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How $137 Billion Strangely Disappears

Veronique de Rugy
January 23rd, 2019
American Institute for Economic Research
Comments (26) Read by 2,894 people

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This report was originally published by Veronique de Rugy at the American Institute for Economic Research

In fiscal year 2018, $137 billion was paid “improperly” by the federal government, according to a recent report. That number sums all the improper payments by what the government calls high-priority programs. They are programs with improper-payments estimates exceeding $2 billion annually.

If it makes your head spin, it should.

Always the optimist, I have tried hard to find some good news in this year’s number. I have been tracking such improper payments for a while, and I am happy to report that, while they grew dramatically between their FY2013 level ($106 billion) and FY2015 ($137 billion), they haven’t gone up since.

Now that’s where the good news stops, I am afraid. In 2015, the $137 billion was spread over 15 programs. The $137 billion in improper payments in 2018 is spread over 12 programs. In other words, each program’s improper payments have grown.

Now, not all of these improper payments are the result of fraudulent activities. Some of them, which include overpayments as well as underpayments, might result from clerical error, from an innocent failure to confirm that a recipient is eligible to receive the amount of money that is disbursed, or from any violation of federal guidelines or rules.

While that may not sound as bad, these are still large-scale mistakes, errors that Uncle Sam continues making year after year in all impunity.

Interestingly, although not surprisingly, most of the government’s “high-error programs” are social welfare programs, which are fairly well-known for having low administrative costs in part because of poor oversight. The highest dollar amount of improper payments comes from Medicaid. The program registered $36.2 billion in improper payments, or almost 10 percent of the $370 billion paid out to beneficiaries in 2018 in total. Second-highest is Medicare’s fee-for-service program, with improper payments totaling $31.8 billion (or 8.12 percent of that program’s total payments). If you add the $15.6 billion in improper payments under Medicare Advantage (Part C)to the other two health care programs, you get 60 percent of all improper payments on the list.

Traditionally, the highest rate of improper payments comes from the Earned Income Tax Credit (EITC) program. Not this time. In 2018, the distinction goes to the Veterans Health Administration VA Community Care Program, with an error rate of 105 percent! Basically, all of this program’s $8 billion in payments were improper. The tremendous level in this program’s improper payments (and the program wasn’t on the list of high-error programs before) isn’t the result of a sudden increase in payments going to the wrong parties, or paid in the wrong amounts, or paid twice or more for the same service. Instead, it seems to be the result of changes made in what the VHA is counting as improper payments —  for instance, all the “transactions that did not follow acquisition regulations.” Nevertheless, such a stupendous error rate should make us wonder what’s going on.

The EITC is hardly off the hook, though. The $18.4 billion in improper EITC payments represents a substantial portion — 25.06 percent — of the EITC’s total 2018 spending of $73.6 billion. That’s right. A full quarter of the program’s payments were improper.

This high error rate is not new. In fact, the EITC is well-known for its high error rate. Ironically, the program is administered by the Internal Revenue Service, a government agency that isn’t known for its leniency toward taxpayers making reporting mistakes. Unfortunately, this fact has had no impact whatsoever on the unconditional support and praise the program receives from both the political left and right. In fact, not only has EITC funding expanded, from $65 billion in FY2015 to its current level, but this program is on everyone’s wish list for yet further expansion. Chris Edwards of the Cato Institute and I do not share this wish; indeed, we have written that the EITC should be terminated.

Also on the improper-payments list are programs with very low rates of error but massive dollar amounts of improper disbursements. One such program is Social Security’s Retirement, Survivors, and Disability Insurance (RSDI). While its improper-payment rate is only 0.68 percent, that’s still some $6.2 billion of payments gone wrong. This low rate is easily explained by the large overall amount of benefit payments made by this agency ($910 billion in 2018). However, just because a program has a low reported rate of error doesn’t mean that taxpayers shouldn’t be displeased.

