I & I Editorial BoardEvery day, it seems, brings a new story of government fraud, which raises two questions: Why is fraud so rampant? And why is so little being done to combat it?
An answer to both can be found in the more than 200 programs that the federal government pays for, but the states run. These are programs that spend a total of $1.2 trillion a year, and despite their openness to fraud, the government does little to combat it.
The money to fund these programs passes through several hands, including state and local government agencies, private contractors, and so on, before reaching a beneficiary. And “every level added to the flow of funds creates a new entry point for fraud risks,” according to a new report from the Government Accountability Office.
So what systems are in place to detect and prevent fraud in these programs? Almost none.
The GAO looked at 20 of the biggest programs — which includes Medicaid, food stamps, special education grants, infrastructure projects, and others — that account for nearly 90% of that $1.2 trillion. It found that only five have anti-fraud detection measures in place. Ten of them — including biggies like Medicaid, Temporary Assistance for Needy Families, and SNAP — had only partial measures. The others have even less.
Worse, legislation requiring agencies to report on their anti-fraud measures lapsed in 2020.
So, it’s not surprising that audits done from 2020 through 2024 found “severe and persistent findings” of fraud risks in 18 of those 20 programs.
As our good friend Mark Tapscott notes at The Washington Stand, this is the ”latest of hundreds of GAO reports identifying hundreds of billions of federal tax dollars lost to waste, fraud, and corruption.”
Trump has been targeting fraud and waste this term, first with DOGE and now his White House Anti-Fraud Task Force, headed by Vice President J.D. Vance. Just last week, the administration withheld more than $1 billion in Medicaid funds intended for California and Minnesota over concerns about widespread fraud in those states.
That’s a start. Now Congress needs to step up and reinstate the fraud reporting requirement that it let lapse. “With this information, Congress would be better positioned to identify gaps in agencies’ fraud risk management practices, benchmark progress over time, and drive accountability,” the GAO notes.
But there’s another option that nobody mentions yet would do much, much more to permanently combat fraud. Stop sending taxpayer money to the states altogether.
It makes no sense to have taxpayers send their hard-earned dollars to Washington, then have those same dollars sent back to their states in the form of program grants, with countless middlemen taking their cuts along the way, legally and illegally.
See also:
“The Fraud Industry Is Thriving, And Guess Who’s Happy About It“
“Want To Eliminate Fraud? Cut The Federal Government By Two-Thirds“
“For Today’s Democrats, Fraud Is A Feature, Not A Bug“
The federal government is ill-equipped to keep track of how $1.2 trillion is being dispersed through a vast web of state agencies and private companies.
And states have little incentive to combat fraud in these programs. Why should they? It’s not their money they’re trying to protect. If anything, this kind of fraud is good for state politicians. As we saw in Minnesota, it brings lots of money in, and every year they can push for more federal funds by claiming the need is greater than ever.
So, what would happen if the federal money pipeline was cut? First, federal taxes could be reduced by $1.2 trillion a year — which means less money leaving the states to begin with.
Second, states that want generous benefit programs would have to raise their own taxes, making politicians more directly accountable both to taxpayers and political opponents for how that money is spent.
Of course, this kind of bold change is a pipe dream. No Republican politician would ever dare propose such a thing, and Democrats, as we’ve pointed out in this space, depend on fraud for their livelihoods. (See: “The Fraud Industry Is Thriving, And Guess Who’s Happy About It.”)
Which means that, no matter how many reports the GAO publishes, or how much politicians wring their hands, and no matter how many temporary task forces are set up, the waste and fraud will continue.
— Written by the I&I Editorial Board
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