Eliminating Fraud, Waste & Inefficiency
Leading up to the 2024 presidential election Donald Trump announced that a principal focus of his administration would be to eliminate fraud, waste and inefficiency within the federal government. With a federal deficit of just under $35 trillion, this is a noble goal as any further increases in the nation’s level of indebtedness (or even a prolonged increase in inflation and interest rates) could have a catastrophic impact on our nation’s economy.
Trump’s newly professed interest in curbing government expenses, however, stands in stark contrast to the $8 trillion increase in the nation’s indebtedness that took place during his first administration. This raises the question of what is actually motivating Trump. Is he really intent on restoring fiscal integrity in our national government, or is he simply pandering to his disaffected voter base? There is also the possibility that he may be contemplating a complete restructuring of the federal government.
To be sure, the federal government with an annual budget of roughly $7 trillion is clearly vulnerable to a broad range of fraud and waste totaling in the billions, if not hundreds of billions, of dollars. A frequent hunting ground for fraud and waste is our nation’s social welfare programs which annually involve disbursements totaling $2.3 trillion to almost 100 million individuals. Pledges to eliminate fraud, waste and inefficiency have long been the euphemisms employed by Republican politicians to camouflage their actual intentions of laying waste to these social welfare programs. Their motivation would not appear to be their concern over the wasteful manner in which the federal government operates, but rather the fact that social welfare programs essentially benefit the nation’s poor and are paid for by its wealthiest citizen who help finance the political campaigns of Republican politicians.
Eliminating wasteful spending has always had a strong appeal for fiscally conservative Republicans. That explains why it has long been a rallying cry of Republican administrations for the past 70+ years. For example, the Reagan administration repeatedly recounted the story of an unnamed “Welfare Queen” who was reported to have made multiple claims for welfare benefits for fictitious children as well as for unemployment benefits under multiple accounts. While this woman’s exploits were relatively rare and only involved small amounts of money their impact on getting Republican voters to the polls was nothing short of miraculous.
Another explanation for the constant Republican attacks on social welfare programs is that they serve as a distraction from the wholesale fraud and waste that takes place in government programs that benefit wealthy business owner who contribute to the campaigns of Republican politicians. For example, fraud and waste in government contracting poses a far greater danger than the fraud and waste found in social welfare programs. That’s because government contractors (in contrast to welfare recipients) typically receive much larger sums of money and have a much greater ability to bribe legislators and government officials. This allows them to successfully pilfer large sums of money (often in the millions, if not scores of millions, of dollars) with little fear of being held accountable.
Another area of waste that benefits wealthy individuals is the way our tax laws are administered. Each year the federal government annually fails to collect an estimated $63 billion in unpaid taxes or roughly 13% of the amount of income taxes owed. Because federal income taxes on the wages of working class Americans are automatically collected and turned over to the government by their employers, these unpaid taxes largely represent amounts owed by wealthy individuals who operate under a system of self-reporting.
Not only is there no public outcry emanating from Republican politicians over these uncollected amounts, but those same Republican politicians have repeatedly opposed Democratic efforts to provide additional funding to the IRS to enable it to collect unpaid amounts even though such additional expenditures have been estimated to enable the recovery of $3.00 for every $1.00 spent.
While 74 departments and agencies of the federal government have an Office of Inspector General to detect waste and fraudulent schemes, as amply demonstrated during the first Trump administration, Inspector Generals are subject to summary dismissal by the president. In fact, during his first term Trump terminated five Inspector Generals in one six-week period. Those firing were undertaken to prevent the terminated officials from carrying out their statutory duty of reporting their findings of fraud and waste to the Congress. They were also intended to send a message to the remaining Inspector Generals that a similar fate awaited them should they disclose their findings of fraud and waste. Thus, the “Achilles heel” of the Inspector General program is that it cannot function in an administration in which various forms of fraud and waste are condoned by the president. This is sometimes referred to as “Crony Capitalism.”
Case in point: How likely is the Trump administration to cut NASA’s budget when one of its principal outside contractors is SpaceX which is 42% owned by Elon Musk who shelled out $132 million in support Trump’s 2024 reelection campaign? Similarly, how likely is NASA to balk at paying any excess charges on the $3 billion of contracts which it awarded to SpaceX in 2023?