Now, if I were the one measuring improper payments by government, I would include all payments made as a result of expansions in people’s eligibility to receive money from government programs. Many such programs distribute taxpayer funds to people under questionable — and in some cases, highly objectionable — circumstances. I am thinking here of programs such as the Supplemental Nutrition Assistance Program and the Social Security Disability program. Then, I would add in all the programs that have no place being funded at the federal level or with taxpayers’ dollars (corporate welfare, transportation, and education spending come to mind). Some of these programs are both inappropriately funded at the federal level and have expanded beyond the original intent of the program because of very questionable changes to eligibility standards. Needless to say, my list would be much bigger!

But while we can debate the merits of whether government should be involved in certain activities (like extending loans to small businesses or for green energy), policy makers at least should agree not to tolerate the high levels of improper payments currently made by many existing programs. The difficulty is that the government has grown so big that no one is accountable for improper payments. With a government so large, it is delusional to believe that there is any form of meaningful oversight going on, especially when no one seems to care at all. The best evidence for my gloomy conclusion is provided by this report, which lays out the numbers in ways easy to understand but will have no noticeable impact.

Year after year, I complain. And year after year, high rates of improper payments occur.

***

About the Author

AIER Senior Fellow Veronique de Rugy is also a Senior Research Fellow at the Mercatus Center at George Mason University and a nationally syndicated columnist. Her primary research interests include the US economy, the federal budget, homeland security, taxation, tax competition, and financial privacy.

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Author: Veronique de Rugy
Views: Read by 2,894 people
Date: January 23rd, 2019
Website: https://www.aier.org/

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26 Comments...

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  1. blinky says:

    They must be using Common Core math.

  2. Serenabit says:

    They could have given 137,000 American citizens $1,000,000 tax free each! At least that would have improved the local economies. And had they done that for every year just the past 10 years, that’s well over a million new millionaires.

  3. The Deplorable Renegade says:

    Send just 1% of that money my way. Think of the preps I could get with that…..

  4. Anonymous says:

    Be careful with this article. last time……
    Donald Rumsfeld announced 2.3 trillion missing funds.
    Next day. Supposed 9/11.
    Then like magic the Pentagon supposedly attacked. And just happens to hit EXACT accounting office that kept track of DOD funds. FBI gathered all external video of area.
    Very magical, exact office?

    I have worked in Pentagon. Bigger than some cities.
    Yet exact accounting office hit?
    Magic. Don’t you believe in magic?

    Go to YouTube.
    Search for: Rumsfeld on Pentagon Waste the Day Before 9/11

    Don’t you believe TeLIEvision?
    Up is down
    Down is up.
    Left is Right.
    Right is Left.

    Don’t you beLIEf?
    Proud of the media CULTure?

    And steel just melts from jet fuel.
    Engineers disagree. MANY MANY MANY.

    Lies Lies Lies. All lies.

    Video for you on YouTube:
    “Steven Jacobson Mind Control Nuero-Linguistic Programing”

    go to “Slavestorms” channel on youTube.
    Look up “PragerU” channel. Education.
    ——————————————————–
    Now lets see if this message censored like most?

  5. Anonymous says:

    Be careful with this article. last time……
    Donald Rumsfeld announced 2.3 trillion missing funds.
    Next day. Supposed 9/11.
    Then like magic the Pentagon supposedly attacked. And just happens to hit EXACT accounting office that kept track of DOD funds. FBI gathered all external video of area.
    Very magical, exact office?

    I have worked in Pentagon. Bigger than some cities.
    Yet exact accounting office hit?
    Magic. Don’t you believe in magic?

    Go to YouTube.
    Search for: Rumsfeld on Pentagon Waste the Day Before 9/11

    Don’t you believe TeLIEvision?
    Up is down
    Down is up.
    Left is Right.
    Right is Left.

    Don’t you beLIEf?
    Proud of the media CULTure?

    And steel just melts from jet fuel.
    Engineers disagree. MANY MANY MANY.

    Lies Lies Lies. All lies.

