Rounding Errors in the White House



Tags: billion, federal, payments, percent, report, cutting, budget, spending, fiscal, government

Throughout 2011, the Obama Administration claimed a number of successes at cutting the ubiquitous "fraud, waste and abuse" in the federal budget. According to the White House's website, nearly $8.5 billion was saved in 2011, including ending the production of commemorative coins ($50 million annually) and recovery of defrauded funds in health care. Other measures will save an expected $3 billion-plus by 2015, and a separate $4 billion over the next five years.

Unfortunately for Americans, the grand total of these "successes" is equivalent to less than .0028 percent of spending in Fiscal Year 2011. It is approximately .0077 percent of last year's deficit. Most importantly, it is not nearly enough to even make a dent in our massive deficits, and these puny efforts ignore the plethora of "low-hanging fruit" that could be cut out of $300 billion-plus that make up fraud, waste and abuse in the federal government. While cutting these monies would not balance the budget, nor prevent the oncoming fiscal cliff from arriving in spectacular fashion, eliminating them is a good step in the right direction.

In 2009, then-Chairman of the Recovery and Transparency Board Earl Devaney testied that as much as 7 percent of federal spending (which is equal to $252 billion in FY2011) is lost to fraud and waste. Related, a 2009 CBS report showed $60 billion in dollars lost to fraud came from Medicare. An internal Department of Defense report in January 2011 showed-according to Sen. Bernie Sanders (I-VT)-that $285 billion in payments were given to contractors who were committing fraud while receiving the payments, from 2007 through 2009. 

Over in the White House, CNN reports that incoming chief of staff and outgoing OMB director Jack Lew stated the federal government made improper payments worth $116 billion in FY2011. While this is down from $125 billion in FY2010 (which was itself up from 2009), it means 3.22 percent of federal spending was simply irresponsibly, if presumably well-intended...and this is before the caveats from the OMB are considered. $48 billion of the 2010 improper payments were estimated to come from Medicare, and over $70 billion from Medicare and Medicaid combined.

Beyond the traditional "fraud, waste, abuse" mantra, duplication of programs is all too common. The Government Accountability Office published a report in 2011 on the duplication of federal programs (see the report here) that could equal "tens of billions" in annual savings if the duplication ended. 

Again, cutting fraud, waste and abuse won't balance the budget. It won't stop a fiscal collapse of our nation. However, was it not for the hundreds of billions of dollars in annual fraud and waste, our national debt would likely be closer to $13 trillion instead of $15 trillion and interest payments could have been around $60 billion less in FY2011. Suffice to say that in claiming a few billion in easy savings is a success is to entirely mislead the American people, and especially the young Americans (AKA the Debt-Paying Generation) who helped bring President Obama into office. 

The writer is the pseudonym of a congressional staffer who has contributed to a number of publications with ideas regarding public policy. His work reflects his own views and not necessarily those of his employer. Contact: Anthony Randazzo, director of economic research, at anthony.randazzo@reason.org

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