Washington is promising a war on fraud. Yet a new Cato Institute policy study by Chris Edwards and Ryan Bourne argues that fraud is only one hole in a much leakier federal bucket. For some inefficient programs, it probably costs the country $3 overall to achieve every $1 of intended benefit.

First, taxes required to fund programs leak value by discouraging work, saving, investment, and entrepreneurship, while households and businesses waste time and money on compliance. Second, Washington leaks value through inefficiency resulting from political bargaining, earmarks, and programs that often kneecap their own ambitions. Federal agencies then add further bureaucracy, mismanagement, administrative overhead, and central-planning mistakes that reduce spending’s effectiveness.

Finally, spending leaks value once the money leaves Washington. Programs themselves can distort behavior, crowd out private alternatives, deliver windfalls to people who do not need help, impose new paperwork burdens, spur wasteful lobbying, and generate improper payments and fraud.

With federal deficits high, the authors call for a broader audit of federal spending to preserve essential programs, reduce avoidable waste, eliminate low-value programs, and revive federalism so more decisions are made closer to the people affected by them.

To speak with one of the authors, please contact Madison Miller at mmiller@​cato.​org