The critics say it can’t be done.
No sooner had Donald Trump asked Elon Musk and Vivek Ramaswamy to lead a Department of Government Efficiency (DOGE), the critics pounced. If you don’t touch Social Security, Medicare, and other entitlements, there is not much left, they claimed. And if you try to cut waste out of discretionary programs, you will hurt the people who depend on them.
Here is what the critics are missing. There is a great deal of waste in our entitlement programs. And by cutting out waste, we can actually make these programs work better for the people who depend on them.
Take Social Security. Last year the agency said it has identified 2 million beneficiaries who have been overpaid. It has sent them “clawback” letters, demanding Uncle Sam’s money back. In some cases, the claims go back several decades, and the amounts can be in excess of $300,000.
There are three especially bad things about these revelations. First, our government has wasted millions of dollars by sending out checks with the wrong amounts— money that in most cases will never be recovered. Second, when the government demands its money back it is often going after people who had no idea they were overpaid and who are living on a fixed income. Forcing a retiree to sell his house or cash out his IRA to pay a surprise bill from the government seems especially cruel in many cases.
Third, virtually no one on Social Security knows whether her check is the “right” amount. That means every beneficiary is at risk of receiving a clawback letter, and that creates a level of insecurity that is the opposite of the purpose of the Social Security system.
In addition to sending “demand” letters to people who are alive, Social Security also has a history of sending checks to people who are dead. For example, the agency’s Inspector General recently discovered as many as 217 dead Oregonians were receiving checks. In one case, a dead beneficiary received checks for 15 years.
While the agency overpays some people, it underpays others. According to the Office of Inspector General, more than 13,000 widows and widowers collectively have lost $130 million in Social Security benefits because of mistakes in claiming spousal benefits. More often than not, these mistakes are made because of bad advice from Social Security personnel.
The Social Security Administration is not alone in making financial mistakes. Other federal agencies are much worse. According to the General Accounting Office, the federal government made $236 billion in improper payments during 2023, including $175 billion in overpayments. The same agency estimates that the federal government loses $233 billion to $521 billion annually to fraud. The GAO also reported that during Covid the government sent 1.1 million checks totaling $1.4 billion to dead people.
So, what can be done?
E verification: government. It is not surprising that Social Security personnel make so many mistakes. The system has 2728 rules and hundreds of thousands of pages explaining the rules governing just 13 basic benefits. For decades we have been relying on humans to do what only a reliable computer program can do. And the agency doesn’t have one.
Fortunately, one exists. Professor Laurence Kotlikoff is the nation’s top authority on Social Security and his online calculator is by far the most accurate program there is, and it helps beneficiaries make the choices that maximize their benefits. It’s available to everyone for a reasonable fee.
Is there any reason why the federal government cannot lease this program, or buy it, or replicate it and make it available to every beneficiary for free? The government would save money by reducing overpayments and by hiring fewer error-prone human employees.
More generally, federal agencies should be sharing information electronically—across all entitlement programs. If one agency knows a beneficiary is dead, every other agency ought to know that as well.
E verification: beneficiaries. Project Unity is a 25-year-old nonprofit entity that serves the needs of several thousand people in ten Texas counties. As far as I know, it is the only organization in the country that operates as a one-stop-shop to determine eligibility for as many as 80 different welfare agencies with federal funding.
Without Project Unity, low-income families would have to jump through one set of hoops to see if they are eligible to enroll in Medicaid and to complete the enrollment. Another set of hoops would be needed to get federal food stamps. Yet another for TANF (cash welfare) benefits. Another for housing.
Since none of these agencies is electronically linked to the others, in principle a family faces as many as 80 different sign-up barriers to get the help they need.
What Project Unity is doing in Texas should be a universal service available to everyone at the bottom of the income ladder. The fact that it isn’t helps explain why roughly one in five eligible taxpayers forgoes the opportunity to apply for the Earned Income Tax Credit. More broadly, Americans forgo as much as $140 billion a year in social welfare benefits to which they are entitled.
In an ideal world, a beneficiary of federal funding should go through just one approval process—one that determines eligibility and completes enrollment for all welfare programs. At the same time, every agency should have electronic access to what every other agency is doing for the beneficiary, as well as access to IRS data and employment records.
Such a system would greatly reduce duplication, waste and fraud. And we don’t have to speculate. Something close to the ideal already exists – in Estonia.
For over two decades, Estonians have been living with a digital ID system that is a model for the world. The ID is connected to a network of 600 public services and a commercial sector of 2,400 businesses. Estonians receive a digital ID and an 11-digit code that verifies the person’s identity to access digital services and make transactions.
According to a government report, the ID system is saving the country an annual amount equal to 2 percent of the country’s GDP. If we did that in the U.S., the annual savings would be $554 billion.
Over ten years, the savings would be $5.5 trillion.
Consolidation and reform. In The Myth of American Inequality, former senator Phil Gramm and his colleaguesidentify more than 100 federal programs that spend money to help those in need. The cost of this spending averages$33,653 per person, per year for people in the bottom fifth of the income distribution, or $134,652 for a family of four.
Roughly speaking, we are spending four times as much on poor people—per person—as the amount the government considers a poverty level income. Yet the official poverty rate has barely changed since the war on poverty began.
Meanwhile, we are told that one in five Texas children experiences hunger. Low-income Dallas families are said to live in “medical deserts,” with little access to doctors.
When people enroll in Medicaid, there is a 40% increase in their visits to the ER. Yet at Parkland, Dallas’ safety-net hospital, the average in-and-out time is almost 6 hours. No wonder that Medicaid enrollees value enrollment as little as 20 cents on the dollar.
It doesn’t seem unreasonable to believe that we could eliminate poverty by spending half the $2.3 trillion we currently spend on means-tested programs.
The saving would equal more than $10 trillion over 10 years.
Don’t believe those who tell us we can’t save oodles of money by eliminating waste. The opportunities are virtually everywhere we look.
