A new GAO report released last week (“Improper Payments: Fiscal Year 2022 Estimates and Opportunities for Improvement”) made brief headlines for finding that, during fiscal year 2022, federal agencies reported a remarkable $247 billion in improper payments. But that finding, like the report itself, could easily be lost as Congress returns from its spring break. It shouldn’t be, since the report offers seven important lessons for policymakers as they consider ways to rein in spending during this year’s critical debt limit standoff.

Lesson 1: Recent decades have witnessed trillions of dollars in taxpayer losses to improper payments. As GAO notes, “Since fiscal year 2003, when federal executive agencies were required by law to begin reporting estimated improper payments for certain programs and activities, cumulative estimates have totaled about $2.4 trillion.”

Lesson 2: Improper payment rates for many programs are eye-popping. As Table 1 from the report below displays, GAO found 17 programs with improper payment rates above 10 percent—and up to an astonishing 47 percent. Some programs are relatively small but others like the Earned Income Tax Credit (31.6 percent improper payment rate), Unemployment Insurance (22.2 percent), and the Additional Child Tax Credit (15.8 percent) involve billions of dollars in misspending every year.

Lesson 3: These large estimated improper payments are only partial. GAO admits the federal government doesn’t have a solid handle on the improper payments it makes, saying “the federal government is unable to determine the full extent to which improper payments occur or to reasonably assure that appropriate actions are taken to reduce them.” That means its 2022 improper payment estimate “is potentially incomplete and not representative of the full amount of improper payments.”

Lesson 4: The 2022 figures also understate improper payments during the pandemic, as some of the most abused programs ended before fiscal year 2022 started. Temporary pandemic unemployment benefit programs—especially the fraud-riddled Pandemic Unemployment Assistance (PUA) program—expired in early September 2021, or a few weeks before fiscal year 2022 started. And while the Department of Labor’s (DOL) Inspector General recently testified that misspent pandemic unemployment benefits totaled at least $191 billion, that omits elevated losses from the PUA program, which most believe had the highest error rates of all. With more time now elapsed since PUA ended (19 months) than it actually operated (17 months), it’s an embarrassment that DOL hasn’t released detailed misspending data about this temporary, and highly error-prone, program.

Lesson 5: While some recipients are hurt by improper payments, taxpayers bear most of the burden. Improper payments include both overpayments and underpayments—which occur when recipients don’t get the full benefits they are owed. However, GAO found almost 40 times as many overpayments ($200 billion) as underpayments ($5 billion; a third category of unknown payments totaled almost $33 billion). That shows how taxpayers are by far the biggest losers from large improper payments. 

Lesson 6: The report challenges recent calls to nationalize the state-run UI program. Some recent proposals have called for nationalizing the state-run UI system, arguing that doing so would improve program efficiency. But the table above shows how multiple federally-run programs have even higher improper payment rates than state-run UI. That includes the perennially abused Earned Income Tax Credit program, whose improper payment rate was 42 percent greater than UI’s rate in 2022.

Lesson 7: These large improper payments offer the opportunity for bipartisan compromise—and savings. GAO notes that “more work remains to be done to improve payment integrity.” That’s a vast understatement—but it’s also a potential silver lining. The disturbingly large improper payments GAO has flagged serve notice to both parties. To Republicans, they are a challenge to develop concrete policies to improve program integrity and find savings, supporting their calls to reduce government spending in common-sense ways. To Democrats who frequently call for more government spending, runaway improper payments in current programs drain potential support for new spending. That gives liberal politicians a strong stake in ensuring benefit accuracy, too. 

For both parties, the table above listing programs with elevated improper payment rates offers a roadmap of where to focus their efforts. That shared interest also reflects rare common ground where savings can be reasonably found that could help broker a debt limit agreement later this year. That makes the outcome of this debate—and attention to the GAO report—in nonpoliticians’ interest, too.

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