If Musk wanted to run DOGE as a force for waste-elimination, he wouldn't be attacking the Corporation for Public Broadcasting and PBS (whose budget accounts for 0.012% of federal spending). He wouldn't be attacking federal fiber subsidies (he's mad that he can't get more subsidies for his dead-end satellite service that caps out at one ten-millionth of the speed of fiber). He wouldn't be attacking high-speed rail (which competes with his Tesla swasticars).

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He wouldn't be fighting with the SEC (which defends the public from costly stock swindles, which is why they've been investigating Musk for seven years).

He could, instead, go after private sector Medicare waste. 33 million seniors have been suckered into switching from federally provided Medicare to privately provided Medicare Advantage.

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provided Medicare Advantage. OOverbilling from Medicare Advantage (whose doctors are ordered to "upcode" patients to generate additional bills) costs the public $83b/year:

medpac.gov/wp-content/uploads/…

Medicare Advantage patients are, on average, healthier than Medicare patients (Medicare Advantage giants like Unitedhealtcare cream off the cheapest-to-service patients).

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> provided Medicare Advantage.

Yet, this healthy cohort costs *more* to treat than their sicker cousins on the public plan - the fraud costs us about 11-14% of the total Medicare bill, and we could save $140b/year by zeroing that out:

pnhp.org/system/assets/uploads…

Zeroing out Medicare Advantage overbilling would pay for "an out-of-pocket spending cap, a public drug benefit, and dental, hearing, and vision benefits" for every Medicare patient with tens of billions to spare.

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Of course, as Dayen points out, the guy in charge of Medicare is Dr Oz, who has spent years shilling for Medicare Advantage, while holding massive amounts of stock in Unitedhealthcare, the nation's largest Medicare Advantage provider, and the worst offender for Medicare Advantage overbilling.

Then there's Medicare itself. Rates for Medicare doctor reimbursement are set by committees of specialists,

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They award themselves sky-high rates while paying rock-bottom wages to the frontline general practitioners who do the heavy lifting. Lowering specialists rates to match the rates paid in Canada and Germany would save the federal government $100b/year:

cepr.net/rfk-jr-physicians-pay…

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RFK Jr., Physicians’ Pay Schedules, and the Elites’ Big Lie – CEPR

Learn about RFK Jr.'s bold agenda to combat corruption in the pharmaceutical industry.

^CEPR

Then there's Big Pharma. For years, Congress legally forbade Medicare and Medicaid from negotiating drug prices, which is why the US government pays the highest rates in the world for drugs developed in the US, with US federal subsidies. US drug prices are 178% more than other wealthy countries, and many drugs are sold at 20-30x the cost of production:

aspe.hhs.gov/reports/comparing…

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A few of these drug prices are going to come down in the coming years, thanks to timid, but long overdue action from the Biden administration. To really tackle a source of government waste, the US government could use its "march in rights" to federalize production of the most expensive drugs:

prospect.org/day-one-agenda/fo…

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Force Drug Companies to Lower Prices

Presidents have two powerful sticks that could weaken the pharmaceutical industry’s power to rake in astronomical profits.

^{Natalie Shure (The American Prospect)}

One possibility floated by economist Dean Baker is for the US government to invest $100b/year in clinical trials, keeping the patents for itself and licensing multiple manufacturers to compete to produce these publicly owned drugs, which would save an estimated $500b/year:

cepr.net/financing-drug-develo…

Then there's price-gouging, useless middlemen like Group Purchasing Organizations who soak the public purse for $20b/year - a "moderate" enforcement action could cut that to $10b.

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Financing Drug Development: What the Pandemic Has Taught Us – CEPR

^CEPR

Speaking of eliminating middlemen, community health centers are a *way* cheaper source of care than big hospitals - $2371/year cheaper per patient, per year. By subsidizing these, the US government could save another $20b/year:

ohiochc.org/news/310956/Landma…

Next, Dayen moves onto the Pentagon, which pulled in $841b last year but has failed seven consecutive audits:

thehill.com/policy/defense/499…

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The DoD firehoses money over private sector contractors, like the $3.6b it hands over to Musk's Spacex every year - a number Musk hopes to grow through Spacex's participation in a new consortium:

ft.com/content/6cfdfe2b-6872-4…

Military contractor wastage is the stuff of legend, like the $2t F-35 Joint Strike Fighter, a lemon that has over 800 outstanding defects and was just greenlit for another year's worth of full funding:

bloomberg.com/news/articles/20…

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Palantir and Anduril join forces with tech groups to bid for Pentagon contracts

Consortium likely to include Elon Musk’s SpaceX in move to grab a bigger slice of $850bn US defence budget

^{George Hammond (Financial Times)}

This kind of wasteage isn't merely shameful, it's illegal. The Nunn-McCurdy Act requires that these large-scale boondoggles be reviewed with an eye to shutting them down. But when beltway bandits like Northrop Grumman’s produce expensive lemons like Sentinel, the DoD continues to hand public money to them, citing "national security":

defense.gov/News/Releases/Rele…

The DoD contracts out so much of its essential functions that it literally doesn't know what it has.

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Department of Defense Announces Results of Sentinel Nunn-McCurdy Review

On Jan. 18, 2024, the Air Force notified Congress that the Sentinel program exceeded its baseline cost projections, resulting in a critical breach under the Nunn-McCurdy statute.

