Donald Trump recently announced plans for a new child care and paid family leave plan. While I will not be offering any opinions on the plan or on Donald Trump as a candidate, I was interested to see that the announcement sparked discussion of government fraud, waste, and abuse. In this case, the discussion surrounds the Unemployment Insurance (UI) program because Mr. Trump claims that he will reduce fraud in UI by over a billion dollars each year to help pay for his proposed child care plan.
Paymentaccuracy.gov, a government website devoted to providing information on payment inaccuracies, estimates a 10.7% improper payment rate in UI for 2016 resulting in $3.5 billion in erroneous payments. While a small amount of this actually represents underpayments, the majority of the $3.5 billion is waste. The trick, of course, is reducing fraud without delaying benefits to those who are eligible and without spending more money on improving the system than you actually save!
This is where things get interesting. The White House Office of Management and Budget claims that UI program integrity improvements, over the next 10 years, would result in just $150 million a year in savings, or just over 4% of the $3.5 billion. The Congressional Budget Office’s estimates are even worse. They estimate annual savings of $40 million at a cost of $17 million per year, for a net gain of just $23 million per year!
These dramatically different viewpoints between Mr. Trump and government regulators point out two problems when discussing government fraud, waste, and abuse. On the one hand, aspiring politicians and much of the public dramatically underestimate how difficult it can be to detect, investigate, and enforce fraud findings. On the other hand, many government agencies only report on the fraud they know about and estimate savings based on using traditional techniques against those unrealistically small numbers.
Here’s what I can tell you from our experience working in Unemployment Insurance. By combining modern detection techniques with cooperation between states and the federal government, we could net far greater savings than are estimated today. Whether or not other facets of Mr. Trump's program are viable is up to you, the voter, to decide. However, I think we can all agree that there are better uses for those funds than making payments to fraudsters.