    Video for you on YouTube:
    “Steven Jacobson Mind Control Nuero-Linguistic Programing”

    go to “Slavestorms” channel on youTube.
    Look up “PragerU” channel. Education.
    ——————————————————–
    Now lets see if this message censored like most?
    We shall see, or not?

  6. Eisenkreutz says:

    No matter how much you affect to be stoic you can’t hide from your nightmares. I have vomited from fear before and I have broken down into tears from fear. I wake up screaming in a cold sweat infrequently. I have periods of lowered sex drive and appetite. I am paranoid and assume the worst about people. So yeah PTSD is real and it sucks.

    But.

    400 years of my ancestors fought for my right to own guns. You little motherfucking commies who hate capitalism and hate freedom need to not be in America. I won’t apologize for being a white man. Rot in hell.

  7. Nailbanger says:

    And then people wonder why i just refuse to participate,,
    Who is John Galt!

  8. Bill says:

    This 137 billion is a drop in the bucket, you can see several youtube videos where Catherine Austin Fitts, reveals there is more than 40 trillion dollars – with a T, missing, based a series of recent independent audits, which is almost 292 times the size of this particular ‘improper accounting’. The better question to ask now is ‘Where is the money now?’. Of course it won’t be found; the question is little more than rhetorical. An official audit, if that’s what they want to call it, was conducted a some years ago on how the fed. gov’t manages it budgets and finances. It was found to have more than 300 different accounting systems and methods, rendering basically the budgets and spending of all dep’t.s, agencies, bureaus, etc, unable to be to reconciled or coordinated with other parts in the gov’t. In other words, in reality there is no accounting, no one really knows what is going on. Therefore, one could also assume there are persons and entities in officialdom organized to take advantage of this chaos. Not only is there incomprehensible sums of money missing, but likely much of it is being used against the interests of the people of this country. The situation is hopeless, it will not be fixed. Ultimately, the chaos will engulf the citizens of this country, only to play out into GOD knows what, the magnitude and trouble which cannot be fully understood at this time. The only reasonable and rational action is to SECEDE NOW !!!

  9. Concerned Republican says:

    Who oversees all three branches of the federal government? Hmm, how could that individual not have known anything about these funds and exactly where they ended up? Maybe that $137B could have been used to pay for the border wall that Mexico is never going to pay for. And repairing and upgrading the infrastructure too. They all have their dirty fingers in the coffers. Trump included.

  10. Asshat says:

    Israel has the $. Think about it.

  11. The Q says:

    ….There’s our WALL…..and then some.

  12. cranerigger says:

    4.16% of the 137 Billion that is wasted by our government in over-payments would yield the 5.7 Billion for a useful wall. The 25% of the Fed. Govt. that is shut down could go back to work, assuming Chucky Shoomer & Nazi Polowzy are tired of throwing their tantrum. At least 5.7 Billion would not be wasted.

  13. Boy, I can’t wait till federal payments to the SNAP/welfare run out in the last week of February. Should be fun!

  14. bb in GA says:

    I’m not thrilled by any waste, fraud, or corruption but get a grip….

    The Fed Gov spends over 4 Trillion dollars per year.

    That would be more than $4000 Billion.

    Misspent % = (137/4000) x 100% = 3.4%

    I sure the real number that is misspent is much higher and I only wish this was the actual number.

    <bb

  15. Mike says:

    No one in Congress is interested in cleaning this up. They hope for more votes to keep the Scam running. All fine for them until the Amusement rides stop turning.

  16. Beaumont 2.0 says:

    I guess, this was intended as an expose, as though the info had been doxxed, foia’ed, or sued out of them.

    “strangely” “disappeared”

    But, they have freely admitted to all of these mistakes and published them, voluntarily.

    “Exclusive: White House preparing draft national emergency order, has identified $7 billion for wall”
    cnn.com/2019/01/24/politics/trump-border-wall-emergency-draft/index.html

    If your tax refund or welfare check was too much…
    Look, they found money.

    There’s no mystique, afterall.

  17. LonnieL says:

    Only about 20% of Obamas 875 Billion dollar stimulus money is accounted for. Where the hell did that money go?!!

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