ONE OF the little-told success stories of President Obama’s first term was the steady decline in improper payments by federal agencies. Specifically, this measure of mismanagement declined from $120.6 billion (3.5 cents of every dollar spent) in fiscal 2010 to $105.8 billion (2.7 cents per dollar spent) in fiscal 2013. “Improper payments,” by the government’s definition, include underpayments or misdirected ones; but 90 percent are overpayments, so we’re talking serious progress against waste and abuse here.
Or we were: Alas, the latest data confirm that improper payments resumed expanding in fiscal 2014, reaching $124.7 billion, just over 3 cents of every dollar spent, according to a newly released Government Accountability Office report.
Contrary to much political rhetoric, not even the total elimination of improper payments would cure the federal deficit, which topped $483 billion in fiscal 2014. Nor is it realistic to expect bookkeeping perfection from a $3.7 trillion-a-year operation (the fiscal 2015 estimate) such as the federal government. Still, improper payments are, by definition, indefensible, and they’ve totaled $1 trillion since fiscal 2003, the first year in which the GAO produced a government-wide estimate. That’s not chump change. The battle against them, therefore, is a battle to protect the legitimacy of active government itself.
This is especially true given the GAO’s finding that three-quarters of the improper payments come from just three programs — Medicare, Medicaid and the Earned Income Tax Credit — all of which are meant to help the elderly and the poor. Nearly 10 percent of Medicare’s $603 billion in outlays last year was improperly paid.
The error rate for the $65 billion EITC, an otherwise highly successful program to promote work and fight poverty among low-income households, was a shocking 27 percent. To be sure, the EITC is also plagued by underparticipation, because the same b yzantine eligibility rules that lead to overpayments and fraud also deter many needy people from claiming money. But the huge mismatch between who really needs EITC dollars and who gets them is a political gift to the EITC’s opponents that must be addressed.
As the GAO notes, much of the progress against improper payments prior to last year was the result of laws passed in 2010 and 2012 that beefed up reporting requirements and mandated waste-reduction planning at executive branch agencies. Another reform, enacted this year — removing Social Security numbers from Medicare cards to fight identity theft — is being implemented. Yet much remains to be done, including more thorough purges of dubious providers from Medicare’s list of payees and tighter standards for who can fill out and file tax returns claiming the EITC.
Everyone complains about waste, fraud and abuse, but it is remarkable how bureaucrats and special interests can come up with excuses not to carry out the managerial reforms necessary to eliminate them. The general interest does not have a lobby. It remains true, nevertheless, that every misspent dollar lining an undeserving pocket is a dollar not available for those who need help. That should be the starting point for discussion of this neglected but vital issue.