The U.S. federal government finished Fiscal Year 2025 with about $7 trillion in outlays and just over $5 trillion in revenues, leaving a deficit of roughly $1.8 trillion -- a gap that adds to the exploding national debt and threatens economic stability.
Under current trajectories, deficits are projected to remain near this scale for the foreseeable future, absent dramatic policy changes. What if, as some argue, the solution is staring us in the face: eliminate waste, fraud, and abuse across government programs and pair that with stronger tariff revenues?
Could that alone balance the budget without cutting core programs or raising taxes? Is this wishful thinking or a real possibility?
There’s some truth to this thesis. However, the data also shows that closing all leaks wouldn’t eliminate the entire deficit. Still, understanding the scale of the figures and where political outrage should appropriately focus can clarify what can truly make a difference.
When policy analysts discuss waste, fraud, and abuse (WFA), they mean different concepts that are measured differently.
Waste includes improper payments, such as overpayments, payments that shouldn’t have been made, or payments in the wrong amount. All fraud is an improper payment, but not all improper payments are fraud.
- Fraud involves intentional deception for gain - the hardest to detect and the most pernicious morally and financially.
- Waste and overlap reflect ineffective or inefficient spending within programs due to poor design or bureaucratic constraints.
Well-known Pentagon procurement excesses, such as outrageously overpriced toilet seats and routine cost overruns, demonstrate how waste can happen even without provable fraud.
Which WFA bucket do these toilet seats fall into? If all three are counted, the WFA number could be three times the real value. This highlights the difficulty of accurately measuring WFA.
The federal government monitors improper payments as an indicator of leakage. According to the Government Accountability Office (GAO), 16 agencies reported
That’s a large headline figure, but it’s still only around 9% of a $1.8 trillion yearly deficit. It also accounts for simple administrative mistakes, not just fraud.
Overlaying this are GAO’s modeled fraud estimates, which suggest $231 billion to $521 billion in fraud losses each year across the federal government.
While that range is broad, selecting the upper limit would yield significant savings. However, even that does not fully bridge a $1.8 trillion gap.
Importantly, these figures are estimates of loss, not recoverable savings. Detection, prevention, and recovery incur costs and practical limitations. Can Minnesota money laundered through Somalia to who knows where be recovered?
So even with optimistic assumptions about lowering waste, fraud, and abuse, we still face hundreds of billions in annual gains -- transformative, but not enough to eliminate the deficit.
Sen. Rand Paul’s annual Festivus Report, which compiles discretionary spending he considers wasteful, highlights over $1.6 trillion in questionable expenses, showing how definitions of ‘waste’ can significantly change the totals.
Tariffs, which are fees on imported goods, generate federal revenue through the U.S. Customs Service. In FY2025, customs duties brought in about $195 billion, a significant increase from previous levels mainly due to higher tariffs on key imports.
If one considers a more optimistic tariff scenario, such as widespread higher average tariffs (for example, a sustained 10% across many imports), analysts from the Yale Budget Lab and Tax Policy Center say it’s not enough. They estimate an additional net revenue of $200 billion – $300 billion annually, even after accounting for reductions in other tax receipts caused by slower import volumes or higher consumer prices.
When combined with aggressive WFA cuts, that puts you in a range where policymakers might be able to eliminate one-third to one-half of the annual deficit without reducing entitlement benefit levels or increasing income or payroll taxes.
Beyond WFA, real deficit reduction ultimately depends on reforming the biggest drivers of federal spending. Let’s examine these.
1. Entitlement Reform
Mandatory spending on programs like Medicare, Medicaid, and SNAP (food stamps) accounts for the largest part of growth in federal outlays. These programs serve as vital safety nets, but years of weak eligibility controls and outdated payment systems have left them prone to billions in improper payments and fraud.
The improper payment rate in Medicare and Medicaid programs has consistently been in the double-digit billions annually. Medicaid faces systemic challenges due to its joint federal-state structure, variable oversight, and rising costs.
Careful reform might include stricter verification systems, value-based purchasing, and fraud-resistant eligibility technologies, while safeguarding benefits for genuinely eligible beneficiaries.
Let me also clarify these “entitlement programs.” Working Americans contribute to Medicare and Social Security through payroll deductions, which are taken from their wages to fund these programs. In other words, recipients are supported via a mandatory savings scheme. Wages are not deducted specifically for Medicaid or SNAP, making them true entitlement programs.
2. Safety Net Modernization
Programs like SNAP and unemployment insurance are essential during recessions or for low-income families, but their quick expansion during the pandemic revealed verification gaps.
Public trust declines when assistance programs appear disconnected from clear standards of need, whether due to verification mistakes or weak enforcement of eligibility rules. An example would be a grocery shopper pulling an EBT card out of a Gucci handbag.
Strengthening identity verification, cross-checking data in real time, and enhancing audit capabilities could reduce leakage without compromising core program goals.
3. Defense and Procurement Overhaul
Defense spending is another key area with documented inefficiencies and contract waste. More competition for contracts, transparency in award processes, and strict enforcement of cost overruns could save money, although this might be politically difficult. Perhaps Congress sees no problem with $10,000 toilet seats.
Instead of cutting defense spending, President Trump is calling for a 50 percent increase in the defense budget, raising it to a staggering $1.5 trillion. Are we gearing up for war?
A good starting point would be to stop the revolving door between flag officers working at the Pentagon and then retiring only to work for defense contractors.
4. Health Care Costs Overall
Healthcare inflation has been a persistent factor driving federal expenditures. Negotiating drug prices under Medicare, reforming care delivery, and encouraging preventive care can help slow long-term cost increases.
Replacing Obamacare with a market-driven system would be a good first step. Programs that expanded coverage without sustainable cost controls accelerated federal healthcare spending growth.
The recent Somali fraud scandals in Minnesota and elsewhere have intensified public outrage. Independent investigations revealed fraud involving the diversion of federal funds meant for vulnerable children and social services - sometimes amounting to millions or more, but in total reaching billions of dollars.
This should serve as a wake-up call for policymakers who support endless charity, without accountability, to the entire world under the guise of “compassion,” while millions of hardworking American families are living paycheck to paycheck, barely making ends meet.
That moral outrage is understandable: taxpayers expect their dollars to serve the common good, not be siphoned off by fraudsters. Smart policy targets wrongdoing, enhances enforcement, and ensures safety net programs assist those in need, not those trying to exploit them.
If it hadn’t involved the Somali community, it would have involved another group, because the core issue was political neglect, not ethnicity. Which elected officials created this fraud scheme and then ignored it, avoiding oversight and enriching themselves from the scheme?
Optimistic budget forecasts depend on political will. Powerful interests oppose oversight. Some lawmakers resist tightening eligibility because they fear unintended harm, others oppose tariffs due to higher consumer costs, and many personally benefit from this fraud.
How many lawmakers have seen their personal net worth explode 10 to 30 times after serving only a few terms in Congress?
Still, the fact remains that hundreds of billions of dollars leave federal coffers each year in ways that could be reduced with determination, technology, and oversight. Combine those savings with responsible tariff revenue, and the path to sustainable fiscal balance becomes believable and politically feasible, even if it doesn’t eliminate the deficit overnight.
Reforming waste, fraud, and abuse is not a quick fix, but it is the most morally urgent place to start. Tariffs can help, but structural reform must come next. What cannot go on is a system that allows huge leakage while demanding sacrifice from those who follow the rules.
Brian C. Joondeph, M,D,, is a physician and writer.
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