Can a Sabre-Wielding Trump Show Mercy to His Fiscal Watchdogs This Time?
COVID-19 emergency relief money, which began to flow soon after President Donald Trump signed the CARES Act in March 2020, united Americans from different walks of life, no matter their race, religion, or political affiliation, in the dogged pursuit of fraud.
To distribute financial help quickly as lockdowns spread, the Small Business Administration and the lenders it worked with didn’t fact-check applications for Paycheck Protection Program loans before they approved them. That gave Americans a chance to show off their fiction-writing skills. Entrepreneurs, a bank manager, prison inmates, a Florida sheriff’s deputy, employees of the federal government, and a Jersey guy called “Harlem Pete” were just some of the folks charged with making stuff up in order to receive one of the 11.3 million loans worth a total of $786 billion the SBA dispersed to save businesses and their employees — but not itself — from devastating losses due to the pandemic.
The SBA has since categorized one in four of those loans as “improper payments,” meaning they could be fraudulent. That may be an extreme situation, but it’s not an isolated one. From 2003 to 2023, the federal government racked up an estimated $2.7 trillion in improper payments. And that’s a low estimate.
The discovery of much of this fraud and abuse can be traced to the work of the government’s in-house watchdogs: the 74 inspectors general. Embedded in each Cabinet-level department along with agencies such as Amtrak and the Securities and Exchange Commission, the IGs identify and recover money lost to fraud and waste and prod the agencies to adopt safer and more efficient methods.
The work of the IGs could become more important during the Trump administration, especially in connection with the new Department of Government Efficiency, led by Elon Musk. Musk, the richest man in the world, has suggested he might cut a trillion dollars or more in federal spending, and the IGs would seem to offer a ready-made partner. But there’s a hitch: President Trump’s fraught relationship with IGs’ offices, whose probes have sometimes put them in the president’s crosshairs.
In 2020, during his first term, Trump used his executive power to oust five IGs without warning in the space of six weeks. The first firing came soon after Trump signed the CARES Act into law. The president ordered the dismissal of Glenn Fine, the IG tasked with overseeing the $2 trillion pandemic-relief programs. Trump also canned the watchdogs for the State Department, whom Secretary Mike Pompeo said was “undermining” the agency; the Transportation Department, who was reportedly investigating whether the agency was favoring contractors in Kentucky, Secretary Elaine Chao’s home state; and the Department of Health and Human Services, whose office had just issued a report on the shortage of hospital equipment in the early days of the pandemic.
Perhaps in response to such concerns, a coalition of the IG offices announced last week that Sen. Joni Ernst would lead a bipartisan group in the Senate to support IGs. The so-called IG Caucus includes Republican Sens. Chuck Grassley of Iowa and James Lankford of Oklahoma and Democrats Gary Peters of Michigan, Richard Blumenthal of Connecticut and New Hampshire’s Maggie Hassan. A statement said they would help “further IG efforts to conduct effective oversight of federal programs and operations and improve government efficiency.”
In fiscal 2023, the 74 IG offices recovered $10.9 billion, conducted investigations that resulted in the conviction of 4,318 scammers, and won 1,106 civil actions on a combined budget of $3.5 billion. The recoveries are a return on investment of more than $3 of taxpayer money for every $1 spent to run the offices. (That figure includes only actual cash the watchdogs clawed back, not money that would be saved if agencies adopted IG recommendations, a higher number often cited by the IGs.) They are, of course, only a fraction of the estimated fraud, waste, and abuse that most experts believe is out there.
Christi A. Grimm, the HHS official whom Trump fired five years ago, was reappointed by President Joe Biden. She told Congress in April that her investigators recouped $3.16 billion in expected recoveries in fiscal 2023 on a budget of less than $500 million. The HHS, which includes Medicare and Medicaid, has a $2 trillion annual budget that’s more than twice that of the Defense Department. In her testimony, Grimm made the case for Congress allocating her office more money because, she said, her investigators nationwide have been turning down between 300 and 400 “viable criminal and civil health care fraud cases” each year because they lacked the resources.
