How Fraudsters Are Bilking the Government Out of Billions of Dollars

SPEAKER_1 (0:03)

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Joe Weisenthal (0:20)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:25)

And I'm Tracy Alloway.

Joe Weisenthal (0:26)

Tracy, what do you think about DOGE?

Tracy Alloway (0:29)

Uh, the coin or the new Department of Government Efficiency?

Joe Weisenthal (0:35)

The latter.

Tracy Alloway (0:38)

Here's what I will say. Part of me hates that government efficiency is being politicized in this way, because if you think that government services are a desirable thing to have, then you should definitely be against waste and inefficiency and fraud in that market, because at a minimum, if you're wasting money, you could be using that money to do even more. And then obviously, if you think that government is just bad in general, then I imagine that you will also think that the government wasting money is also bad.

Joe Weisenthal (1:08)

So there's no constituency. There probably shouldn't be an ideological constituency or political constituency for waste, right?

Tracy Alloway (1:17)

Yeah, exactly. Like, I feel like we should all agree on this, but also I hate the way it's kind of unrolling. Let's put it that way.

Joe Weisenthal (1:25)

I would say I broadly agree. Waste is bad. Whether the existing make up of this sort of quasi blue ribbon commission to get rid of waste, whatever that means, is actually going to do it. Look, I'll be open minded, but I like the premise of cracking down on waste. I will just say that. You know what the other thing is? So first of all, part of the issue here is that waste is probably difficult to define. Fraud, in some cases, is probably difficult to define.

There will probably be political fights over certain types of spending that's like, you call this waste, I call this a good allocation of whatever. I imagine many of the political fights around this will sort of revolve around some of these questions. There's a lot there, but I'm glad we generally agree that fraud is bad.

Tracy Alloway (2:20)

Fraud is bad, waste is bad, but I think you're absolutely right that the definitions are going to be crucial, right? And this is where I worry about the politicization because you can just come in and say like, oh, I don't like this, so I'm going to call this a waste and go on from there. But I think we should talk about it because this has come up in a number of episodes specifically on the PPP post-pandemic. And so it's clearly something that is on people's minds.

Joe Weisenthal (2:46)

Totally. Right now, we are recording this Thursday, November 14th. We are in a moment where resources in the economy are constrained, right? The unemployment rate is low. Inflation continues to be by some measures above the Fed's goal. It is not crazy from like a macro standpoint to think we need to make things more efficient and better to have a better use of our real resources right now.

Tracy Alloway (3:14)

This is your other middle-age man thing. You have decided to become a real resource constraint guy, right?

Joe Weisenthal (3:20)

Yeah. I am like, oh, we got to crack down.

Tracy Alloway (3:22)

We have to make tough decisions.

Joe Weisenthal (3:23)

We have to make tough decisions. We are taking the candy away from the kids. I am going to be one of those guys.

Tracy Alloway (3:27)

Here is a tough decision. If you are going to talk to someone about government waste, would you talk to Elon or Vivek? There are two.

Joe Weisenthal (3:33)

Well, Elon would get more downloads if we had him on the podcast, so I would talk to Elon. But we actually have a better guest. I think we have the perfect guest to talk about government waste, fraud, where we might be able to move the dial in a substantive way on this kind of stuff. We are going to be speaking with Jetson Leder-Luis. He is an assistant professor at the Questrom School of Business at Boston University. He is also a faculty research fellow at the NBER, and this is what he studies, particularly areas around fraud and how companies defraud the government, wasting millions, probably billions of dollars. So Jetson, thank you so much for coming on Odd Lots.

Jetson Leder-Luis (4:13)

Thanks so much for having me.

Joe Weisenthal (4:14)

What do you describe your research? I kind of described it, but what do you describe what you do and your background?

Jetson Leder-Luis (4:20)

Yeah, that's great. So I'm an assistant professor. I study economics, and in particular, I'm interested in questions about fraud in government spending. I received my PhD from MIT Economics in 2020, and I've written a number of papers trying to explore the mechanisms the government can and does use to cut out fraud in public expenditure.