Government waste, fraud and abuse rose 13% last year - despite Musk and DOGE saying they'd cut $1 trillion from the budget

By Brett Arends

Cutting it all still won't save the budget

Remember this?

The government's leading watchdog reported this week that federal waste, fraud and abuse actually rose 13% last year - and in any case represent a budget-cutting target far smaller than many had claimed. The news will come as a disappointment to the Trump administration.

So-called improper overpayments, one key estimate of federal waste, came to $153 billion during the 2025 fiscal year, which ended in September, according to a new report from the U.S. Government Accountability Office, the independent federal watchdog. That's an $18 billion - or 13% - rise from the year before.

The figures involved are objectively large amounts of money but look far less impressive in context. The latest overpayments estimate represents 2% of total federal spending, which came to $7 trillion during the year. It amounts to less than 9% of the federal deficit, which was nearly $1.8 trillion, according to the Congressional Budget Office.

In other words, eliminating all of this overspending, even if that were possible, wouldn't make a dent in total spending. And it would do very little to close the yawning federal deficit, which is threatening the financial outlook for Social Security and Medicare and undermining the U.S. government's reputation as the bedrock of the global financial system. The national debt, which stood at 25% of gross domestic product when Jimmy Carter left the White House in 1981 and at 36% just before Lehman Brothers collapsed in 2008, now amounts to about 100% of GDP.

The Trump administration has pinned a lot of its fiscal agenda on the idea that "waste, fraud and abuse" constituted a huge percentage of federal spending, and that getting rid of it would allow the government to slash taxes without cutting Social Security, Medicare or other meaningful programs. Before the 2024 election, President Donald Trump's budget cutter Elon Musk promised voters he would slash $2 trillion from the $7 trillion budget.

After that promise helped Trump win the election, he halved the number.

Last year, Musk repeated that there was $1 trillion in fraud in the budget, saying his DOGE, or Department of Government Efficiency, had uncovered the biggest scam in history.

Instead, the Trump administration is increasing overall federal spending, and the savings so far have been comparatively trivial.

Trump, during a televised speech to a joint session of Congress a year ago, also repeated Musk's claim that the Social Security budget contained huge amounts of money being fraudulently paid to dead people.

This turned out to be completely untrue.

More than a third of all the improper overpayments, or $57 billion, are attributable to Medicare, the GAO says in its latest report. The total across the redistributive programs of Medicaid, the earned-income tax credit and SNAP came to $68 billion, or just under 1% of federal spending for the year.

The GAO's estimate of total improper overpayments is not completely comprehensive, as the GAO admits. Some waste is being missed. The Department of Defense, now being referred to as the Department of War, "has multiple programs that do not report estimates," GAO tells MarketWatch. Audits have repeatedly shown than the department's gigantic budget is full of holes.

The full improper payments figure reported for 2025 came to $186 billion, but that included at least $10 billion in underpayments as well. However, it is "directionally correct," according to a management-consultant phrase used by Trump's allies after being popularized, apparently, by a former McKinsey consultant.

The idea that there were hundreds of billions or even trillions of dollars in fraud in federal spending, while popular on the campaign trail, always came up against one awkward counterpoint. Federal whistleblower laws mean that anyone who reports such fraud is entitled, by law, to a substantial slice of whatever fraud the government finds. If there were $500 billion in federal fraud each year that had previously gone unreported, it would mean that individuals with knowledge of that fraud were deliberately passing up over $100 billion in whistleblower payments.

But hope springs eternal. Mehmet Oz, the Trump administration's overseer of Medicare and Medicaid, said he may have uncovered huge amounts of fraud in Medicaid hospice spending.

Fox Business host Larry Kudlow, Trump's former chief economic adviser, reported that Oz had found $100 billion in fraud "in Los Angeles alone." Kudlow argued this was further evidence of massive fraud that could enable yet more tax cuts.

Critics of the Trump administration will say it is embarrassing that overspending rose last year, during the first year of the second Trump administration and despite all of DOGE's so-called cuts. This isn't entirely fair. The numbers rose in part because of more reporting, the GAO said. Furthermore, the overspending related to fiscal 2025, meaning the federal budget year that ended on Sept. 30. So this was still substantially the budget of the previous Biden administration.

On the other hand, this works both ways. Trump's Justice Department recently praised the current president for fraud convictions, some of which were actually the result of investigations and prosecutions that began under the Biden administration.

In government, as in many things, words are the easy part. Anyone can make any claim they like. What really matters are the actual facts. If voters don't learn to tell the difference, reality will make it clear to them.

-Brett Arends

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

04-29-26 1000ET