IG offices also critique the methods of their departments in the interests of saving money and streamlining operations. The Department of Housing and Urban Development, which has a lousy record of fraud detection in its rent-assistance programs, has an inspector general’s office, led by Rae Oliver Davis, that’s identified changes in the processes for the department that could save $982 million if implemented.
On the other side of the ledger, the post-Glenn Fine SBA said it got back only about $20 million of the more than $1 billion of the loans it identified for recovery in fiscal years 2000 to 2023.
Was the pandemic emergency spending worth it? Was the fraud an acceptable price to pay? The CARES Act enjoyed universal congressional support — it passed the Republican-controlled Senate unanimously and the majority-Democrat House on a voice vote. Some researchers report it boosted employment and kept millions of paychecks flowing, which was the goal of programs like the PPP. On the other hand, the Justice Department said in its 2024 report on combatting COVID-19 scams that “civil pandemic fraud enforcement will continue to require substantial resources for years to come.”
It can be argued that without bailouts there would be no fraud to track down, so do away with bailouts. But it would’ve taken nerves of steel, and a casual attitude toward reelection, for officeholders to have saved Wall Street’s biggest banks in 2008 and then in 2020 deny America’s 33 million small businesses, which are responsible for nearly two-thirds of net new jobs in the U.S. and produce more than 40% of the country’s economic output. Given that lawmakers chose bailouts, the problem was the speed and accuracy with which the money was distributed.
“We believe the real focus should be on preventing the overpayment or the improper payment from occurring to begin with,” said Hannah Padilla, a director at the Government Accountability Office, a nonpartisan watchdog that reports to Congress. “Once the payment is made, it’s very difficult to get it back.”
Padilla said now is the time to put stricter controls in place — before the government starts writing checks to avoid or deal with another disaster. “It’s a lot more cost-effective to have controls that are as tight as can be,” she said. “We want them to think about lessons learned for next time.”
And it will happen again. Years ago, when his young daughter asked him, “What’s a financial crisis?” JPMorgan Chase’s longtime CEO Jamie Dimon said he told her, “Something that happens every five to seven years.” Dimon may have been off on the number of years, but not far off.
How DOGE sees government’s role in limiting the damage of an emergency, or recouping funds misappropriated by fraud, or the constituency it chooses to protect, can, at this point, only be decoded by parsing the occasional public statement from its twin powers. Musk and Vivek Ramaswamy – who had been tapped as the outfit’s co-leader but has reportedly stepped down to run for governor of Ohio — didn’t make themselves available for comment.
DOGE can only recommend; it’s up to Congress where the money goes, or where it stops going. Public comments from the principals suggest they’ll use a machete to cut the size of government rather than a scalpel. Ramaswamy told followers on X that they should “expect certain agencies to be deleted outright.”Will those kinds of decisions be based on improving government efficiency, or on some other criteria? Trump has promised to “obliterate” the Deep State. “I am your justice,” he told the Conservative Political Action Conference in 2023. “I am your retribution.”
“DOGE is very much a black box right now,” said William Galston, senior fellow in governance studies at the Brookings Institution. “Legally, it’s a bunch of guys sitting around talking.”
Already, a group of attorneys has filed a lawsuit claiming that DOGE, as a non-governmental organization, violates federal transparency laws, among other infractions.
DOGE’s work is expected to be completed by July 4, 2026, America’s 250th birthday, so there’s little time to waste. Like the haste with which the SBA cut checks for small businesses during the pandemic, DOGE will be making decisions quickly and based on a variety of criteria.
While its aim is clear – to thwart what Ramaswamy has called the “bureaucratic machine” – how it will execute its mission remains unclear. Perhaps an early indication of how this new government watchdog agency plans to proceed will be the relationship it strikes with the watchdogs already in place.
This article was originally published by RealClearInvestigations and made available via RealClearWire.
