  People will be cut off and starving in the streets if the federal spending spree is slowed.  "What would you cut?"  candidates are asked.  This is a trap.  Attack journalists twist whatever a candidate answers into a scandal of heartless cruelty.

During my five years working inside government, I saw that easily 15% of the federal budget could be cut, with no reduction in the output of government services, benefits, activities, or useful functions.  In fact, quality should actually improve in many instances from reducing unnecessary complication, red tape, duplication, and burdensome procedures.

Could the USA collapse during 2013?  Our country is facing a disaster that most citizens, politicians, and journalists scarcely grasp.  It could be next week.  It could be next month.  What if investors simply choose to stop loaning Uncle Sam any more money?

Every week, the U.S. Treasury borrows money to keep operating, by holding auctions of "T-Bills."  Institutional investors, foreign and domestic, show up to bid on these government bonds (Treasury Bills).

What if investors decide that it just isn't worth risking any more of their money?  There won't be any money.  Even when the country still looks strong, investors could sit on the sidelines, worrying: "Let someone else take the risk."

If the lending stops, can the country survive when the Ponzi scheme collapses?  What if there is no money to cut social security or Medicare checks, or operate the government?  What will be America's national defense if there is no money to feed or pay our troops, no money to put fuel in our ships in foreign ports? 

I had a bird's eye view of waste and inefficiency as a management analyst in the Management Improvement Service at the U.S. Department of Education.  I saw the problem across many federal departments and agencies.  I helped organize government-wide management improvement conferences.  At MIS, we were trying to implement nationwide initiatives such as Reagan's Productivity Improvement Program (PIP), OMB Circular A-133 (TQM), and OMB Circular A-76 (competing bids with the private sector).  The bureaucracy resisted.  Political leaders didn't help.

I saw that 10% and very likely 20% of all government spending could be slashed, both administrative and programmatic, and nobody would ever notice in terms of the results produced by the government.  But structural changes would be required...which is partly why Reagan failed at controlling the budget.

Our Productivity Improvement Branch, led by Gordon Rairdin, explained to a manager in the Office of Postsecondary Education what President Reagan and George Bush had ordered all government managers to do.  The Productivity Improvement Program was mandatory to streamline operations and cut costs.  (It was never implemented.)

The manager stared at us like we were aliens from Mars.  He had no interest in streamlining his office; he couldn't care less what the President had ordered.  He had spent years making his office as mysterious and incomprehensible as possible, to increase the number of employees and protect the office from the politicals.  And here we were, telling him how to simplify things!  He ignored and disregarded the president's orders and refused to implement the program. 

Congress must change the incentives of federal managers.  When bonuses depend upon results, suddenly bureaucrats hustle like entrepreneurs.  The assistant secretary running OSERS under Lamar Alexander modified the performance evaluation standards for all OSERS civil service managers.  Managers could not qualify for their annual bonus without meeting her targets for "audit resolution."  Suddenly, OSERS managers became obsessed with achieving the assistant secretary's targets. 

Congress must prohibit consideration of the size of an office's budget and number of employees when setting a manager's salary.  Currently, managers are rewarded for complicating the bureaucracy and expanding it.  The more an office spends and the more employees it has, the higher the grade level and the bigger the salary of the manager or executive.  The more unnecessary complication, the less accountability there is to elected leaders who won't understand things.

I also worked in the Executive Office of OBEMLA.  I helped prepare the budget submission and congressional budget briefing book for the Office of Bilingual Education and Minority Languages Affairs.  Ronald Reagan and Secretary William Bennett had won a change in the law to encourage English language proficiency in public schools.  So OBEMLA argued that our office needed two more program officers to implement the new law.

However, when our office was granted two more slots (FTEs), the director diverted those two slots to a new research division.  The assistant secretary (in substance) had promised the research director a grade increase.  The personnel office would not approve his higher grade level unless he had more employees to manage.  The executive officer and I fumed privately.  The payroll budget had been bloated simply to give one manager a much smaller raise.

Later, I oversaw development of a computer system (CARS).  The contractor SYSCON billed USDE for a senior level computer programmer.  However, SYSCON back-filled a young woman who had not yet graduated from college, when the initial programmer got a job at SHAFE in Brussels.  So SYSCON was billing for a senior-level programmer, but paying peanuts for a college student to do the work, and pocketing the difference between what the company had promised the government and what it actually delivered. 

Because this very pleasant young woman was still learning, it took her perhaps five times as many hours to do the work as a senior programmer would have required.  So the number of hours billed skyrocketed, and the project funds were quickly depleted.  SYSCON billed USDE for "change requests" for not doing work right the first time.  I don't think  CARS was ever finished correctly. 

But most revealing was the reaction: nobody cared.  I reported the waste and over-billing to the budget office, after the Grants and Contracts Service and information technology office failed to act.  The most incredible part is that nobody was interested that money was being wasted.  I reported the abuse to relevant congressional committees.  Again, no response.  More telling than any specific example was that wasted money didn't arouse any attention.

My experience in the system leaves me with no doubts on this issue: in official Washington, waste, fraud and abuse are seen as normal.