- Tuesday, 24 October 2023
- Written by John Hood
As Russia’s full-scale war against the independent country of Ukraine approaches its 20th month, the role of the United States in arming, training and funding the Ukrainians has become a point of contention between Joe Biden and some of his potential GOP opponents, as well as among Republicans on Capitol Hill.
Does the issue deserve debate? Sure, and I say that as an advocate of America’s support for Ukraine. But if your primary concern is its cost to taxpayers, many other issues should concern you more.
Take benefit fraud, for example. Medicare, Medicaid, Social Security and other entitlements are the main drivers of deficits. In 1973, federal spending amounted to 18% of the gross domestic product. Discretionary programs such as defense, transportation, and education made up 53% of the federal budget, with mandatory spending (primarily entitlements) at 40% and interest payments at 7%.
Today, federal spending makes up a quarter of GDP. The breakdown is now 27% in discretionary programs, 63% mandatory, and 10% interest. By 2053, if present trends continue, spending will approach 30% of GDP. Interest payments will more than double as a share of spending, to 21%, while discretionary will continue to shrink in relative terms.
The math is merciless here. Balancing the budget will require structural changes to entitlement programs. But even getting serious about benefit fraud — about individuals and companies receiving taxpayer money to which they aren’t entitled — would do much more to repair America’s finances than cutting off aid to Ukraine would.
Consider the case of unemployment insurance. I’ve written often about the faulty design and management of the UI system, including here in North Carolina. During the COVID pandemic, state and federal officials made it easier to obtain benefits — and fraudsters took advantage of that to bilk employers and taxpayers.
This happened to me, in fact. I teach at Duke University every other semester. A couple of years ago, someone stole my identity, claimed to have been laid off, and filed for benefits. Despite my best efforts to stop it, the crook got paid.
According to the Government Accounting Office, as much as $135 billion in UI benefits were awarded fraudulently during the pandemic. That’s probably a low-ball estimate. Matt Weidinger, a senior fellow at the American Enterprise Institute, applied the GAO’s formula to a broader base and estimated that improper payments may total as much as $240 billion.
By comparison, the United States has, to date, sent about $75 billion to Ukraine in the form of military, economic, and technical assistance. If we expand the category to include not only spent but requested funds — and not just aid to Ukraine itself but also aid sent to our allies helping Ukraine — the total comes to $135 billion, according to the Center for Strategic and International Studies.
Now consider Medicare and Medicaid fraud. It costs the federal treasury a minimum of $100 billion a year and likely much more. Farm programs, energy subsidies, grant and loan programs, targeted tax breaks for favored industries — these and many other federal policies are plagued by waste, fraud, and abuse.
The GAO estimates that the federal government made $247 billion in improper payments in FY 2022 alone (and that figure didn’t even include some welfare programs such as Temporary Assistance for Needy Families). In other words, benefit fraud costs American taxpayers much more than the war in Ukraine has or will.
That’s not an argument against strict oversight of foreign and military aid. Nor is it an argument that all the White House and Congress need to do to balance federal budgets is to cut out improper payments. That won’t be nearly enough, as I’ve also written about many times.
My point is simply that the political attention paid to the fiscal impact of aid to Ukraine is far out of proportion to its contribution to federal deficits. In a rational world, our leaders would set their priorities accordingly. Alas, that’s not the world we inhabit.
Editor's note: John Hood is a John Locke Foundation board member. His latest books, Mountain Folk and Forest Folk, combine epic fantasy with early American history (FolkloreCycle.com).