For the most part Republican efforts to cut social welfare programs have only resulted in minor, if any, reductions in federal expenditures. In reality, despite the roughly $2.3 trillion these programs disburse annually, they are plagued by a relatively small amount of fraudulent payments. For example, in 2023 the Social Security Program (the Department of Health and Human Services’ largest program) disbursed an aggregate of $1,379 billion to roughly 67 million individuals and the estimated amounts of fraudulent disbursements totaled only $13.6 billion or slightly less than 1% of the total amount disbursed. The relatively small percentage of inappropriate disbursements was largely due to the fact that the ten programs overseen by the HHS were policed by its Office of Inspector General which employs 1,600 people and has an annual budget approaching $500 million. This is by far more employees and resources provided to the Offices of Inspector General of the remaining 73 Departments and agencies of our federal government.
In addition, the fraud and waste that exists in social welfare programs is spread over hundreds of millions of transactions involving just under 100 million recipients, with the result that the costs of prosecuting wasteful activity in those programs frequently renders such initiatives fiscally counter-productive. Even the deterrent effect of prosecuting welfare recipients who wrongfully collect as much as $50,000 would not be cost beneficial.
Unquestionably the most wasteful social welfare spending authorized by our federal government since World War II was contained in the CARES Act enacted in March 2020 shortly after the onset of the Covid-19 pandemic. The object of that legislation was to quickly disburse roughly $2.3 trillion (or almost twice the annual amount of social security benefits) into the hands of Americans to keep the nation’s economy alive while most businesses were being temporarily shuttered to minimize the spread of the Covid virus. This was accomplished through a half dozen separate programs, some directed toward individuals, some directed toward business enterprises (both large and small) and some directed toward state governments.
The problem was that all of those programs were quickly devised and poorly conceived, allowing them to become rife with fraudulent disbursements. This was not only a result of Congress’ haste in enacting them, but also because there were insufficient resources allocated to the agencies authorized to manage and oversee the distribution of the funds. In some cases, there was no pre-existing agency to perform those tasks requiring the hasty creation of a new agency with no established procedures and trained personnel.
Some of the problems plaguing the programs authorized in the CARES Act are described in an article I wrote in February 2023 detailing how over $200 billion was disbursed to persons submitting fraudulent unemployment claims. Even more problematic was the Act’s Paycheck Protection Program which disbursed over $800 billion to enable small businesses to continue compensating their employees. The procedures set forth in the CARES Act for assuring that the allocated monies would be utilized as intended were so ill-conceived that the Congress ultimately had to pass remedial legislation which essentially abandoned all efforts to determine whether those funds had actually been utilized as originally contemplated.
The moral of this story is that the best way to prevent fraud and waste in government programs of all types is to adopt carefully-conceived procedures for accountability and to have the program overseen by an organization with sufficient resources to carry out its prescribed functions. Although the Inspector General program created in 1978 was intended to quickly recognize weak fiscal controls in programs administered by our federal government, as discussed above even that program is not without weaknesses.
The good news is that despite continuous efforts by Republican to eliminate social welfare programs, well-established ones like Social Security, Medicare and Medicaid don’t die easily. Indeed, politicians often refer to the Social Security program as “the third rail of American politics”— touch it and you die. Similarly, even though House Republicans voted over 60 times to repeal the Affordable Care Act enacted during the Obama administration, by the time they finally won control of the government following Trump’s election in 2016, the ACA had become so entrenched that they were unable to muster the requisite votes to repeal it. That is even more true today than in 2017 because the number of Americans acquiring health insurance with monies provided by the ACA has grown from roughly 27 million to almost 50 million. Thus, even though President-elect Trump has stated he still wants to repeal the ACA, his efforts to do so will undoubtedly be met with widespread popular resistance.
Project 2025, which appears to be the roadmap that will guide the second Trump administration, calls for “drastic” cuts in the Medicaid Program to which the federal government annually contributes $33 billion. That program was begun in 1965 as a joint federal/state program to provide health insurance benefits for low income individuals not eligible to participate in the Medicare Program. With the adoption of the ACA in 2010, the Medicaid Program was greatly expanded to include a number of new health problems with the federal government assuming over 90% of the costs of the expanded benefits. Notwithstanding the continuing antipathy of Republican politicians against the ACA the number of states that have chosen to adopt the expansion of the Medicaid Program has grown from 26 to 40. Thus, this, the federal government’s third largest social welfare program, also appears to have become politically immune to spending cuts.
