10 Big Ways the Government May Be Wasting Taxpayer Money

November 1, 2014 by 247alex

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Source: thinkstock.com
Free high-end gym memberships for diplomats, a study that watched grass grow, and Swedish massages for rabbits are but some of the ways the government wastes taxpayer money, according to a new report by Senator Tom Coburn (R-Okla.).

In his annual report, Dr. Coburn scrutinizes federal government spending, looking for indications of waste in various forms, including failed initiatives, odd research, and missed savings opportunities. This year, Dr. Coburn’s report lists 10 items that it asserts each cost taxpayers $468 million dollars. Based on Dr. Coburn’s 2014 Wastebook, here are 10 big ways the federal government may be wasting taxpayer money.

Click here to see the 10 ways the government may be wasting taxpayer’s money

In a phone call with 24/7 Wall St., Dr. Coburn discussed specific details of many of the most expensive cases in the report. In this year’s Wastebook, the Department of Defense is responsible for three of the 10 most expensive cases. Dr. Coburn chastised the department, noting, “Their procurement systems are totally messed up. They can’t buy anything on-time or on-budget.” Dr.Coburn was also critical of his own party’s treatment of defense spending. “Republicans have a blind eye to defense. They’ll tolerate a lot of waste.”

The Department of Defense was hardly the only government body Dr. Coburn criticized. The report argues that many agencies that handle key elements of the nation’s social safety net also exhibited waste. Medicare and Medicaid policies accounted for two of the three largest sources of waste, in dollar terms, in the 2014 report. Fraud in food stamp use, too, was singled out by the Senator as a source of waste. The Office of Management and Budget (OMB) indeed considers many of these programs to be “high-error programs,” meaning that levels of improper payments are high.

In some instances, Dr. Coburn was critical of was critical of how federal programs have been managed. Notably, he called the Department of Veterans Affairs’ treatment of sleep apnea disability claims “a management position the VA has taken that is not based on sound medical science.”

However, not all organizations have agreed with the Senator’s conclusions about their work. The National Science Foundation (NSF), whose funding of various research initiatives is heavily-scrutinized in the 2014 Wastebook, in particular takes issues with many of his characterizations. In an email to 24/7 Wall St., Dana Topousis, spokesperson for the NSF, said, “The National Science Foundation stands by its rigorous merit review process.”

Topousis added that, most NSF proposals are independently reviewed by no fewer than three independent experts neither employed at the NSF nor at a research institution involved in the proposal. Finally, Topousis noted that people “shouldn’t get caught up with the quirky names that some may attach to NSF awards.” One successful NSF-funded program Topousis cited was for a Stanford research project called BackRub. That project led to the founding of one of the world’s largest companies, Google, Inc.

Based on Senator Tom Coburn’ 2014 Wastebook, 24/7 Wall St. reviewed the 10 big ways the government may be wasting taxpayer money. Levels of purported waste are in some instances estimates and may change as federal policies are changed.

10. Department of Defense scraps 16 planes for $32,000
> Cost: $468 million

In 2008, the Department of Defense spent roughly $468 million on a fleet of 20 planes for the Afghan Air Force. Sixteen of these planes were later scrapped, with proceeds from the scrapping totalling just $32,000. John F. Sopko, Special Inspector General for Afghanistan Reconstruction, noted that he saw 16 of the 20 planes sitting unused at an airport tarmac in Kabul in 2013. In a letter to the Secretary of the Air Force, Sopko voiced several concerns about how the planes were disposed of and what the fate of the four remaining planes would be. As of July, the Office of the Special Inspector General for Afghanistan Reconstruction had 318 ongoing investigations into contract fraud, public corruption, and theft, among other issues.

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9. Missile defense system misses the target
> Cost: $998 million

The United States has spent billions on the Ground-based Midcourse Defense (GMD) system intended to intercept incoming enemy missiles. But despite the billions spent and years of development, the program has just “a 30% success rate in tests that [also] fail to replicate a real world scenario,” according to Dr. Coburn’s Wastebook. In a 2013 report about the program, the Government Accountability Office (GAO) found that the Missile Defense Agency has “long-standing acquisition management challenges that hamper the agency’s ability to make wise investment choices … within budget and time constraints.” A 2012 report from the National Research Council also noted the limited ability of the GMD program, as then structured, to defend the U.S.

8. Pentagon spending $1 billion to destroy $16 billion in ammunition
> Cost: $1.0billion

The Pentagon currently plans to spend $1 billion — which the Coburn report notes is equal to the salary of more than 54,000 Army privates — to destroy $16 billion worth of ammunition. A recent GAO study cited by Dr. Coburn’s report found that this amounted to 39% of the Army’s total ammunitions inventory. However, the GAO study also noted examples in which the Army, Navy, and Marine Corps reclaimed ammunition from stockpiles of weapons to be disposed. The Department of Defense has noted that some of the ammunition may be outdated or banned by international treaties.

ALSO READ: States Slashing School Spending

7. Exploding claims of sleep apnea at the VA
> Cost: $1.2 billion

The U.S. Department of Veterans Affairs (VA) pays out benefits to disabled Veterans based on the extent of their disability. The VA rates disability on a scale of 0% to 100%, with veterans asserting they have sleep apnea automatically awarded a 50% disability. Dr. Coburn criticized this VA policy as “not based on sound medical science.” He added that, “it’s now become like a game to come home and apply for sleep apnea.” In reporting on sleep apnea for Military.com, Tom Philpott — whose work is cited in the Coburn report — wrote, “A 50[%] rating is a key threshold, making retirees eligible to receive both full retirement and VA disability pay.”

