The Corner

Wasteful Federal Spending: $125 Billion in Improper Payments Is Just the Beginning

There is a lot of waste in the federal government: It is documented, Congress holds hearings about it, and each year the GAO issues a list of programs that are the most at risk for it. But very little changes — in fact, the waste might be getting worse. Take a look at the trend in  improper payments in the funding of federal programs and activities. As this chart shows, since the implementation of the Improper Payments Information Act of 2002 (the main objective of which was to enhance the accuracy and integrity of federal payments), reported wasteful payments have increased, which could mean that the amount of waste in the federal government has exploded or simply that federal reviewers have become more adept at documenting it. Either way, overt waste in the federal government represents a significant problem.

As we see, in FY 2010, according to the Financial Statement of the United States, $ 2.3 billion in outlays were reviewed by federal-executive-branch entities for improper payments; 5.5 percent of these payments, or $125.4 billion, were found to be improper. That’s a significant increase over the FY 2002 level.

Of course, that waste pales in comparison to the waste that exists in current congressional spending patterns, and in the economic damage caused by the misallocation of capital and the creation of perverse incentives. Federal spending on functions that should be left to the states (e.g., education), federal spending on functions that should be left to the private sector (e.g., Amtrak, air-traffic control), and federal spending on things that government has no business doing in the first place (e.g., the stimulus bill’s shovel-ready projects) — all of that is waste, too. That’s the case I made to Congress last Thursday during my testimony before the House Committee on Oversight and Government Reform.

What does the question of the proper role of the federal government have to do with oversight? A lot, actually. When lawmakers are busy running state, local, and private affairs, they have less time to focus on critical national issues. Also, they have less time to conduct proper oversight of federal programs.

The bottom line is that the federal government cannot and should not be the solution to every one of our problems. There are things that only the federal government can do, but when the federal government gets involved where it shouldn’t be, it wastes capital, time, and taxpayers’ money. Shrinking the size of the federal government would reduce wasteful spending dramatically, and shrinking the federal government will make oversight easier and more effective.

The whole hearing is here.

Veronique de Rugy — Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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