Dan Lips is a senior fellow at the Foundation for American Innovation and a former policy director with the Senate Homeland Security and Governmental Affairs Committee.
When the US Congress returns from its summer recess in September, lawmakers will have a month to negotiate a spending deal to avoid a government shutdown. This debate will further expose partisan divisions on fiscal policy and the so-called Department of Government Efficiency’s cost-cutting moves. Behind the scenes, however, the Trump administration is working with Congress to enact comprehensive reforms to prevent wasteful spending, which have long-standing bipartisan support.
Altogether, the US government’s misspending costs hundreds of billions of dollars each year. In 2024, federal departments and agencies made $162bn in improper payments.
In 2010, President Barack Obama established a “Do Not Pay List” for federal agencies, which would vet planned federal payments against a “network of databases” to verify eligibility. The aim was to shift the federal government’s strategy for stopping fraud and misspending from a “pay and chase” model to one of prevention. However, laws limiting data sharing between federal agencies undermined the Obama administration’s plans for the list. Since Obama established Do Not Pay, the federal government has misspent more than $2tn.
As bad as misspending continues to be, the government loses even more to fraud. The Government Accountability Office estimates that annual losses due to fraud total between $233bn and $521bn — as much as 7 per cent of total federal spending. Foreign adversaries and transnational criminal organisations are often to blame. A 2024 congressional review estimated that half of all lost pandemic-era unemployment assistance was stolen by foreign actors.
Doge has captured the public’s attention by dismissing thousands of federal workers and halting billions in federal grants and contracts. Lost in the hype has been the White House and Treasury Department’s worthwhile campaign to prevent fraud and misspending.
In March, President Donald Trump issued three executive orders that aimed to reduce improper payments by strengthening financial controls and moving all government transactions to secure electronic formats. Like Obama, Trump directed federal agencies to improve data and information sharing. These reforms could substantially reduce misspending and fraud. However, their success again depends on Congress authorising necessary data and information sharing between federal agencies and allowing the Treasury to access certain private-sector information, including credit reporting, for improved vetting.
Republican Senator Joni Ernst recently sponsored a bill to codify and authorise the data access reforms included in Trump’s executive orders. This would allow the Treasury to access certain databases and establish an information-sharing protocol with the Internal Revenue Service to verify individuals’ eligibility for certain means-tested benefits. Democratic lawmakers could provide critical bipartisan support. In 2024, Senators Gary Peters, Dick Durbin, and Ron Wyden sponsored similar legislation and should now back Ernst’s bill. Such a reform could generate significant savings. An unpublished analysis by the Bureau of the Fiscal Service estimated that providing the Do Not Pay system with access to additional data streams could reduce federal fraud and improper payments by tens of billions of dollars. Treasury officials say the savings could be significantly higher.
In late July, a Senate committee unanimously approved a narrower bill to establish permanent information sharing between agencies to prevent payments to dead people. Broader legislation to stop misspending should be on the agenda this fall. The US government cannot afford to let fraudsters, including foreign adversaries, steal hundreds of billions from taxpayers. Lawmakers from both parties should now help Trump finish what Obama started.