At the end of his first 100 days in office, President Trump claimed that his Department of Government Efficiency (DOGE) had uncovered “hundreds of billions of dollars in waste, fraud, and abuse.”
Fraud, waste, and abuse in government—and beyond—are significant ongoing challenges across all societies. However, it is essential to distinguish between how DOGE has addressed these issues and what constructive actions could be taken in the future to address them.
Reducing them requires ongoing targeted improvements in oversight, enforcement, and policy design rather than short-term and temporary responses that fail to address root causes.
A certain level of inefficiency is inevitable in any system as large as the US economy or federal government (see list). Even if waste, fraud, and abuse were confined to 5 percent of government outlays, that would amount to $350 billion. The IRS itself has estimated a gross tax gap (note: this includes simple errors, not just intentional cheating) of $700 billion in 2022, or about 15 percent of revenues. President Trump’s claim (above) is correct but hardly news.
Let’s not overlook the extent of societal fraud and abuse that occurs in the private sector, which can be mitigated by effective government action. Consider all the financial scams and overcharges you face daily through both direct mail and email, which may increase further with a weakened Consumer Financial Protection Bureau.
Addressing fraud and other abuses requires attention to reports from groups like the Government Accountability Office (GAO), which regularly suggests new ways for agencies and Congress to save billions of dollars. In its regular publication of high risks to the nation, it often recommends devoting more personnel rather than fewer to addressing these risks in both the private sector and the government. Yet instead of reinforcing the investigative efforts of the GAO and related watchdogs, DOGE and the Administration dismissed many knowledgeable sources, such as Inspectors General, and, just recently, demanded an investigation of the GAO.
The IRS case
Consider the IRS. Many years ago, the American Bar Association (ABA) and the American Institute of Certified Public Accountants (AICPA) engaged me to analyze how much revenue could be generated by increasing IRS resources.
What I found might not surprise you. By using various estimation methods, I discovered during the study in the 1980s that each dollar spent on the IRS generally boosts revenues directly by between $3 and $8—a bit less than the IRS tended to claim, but still substantial. That ratio may have changed somewhat in recent years, but likely not by much.
As a result, the recent firing of IRS personnel is likely to cause a revenue loss far greater than any savings from reduced administrative staff. It could even jeopardize the income tax itself.
Two difficult-to-measure effects will exacerbate that loss. First, tax evasion is likely to increase significantly as taxpayers become aware that their returns will be less likely to be audited or examined. Second, because of DOGE’s specific targeting of newer hires for firing, it will now be extremely challenging for the IRS to attract the new, talented individuals it needs.
Real reform requires attention not only to administrative practices but also to the law. Many aspects of taxation are currently too complicated to manage effectively. For example, the IRS audits very few people—even fewer now with the DOGE cutbacks—and any attempt to audit or check small contributions can be quite costly relative to the revenues raised.
Congress has the authority to create laws that can be easily managed by a smaller staff. If we want to reduce the number of IRS agents, for example, we need improved reporting systems, the hiring rather than firing of staff who can enhance technology, simpler rules for taxpayers for follow, and fewer duplicative or harder-to-enforce subsidies.
In summary, effective methods exist to combat fraud and abuse, as well as waste and error, and the right strategies can yield significant improvements. Officials should opt for proven, sustainable solutions.