Another problem confronting the new Trump administration is that a strategy of cutting the budgets of programs that are inefficiently managed is not even the right approach. When the budgets of welfare programs are cut, those programs don’t become more efficient. Instead, they are forced to cut back on their capital expenditures in an effort to continue to provide funding to their existing beneficiaries. Every successful business manager knows that the best way to achieve greater efficiency and accountability is to invest in information technology which will not only enable fewer employees to service an agency’s existing (and potential future) clientele, but will also make it far easier to detect fraud and waste. The simple fact is that most governmental agencies, both state and federal, are hampered by antiquated computer systems which, in part, explains why they tend to be less efficient than privately owned companies that provide similar services.
It's important to understand that the Executive Branch of our federal government is operated by 15 separate departments and over 2,000 agencies. Indeed, every time a new problem area is discovered or a new technology is developed there is a tendency to establish a new agency to seek to understand and address how those developments might adversely impact the nation’s citizens. This raises the problem that the functions of many such agencies might overlap and in some cases might be working at cross purposes. Occasionally government agencies also outlive their usefulness. To address such “growing problems” roughly every 20 years the federal government undertakes to reorganize itself so it can operate in a more rational and efficient manner. These issues could clearly be what the incoming Trump administration is gearing up to address.
In this connection, Trump has tapped two highly successful entrepreneurs (Elon Musk and Vivek Ramaswamy) to serve as heads of an advisory group (dubbed the “Department of Government Efficiency” or DOGE) which will be dedicated to identifying ways to trim federal expenditures. The question is what will be DOGE’s modus operandi for achieving that goal.
Will this turn out to be just another effort to divert the public’s attention from the dysfunctional manner in which the federal government has been operating? Will DOGE concentrate on making individual agencies and departments more efficient by upgrading the technologies they employ and eliminating a number of jobs? Will DOGE recommend reorganizing and/or combining a number of federal departments and agencies to make them perform in a more coordinated and/or efficient manner?
One clue as to what may lie ahead is what is contained in Project 2025, the 900+ page roadmap prepared for the incoming Trump Administration by the Heritage Foundation with the help of a number of Trump’s advisors who will be serving in his new administration. That document contemplates the possibility of totally eliminating several entire departments and agencies of the federal government. Among those being recomended for extinction by Project 2025 include the following:
The Department of Education with 4,400 employees and an annual budget of $68 billion;
The Department of Homeland Security with 260,000 employees and an annual budget of $176 billion;
The Department of Housing and Urban Development with 9,442 employees and an annual budget of $73 billion;
The Environmental Protection Agency with 17,145 employees and an annual budget of $11 billion; and
The Veterans Administration with 377,805 employees and an annual budget of $369 billion.
It’s not clear whether the functions performed by these entities will be eliminated or simply taken over by the states. The problem with this proposal is that the functions performed by these agencies are necessary for the protection and well-being of the nation’s citizens and that the states are poorly equipped to take them over. This is the same problem that became painfully obvious when the Cares Act virtually doubled the amount of monies being disbursed by state agencies.
Equally important, establishing separate (and in many cases new) agencies in each of the nation’s 50 states hardly seems like a plan to achieve greater efficiency even assuming the states have the resources to shoulder the responsibilities which would be abandoned by the federal government.
Because of these problems, it appears that having the states take over the functions to be abandoned by the federal government was never intended to be a part of Project 2025’s plan. At best, Project 2025 seems to call for the complete elimination of those functions currently being performed by the targeted agencies and let the nation’s citizens fend for themselves in addressing the needs now being served by the agencies marked for extinction. In short, this proposal seems to call for “throwing the babies out with their bath water.”
My concern is that Trump may not be content to simply achieve incremental progress toward greater efficiency, but is looking to make wholesale changes in the way our federal government operates. With his affinity for building large and ornate structures and his admiration for those who have achieved great wealth it’s not difficult to conclude that Trump is being motivated by a desire to resurrect America’s Gilded Age.
That was the period when the nation was led by a cadre of industrial titans who built large rail systems, tall buildings, steel mills, and factories, all without government restrictions. It was also a period when workers’ efforts to organize were suppressed and America was rapidly becoming the earth’s most prosperous nation. Trump’s selection of Cabinet members and close advisers, none of whom are advocates for working class Americans, clearly seems consistent with such a plan. It shouldn’t be forgotten, however, that the Gilded Age ended in the Great Depression and trying to duplicate it could set our nation back 150 years.