Tech billionaire Elon Musk, who spearheads the government efficiency department under the administration of President Donald Trump, recently brought up the discussion of cost-saving in Social Security during a Fox Business episode. Speaking with Larry Kudlow, the former Trump economic advisor, he referenced a Government Accountability Office estimate from 2024 stating that federal government fraud accounts for a ‘half a trillion dollars’. Highlighting the vast wastage linked to entitlements, Musk suggested studying this area as a prime focus for fraud reduction. Musk’s comments regarding the ‘elimination’ of these entitlements sparked concern among Democratic opponents of Trump and Musk.
Karoline Leavitt, Trump’s White House Press Secretary, reassured in a press briefing on March 11 that Musk was addressing the issue of curbing wastage, fraud, and abuse within Social Security, Medicaid and Medicare. Musk assured that Trump’s commitment is to safeguard these benefits. At a Tesla promotion event at the White House, Musk faced a query on the safeguarding of Social Security benefits. His response reiterated cautious commitment towards maintaining these benefits, and the identification of areas of fraud and wastage as key to preserving these programs.
The terms ‘fraud’ and ‘waste’ describe two different subjects: ‘waste’ usually implies negligence, and ‘fraud’ implies illicit activities. Musk mentioned a report by the Government Accountability Office—an apolitical congressional auditing arm that scrutinizes federal expenses—that predicted annual fraudulent payments across government to fall between $233 billion and $521 billion, considering the whole government, inclusive of pandemic-related aid programs which experience unprecedented rates of fraud.
Musk spoke about his aim of reducing the fraudulent wastage, which can assist him in truncating around $1 trillion of the budget. His estimate of fraud seems to incline towards the upper limit set by the GAO. What then do we know about the total fraud at a government level? The Government Accountability Office, operating under President Joe Biden, produced an initial, comprehensive estimate of federal dollars lost to fraud.
Their estimate—which spanned the data from 2018-2022, and was based on reports from agency inspector generals and reports of fraud submitted to the Office of Management and Budget—showed a likely fraud loss of between $233 billion and $521 billion annually. Musk quoted the upper limit of half a trillion. The GAO estimate comprised not only definitive legal fraud findings but also estimates from individual agency fraud investigations. These projected losses represent about 3% to 7% of average federal outlays.
Federal experts rebuke that the comprehensive analysis found in governmental reports should be considered. It may be possible that fraud accounts for about 5% of the annual federal budget, with some programs having error-induced payment rates above 10%. However, the term ‘improper payments’ does not equate to fraud—it includes circumstances where adequate documentation is missing. ‘Regardless of the exact figure, the absolute quantity of fraud is staggering,’ the discussion on fraud concludes.
Fraud and wastage, although separate concepts, were merged, missing out on the fact that the cases of fraud during the COVID-19 era likely inflated the government’s estimation. As noted in the report, the Government Accountability Office suggested that the range is an indication of the doubt in fraud estimates and variance in risk environments from 2018 to 2022. So, what insight do we have into Social Security fraud?
In the White House press briefing on March 11, a reference was made to an inspector general report from the Social Security Administration that reported more than $70 billion of fraudulent transactions in that program alone. But there was no conclusion regarding over $70 billion in Social Security ‘fraud’; rather it was attested that the program delivered nearly $71.8 billion in ‘improper payments’ from 2015 to 2022, which accounted for less than 1% of total payments.
On the Fox Business channel, Musk pointed out a ‘massive amount of fraud’ with individuals falsifying Social Security numbers for availing a spectrum of government benefits, including health care, Social Security, and unemployment support. The inspector general’s exposure of improper payouts was most often overpayments, with occasional underpayments. Instances like beneficiaries withholding necessary info or administration not updating records were the common issues identified by the inspector general report. However, these are not necessarily indicative of criminal intent.
‘Improper payments will persist as an issue in the future without, enhanced data access, systems modernization, automation, and policy or legislation changes,’ stated the report. The inspector general of the Social Security Administration found that $298 million were disbursed post-death to around 24,000 beneficiaries from 1998 to 2019. The beneficiaries under suspended payment status continued to receive payments due to the non-adherence of technicians to rules or complete search of all death records.
The report did not pinpoint specific fraud cases but delivered death information to the Office of Investigations. Just this year, the culprits have been charged or punished for fraudulently cashing checks sent to deceased beneficiaries, Social Security benefits identity theft, and the pilferage of Social Security payouts meant for children.
Musk stated in the interview that many excellent audits were conducted at the federal level, but there was a lack of consistent implementation of auditors’ guidance. The Social Security Administration’s inspector general created a status report on the latest recommendation. In total, the inspector general highlighted 280 preceding recommendations which remained unimplemented, with a potential savings of $18.4 billion.
In some instances, proposals were contested by the Social Security Administration. Among the unimplemented recommendations were more vigilant examination of specific beneficiary groups showing potential discrepancy along with recommended amendments in computer system’s alerts.
Social Security, which is anticipated to face financial issues in the coming decade, is further burdened by the issue of benefits being collected by deceased individuals. The most alarming threat to its longevity is the growing imbalance of workforce contributing their tax dollars and the rising number of retirees. Since the inception of Social Security in 1935, the average American lifespan has increased, thereby increasing the number of potential beneficiaries. However, as the ‘baby boom generation’ steps into retirement, fewer workers are contributing to the system.
The inability of the Social Security Trust Fund to provide a full cover of benefits is foreseen by 2035. This potential shortfall has been continually highlighted by trustees over more than a decade. Proposing changes to Social Security has been a firm taboo for politicians across both parties due to potential backlash, as the older demographic generally exhibits high voter turnout, a fact that political pundits often liken to ‘the third rail’ in American politics.