America has maxed out its debt again. Tim Geithner sent a letter to Congress on January 6, 2011 asking for a raise in the debt ceiling because our financial obligations remain on course to go through the roof this spring. This has consequences on the homefront and internationally, because the U.S. has always been considered a worry-free investment (see: Forget China. We Can Bury Ourselves Without Their Help.) We last bumped up the debt ceiling in February 2010, when we decided that $14.29 trillion was an acceptable limit.1
Failure to raise the ceiling will turn us into a deadbeat nation, forcing the federal government to default on obligations owed by an assortment of agencies, departments, and programs, all of which have one thing in common. They pay out billions improperly, and set infuriatingly low performance targets, presumably because taxes and debt limits can always be raised. Here are a few examples from Geithner’s list of what must be funded, and what these programs cost taxpayers in lost dollars:
From 2004-2008, $16.6 billion was overpaid in Supplemental Security Income (SSI) benefits.2 In 2010, the SSI improper payment rate was 10%, $4.8 billion.3 The Retirement, Survivors, and Disability Insurance (RSDI) program went from $1.2 billion in overpayments in 2007 to $2.5 billion in 2009.4 In 2010, the program made $3.2 billion in improper payments.5
Medicare and Medicaid accounted for 50% of improper payments in 2008, with $10.4 billion improperly paid by Medicare Fee-For–Service, and $6.8 billion by Medicare Advantage.6 By 2010, Medicare Fee for Service improper payments had grown to $34.3 billion, and Medicare Advantage to $13.6 billion.7
Medicaid won the award for most improper payments in 2008 at 10.5%, $18.6 billion,8 but outdid itself in 2010 by raising the bar and realizing $22.5 billion in incorrect payments.9
Unemployment benefits to states:
$17.5 billion, 11.2% of total benefits, was paid out improperly in 2010.10
U.S. military salaries and retirement benefits:
Payments to deceased retirees accounted for the most in misspent military retirement dollars, with the dead profiting from $58.5 million in improper payments in 2010.11 In 2007, military pay, civilian military pay, retirement pay, and travel pay were overpaid by $249.2 million.12 By 2010, the figure had risen to $450.5 million.13
In promoting the Improper Payments Act signed in July 2010, President Obama revealed a strategy to fixing the problem: pay auditors more money to inspire them to do their jobs:
That’s why, earlier this year, I directed our federal agencies to launch rigorous audits conducted by auditors who are paid based on how many abuses or errors they uncover -– the more they find, the more money they make. So they are highly incentivized.14
Uncle Sam views tax dollars as an inexhaustible resource of little inherent value because there is always more to be had, but as states are compelled to raise taxes to fund their own irresponsibility (see: Live In Illinois? Get Out Now.), Congress will have a difficult time passing federal increases. There are billions to be recovered in improper payments, but the proud posting of a 9.8% error goal for unemployment benefits does not inspire confidence in taxpayers who rightly assume that the officials who manage these programs are either incompetent, overwhelmed by the bulk of their own kingdoms, or both. Pleas for a civil national dialogue (see: A Shift In Power Brings Hollow Pleas For Tolerance) will fall flat as taxes rise and benefits are cut.
Geithner’s letter mentions that raising the debt ceiling will enable Treasury to make payments to keep government offices running. Here is where we can save some money. We should shut the whole operation down and farm our government out to the private sector. At least private sector employees understand that presenting an improvement plan to the boss that includes a 10% error rate will not result in an incentive payment.