6. Five decades of controversy for the Job Corps
> Cost: $1.7 billion

The Job Corps is a Department of Labor program designed to help young workers build workplace skills. Participants in the program can earn their GED or a high school diploma and can also pursue college preparation or job training. According to Dr. Coburn’s Wastebook, however, the program is extremely expensive, costing about $45,000 per student per year. Additionally, just 59% of participants complete their training, and those who do not complete it have no obligation to repay taxpayers. Although the program has its critics, it also has defenders. Representative Rosa DeLauro (D-Connecticut) recently said that, due to the Job Corps, “we have more future EMTs, chefs, nurses, carpenters, small businesswomen, and workers all over the country, ready to compete in the 21st century economy.”

5. Food stamp fraud
> Cost: $3.0 billion (tied-4th highest)

The Supplemental Nutrition Assistance Program (SNAP), formerly known as the federal Food Stamp Program, helps families afford the food they need. However, the program is also one of 13 identified by the OMB as a “high-error program” due to its high level of improper payments. According to PaymentAccuracy.gov, SNAP is projected to have an improper payments rate of 3.8%, totalling $3.0billion, in 2014. Dr. Coburn told 24/7 Wall St. that going to a debit-type card for SNAP benefits helped curtail some amounts of fraud. However, “it’s used to run all sorts of dark operations,” Coburn also asserted. “In other words, people sell their card with their ID to somebody else for cash.” A 2013 study from the U.S. Department of Agriculture found that, from 2009 through 2011, 1.3% of all SNAP benefits were trafficked — or sold for cash — totalling some $858 million per year.

However, some groups have defended SNAP’s casehandling. This includes the Center of Budget Policies and Priorities, which says that many errors in payments are actually underpayments, and that SNAP “has long had one of the most rigorous systems of any public benefit program to ensure payment accuracy.”

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4. Golf club testing and elementary school experiments on the International Space Station
> Cost: $3.0 billion (tied-4th highest)

The International Space Station (ISS) is described by Coburn’s report as “one of the greatest achievements in manned spaceflight.” However, this does not preclude it from being extremely expensive. The report argues that projects designed by elementary and high school students for the ISS are probably not justified by their costs. The report calculates that, based on the operating cost of the ISS, each hour of research costs $1.5 million. Dr. Coburn told 24/7 Wall St., that there is nothing at all wrong with trying to boost interest in science, technology, engineering, and math education. But, he added, “we ought to have some judgement about what we are doing and why.” NASA is included in Coburn’s Wastebook several times, including for sponsoring a $15,000 challenge to find the tomb of Genghis Khan, as well as for its participation in Comic-Con.

3. States taking advantage of a Medicaid provider tax loophole
> Cost: $4.0 billion

Coburn’s report estimates that one Medicaid tax loophole costs the federal government roughly $4 billion a year. Under this loophole, many states impose taxes “on the very same health care providers who are paid by the Medicaid program, [then] increasing payments to those providers by the same amount,” according to a 2010 report from The National Commission on Fiscal Policy and Reform. These added payments then count as spending on Medicaid in determining the amount of a state’s spending on Medicaid that the federal government must match. Although the commission was composed of representatives and senators from both major parties, Congress has yet to close the loophole. For fiscal 2015, total federal spending on Medicaid is expected to be over $331 billion.

ALSO READ: The 10 Most Livable Countries

2. Identity thieves file bogus tax returns
> Cost: $4.2 billion (at least)

People filing tax returns under other peoples’ names represent a major problem for the federal government. Based on a 2012 report from the Treasury Inspector General for Tax Administration, Dr. Coburn’s Wastebook estimates that such fraud could cost Americans as much as $4.2 billion per year. This is based on the report’s claim that the Treasury could issue roughly $21 billion in refunds to fraudsters over five years. According to a GAO study also cited by Dr. Coburn’s report, identity thieves were able to successfully claim roughly $5.2 billion in fraudulent refunds from some 900,000 returns in the latest tax season. The IRS was able to prevent or recover even more money from being fraudulently claimed, amounting to $24.2 billion in refunds on about 4.1 million tax returns.

Dr. Coburn’s report notes, “While the IRS is increasing efforts to address identity theft and stolen refunds, much remains to be accomplished.” In fact, the Earned Income Tax Credit (EITC) is considered by OMB to be one of 13 “high-error programs,” with more than 24% of payments deemed improper, the most of any federal program. However, this does not mean that tax credits are not useful. Writing in Democracy, a progressive policy journal, Jason Furman, chairman of the President’s Council of Economic Advisers, states, “The EITC and partially refundable child tax credit have dramatically altered the impact of the tax code on poverty.”

1. Medicare practice leads to higher costs
> Cost: $5.0 billion

One particular Medicare practice is the largest source of waste, in dollar terms, identified by the 2014 Wastebook. Coburn’s report cites a June study published by Health Affairs, a health policy journal. In the report, the authors note that a relatively small change to Medicare Part D, which offers prescription drug coverage to Medicare recipients, would save the government money — $5 billion as of 2009. Currently, the study says, Medicare randomly assigns qualified recipients “to a stand-alone Part D plan whose premium is equal to or below the average premium for the basic Part D benefit in the region.” The report states that an algorithm that matches new enrollees to plans that meet their prescription needs would be enough to generate the $5 billion in savings.

Dr. Yuting Zhang, Associate Professor at the University of Pittsburgh and one of the authors of the Health Affairs study, discussed her findings with 24/7 Wall St. “We figured if we could design a more intelligent reassignment based on their medication use, prior-year, then that might be more efficient,” Dr. Zhang said. She then reiterated her team’s finding that “the government could potentially save $5 billion just from this simple reassignment.”