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Nikrad: Treasury Identifies Billions in Waste

On Jan. 17, the Department of the Treasury came out with its year-end report for fiscal 2012. One of the biggest highlights of the report was the Government Accountability Office’s estimate that $108 billion was lost to improper payments by the federal government.

This number is both good and bad. On the one hand, $108 billion could buy 366,000 Ferraris. On the other, as the report notes, this means the federal government has improved by only about 1 percent in its oversight since 2009.

As Congress continues to debate whether to address America’s coming fiscal crisis, one thing is clear: Improper payments and other wastes of taxpayer dollars are unacceptable. While philosophical and political disagreements prevent Congress from cutting certain programs, all Americans can agree dollars spent should go where the law dictates and nowhere else. While it is difficult to calculate the total amount spent inefficiently in the federal budget, the rough estimate below shows this part of the budget dwarfs spending on almost all existing government programs.

First, while the Treasury report reveals improper payments totaled $108 billion, only about 64 percent of federal spending was able to be examined by the GAO. As such, the amount lost to improper payments could easily total more than $160 billion.

Second, the GAO has released two of its three audits on duplication in the federal government. While the agency has not defined just how much this spending costs the taxpayers, Sen. Tom Coburn, R-Okla., has estimated the cost to be $100 billion in each report thus far. If we assume the third report — due out in February — has the same amount of duplication, this means at least $300 billion lost to duplicated programs.

Third, there is simple waste and fraud. Much of this can be found in the Department of Defense, which is consistently listed as a top concern for fraud by the GAO. As much as $60 billion was estimated to have been lost in Iraq and Afghanistan as of August 2011, and Sen. Bernard Sanders, I-Vt., specified $1.1 trillion over a decade that went to 37 top defense contractors who were found guilty of defrauding the federal government. Forbes has outlined $100 billion in weapons programs that simply “didn’t work out.”

Last year, Coburn’s office found as much as $700 billion may simply be sitting in never-used federal grant funds. In examining one-tenth of the total, his office found funds going as far back as the Atlanta Olympics in 1996.

There is no way to tell exactly how much money is lost to fraud, waste, abuse, duplication and simple stupidity in the federal government. However, based on the above calculations, it is not unreasonable to estimate that anywhere from $400 billion to $450 billion is lost in improper payments plus duplication. Add in fraud and waste plus unused grant funds, and this estimate rises significantly. This does not include other spending that Coburn highlighted in his book, “The Debt Bomb,” where he explained that as much as one-third of federal spending is lost to inefficiencies.

No business would allow this much of its budget to be wasted. Sadly, this is business as usual in Washington, and solutions are tough to come by.

According to the Treasury report, high-risk areas for improper payments include food stamps, Pell Grants, unemployment insurance, Medicaid and Medicare fee-for-service. Additionally, eliminating redundancy and fraud in the Department of Defense would save billions without risking national security.

If the government can’t effectively police itself, how can the American people promote fiscal responsibility? The simplest solutions are often best: If the programs are not able to be policed, then they should be eliminated or downsized.

Kavon Nikrad is the founder and editor-in-chief of the campaign and elections website and a 2011-2012 policy fellow at the Humphrey School of Public Affairs at the University of Minnesota.

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