^{U.S. Department of Defense}

It pays contractors and subcontractors to produce parts for its systems, but has no way to know if those parts have actually been produced. Meanwhile, private equity rollups like Transdigm have merged every single-source aerospace supplier and jacked up the price of spare parts for existing military systems, pulling down 4,500%+ markups:

theintercept.com/2019/05/28/ro…

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How Rep. Ro Khanna Got a Price-Gouging Defense Contractor to Return $16.1 Million to the Pentagon

The freshman congressman asked the Defense Department’s inspector general to look into Transdigm, a defense contractor with a monopoly over spare parts.

^{David Dayen (The Intercept)}

To estimate the *easy* military savings - the ones that won't require shutting down jobs programs scattered in every key Congressional district - Dayen takes the CBO's estimate and cuts it in half, to get an annual savings of $150b/year.

Then there's general prodcurement, where the GAO estimates the US loses $150b/year to bid-rigging and another $521b/year to fraud (the USG also spends $70b/year on management consultants who do no discernible useful work).

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Dayen estimates the annual savings from "stringently enforcing fraud and abuse, insourcing operations, and no longer paying for bad advice" at $150b/year.

Then there's tax cheating. The IRS estimates that it undercollects about $606b/year in taxes. The top 1% account for $163b/year of that (Elon Musk's own effective tax rate is just 3.27% as of the five years precedent 2021, the year for which we have his leaked tax return; he paid no taxes in 2018).

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Every dollar the IRS spends on auditing brings in $2.17 in tax, and every dollar the IRS spends auditing the wealthy generates $6.29 in tax. A dollar spent auditing the top 10% brings in $10:

timesfreepress.com/news/2024/d…

Audits are durable sources of tax. People who've been burned by an audit are far more honest in the decade after that audit.

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Opinion: The IRS shows what government efficiency really looks like

Between all the talk of fiscal commissions and efficiency agencies, it seems like the question of the day is how to make the U.S. government operate more proficiently.

^{Kathryn Anne Edwards / Bloomberg Opinion (TNS) (www.timesfreepress.com)}

The GOP zeroed out Biden's IRS increases. CBO estimates a fully funded IRS could easily increase the taxes it collected by a net of $200b/year.

There's also new sources of tax. Dayen likes Dean Baker's proposal for taxes on stock returns: add dividends and stock appreciation at the end of the year, then multiply by the tax rate. Baker says this is a loophole-free way to bring the effective corporate tax rate up from 20% to 25%, generating $65b/year:

cepr.net/winning-the-tax-game-…

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Winning the Tax Game: Tax Stock Returns – CEPR

^CEPR

This would be especially hard on heavily financialized companies with "impossibly high stock price/earnings ratios" - e.g. Tesla.

Dayen also proposes rejigging the tax rate on retirement and health insurance plans, where nearly all the tax breaks are scooped by the highest earners. The Tax Policy Center has $1.12-$1.38t/year worth of other tax reforms that would shift the tax burden from working people to the idle rich:

taxpolicycenter.org/briefing-b…

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What are the largest tax expenditures?

^{Tax Policy Center}

Dayen says, "let's ask for about 20% of that" and ballparks the tax income at $200b/year.

How about subsidy cuts? $10b/year in fossil fuel subsidies. Eliminating the notorious sources of fraud in crop insurance would save $5b/year:

gao.gov/assets/gao-06-878t.pdf

There's $7b/year in subsidies to the Home Bank Loan system and $5b/year lost to pass-through entity loopholes.

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Add it all up and you're saving $1.4215t/year without even breaking a sweat, just by tacking (some of) the country's worst looting and tax evasion. Dayen points out US expenditures will fall even more than this, because it won't be paying as much T-bill interest if it doesn't spend this money. We could also just make the Fed stop using the blunt, expensive tool of interest rate hikes to manage inflation.

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There's plenty of scenarios where interest payments result in the remaining $580b/year in savings, bringing the total up to $2t.

Now, sucking $2t/year out of the US economy all at once - even $2t in waste and fraud - would *not* be good for America! That kind of economic shock would bring the US economy to its knees, for years to come. All that money still fuels the demand side of the economy.

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But a slow rampup, and more public spending on *useful* programs (say, climate resiliency and retrofitting), would strengthen the economy while still bankrupting the fraud sector.

DOGE is wildly unpopular with the American electorate - even large pluralities of Republicans think its stupid. Campaigning on cutting fraud and profiteering would be a wildly popular way for Democrats to separate themselves from Republicans. Few Democrats are rising to the occasion, though.

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*Picks and Shovels* is a new, standalone technothriller starring Marty Hench, my two-fisted, hard-fighting, tech-scam-busting forensic accountant. THIS IS THE LAST DAY to pre-order it on my latest Kickstarter, which features a brilliant audiobook read by Wil Wheaton:

martinhench.com

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Image:
Steve Jurvetson (modified)
flickr.com/photos/jurvetson/52…

CC BY 2.0
creativecommons.org/licenses/b…

eof/

Happy Elon Musk

At TED today, discussing: - Making Twitter Open Source - With More Freedom of Speech - His obsession with truth - Humanoid Robot Armada - Manufacturing at Scale (growing battery production 1000x) From dinner last night and my photo of his TED inter…

^Flickr