Taking a serious look at the search for waste and fraud

Economic columnist Veronique de Rugy recently took members of the Trump administration to task in these pages for thinking that they could steer the American economy with tariffs, subsidies, and industrial policy — things that are a na th e ma to her libertarian sensibilities.

One paragraph caught my attention in describing their folly:

“The DOGE experience should have been a clue. Elon Musk, our generation's most incredible innovator, arrived with genuine urgency and a mandate to cut$2 trillion in waste. He failed because this government isn't like one of his private companies. Musk faced a motivated government apparatus ready to resist with armies of lawyers, lobbyists, contractors and congressional allies whose livelihoods depend on the status quo.”

The word that caught my eye in the paragraph above was “waste.” One could read that paragraph and assume there was $2 trillion in budgetary waste just waiting for Musk and his DOGE hotshots to find, but that it was too heavily defended by the “deep state.”

I will not argue that there is not fat in the federal budget. Of course there is. Finding it and removing it is partially the job of federal agencies (inspectors general, the General Accounting Office) and partially the job of Congress (oversight).

However, most of the federal budget (Social Security, Medicare, Medicaid, the interest on the debt and other “mandatory” programs) was off limits to DOGE. And that’s where the real money is.$2 trillion in waste? Nope.

Everyone should understand that one person’s “waste” is another person’s vital program. These are philosophical and political arguments and are settled (or not) in a debate between the parties.

Take USAID. While the legality of its closure is still in the courts, the relatively small amount of taxpayer dollars expended by the aid agency are either a vital foreign policy tool and a source of soft power or it is money down a rathole that creates dependencies, holds back development, and needs to be replaced with market-driven policies. Congress decided on the former, DOGE on the latter.

The Constitution says Congress decides.

The GAO identifies duplication and other reforms that could save tens of billions each year that can be counted as “waste,” but that is not where the real money is.

It might be more useful to focus on waste’s cousin, fraud (you know, “fraud, waste and abuse”). Fraud is basically Americans stealing from other Americans, whether it is false Medicare claims, tax avoidance or overbilling by contractors.

The GAO estimates that the federal government loses between $231 billion and $521 billion a year (the higher number is from periods such as the pandemic when the emphasis was getting money out the door with less oversight because the priority was speed and propping up the economy). The government claws back just a small fraction of that. Most of that is improper payments.

More damaging is tax avoidance, primarily because of under-reporting of income as opposed to clever accounting. That comes to just over $600 billion annually.

Since the Trump administration took office, some 26,000 IRS employees have quit, taken buyouts or been fired. The Yale Budget Lab estimates that the loss of personnel has meant around $860 billion in uncollected taxes.

Meanwhile, the president began his term by firing 17 Inspectors general and the positions remain vacant. The website that housed inspector general reports on how the government might be more efficient is down because the White House has withheld the funds.

At the Department of Justice, hundreds of investigations into fraud have been dropped to focus on immigration cases.

If you didn’t know better, you’d think that someone didn’t want a bunch of IGs and lawyers looking over their shoulders.

• Keith Peterson, of Lake Barrington, served 29 years as a press and cultural officer for the United States Information Agency and Department of State. He was chief editorial writer of the Daily Herald 1984-86. His book “American Dreams: The Story of the Cyprus Fulbright Commission” is available from Amazon.com.