Hopefully you were able to enjoy the long weekend without an Understanding America to keep you informed. The rare Friday holiday had us pausing mid-roundup, but we’re back! And Daniel kicks off with the White House’s Task Force to Eliminate Fraud:
In March, President Donald Trump signed an executive order establishing the Task Force to Eliminate Fraud, a government-wide effort chaired by Vice President JD Vance to root out fraud in federal benefit programs, catalyzed by the exposure of widespread abuse in Minnesota. The Trump administration says the problem is structural: Both means-tested social welfare like Medicaid and food assistance and earned social insurance like unemployment run on a federal-state split. Washington funds or underwrites the program and sets the rules, while the states administer it—a division of labor that rewards states with federal cash for allowing unfettered program growth.
For decades, the federal government’s answer to benefit fraud has been to pay first and investigate later—what the administration calls a “pay-and-chase” model that catches fraud only after the money is gone. Vice President Vance has said that the United States loses about $250 billion to fraud each year, but only recovers about $10 billion of it. The administration wants to put more effort into screening eligibility at the front end, before a bad claim is ever paid, alongside more aggressive investigation and prosecution of fraudsters, who are mostly providers running schemes that milk the programs from the inside.
Since the Task Force began in March, federal prosecutors have moved in waves. In Minnesota, the Department of Justice’s National Fraud Enforcement Division’s takedown of 15 defendants caught more than $90 million in fraud, including $46.6 million billed to Medicaid for children with autism. Eight people have been arrested in a Los Angeles hospice sweep, 15 charged in a $1.4 million Massachusetts benefits scheme, and 7 indicted across three states over fraudulent pandemic-relief loans.
The Trump administration is also widening the aperture from individual fraudsters to the states that house them, charging that lax oversight has let fraud flourish in programs meant for the needy. It has demanded more access to the data of federally funded programs, pressed states to verify eligibility more rigorously, and sought enrollee records—including to screen out the ineligible, among them immigrants here unlawfully. Democratic states have fought the moves in court. In May, the Department of Health and Human Services initiated audits of every state’s Medicaid fraud-control unit, demanding each show it is “effectively and aggressively prosecuting Medicaid fraud” or lose its federal money. The much bigger federal stick is the Medicaid program funding itself, which the administration had already begun freezing for states it judges noncompliant. Last week, the Task Force turned its focus to unemployment insurance, when acting Labor Secretary Keith Sonderling warned all 50 governors that the Labor Department would withhold administrative funds from states that fail to tighten controls.
The activists and states resisting all this, purportedly on behalf of beneficiaries, are in fact the safety net’s worst enemies. Generous welfare and social insurance programs depend upon a promise a people makes to itself, that the resources taken from those who work will reach those who truly cannot, and that the compact will hold when any one of us, in turn, falls on hard times. Social insurance puts that reciprocity into practice—calling upon neighbors and strangers as citizens of a nation, bound together in mutual obligation across the country and between generations. To take from that compact without a claim on it robs someone who has one. Fraud, as Vice President Vance has put it, has two victims—the taxpayer whose contribution is stolen, and the beneficiary whose program is looted by someone who was never owed a cent.
Fraud draws down more than taxpayer money. It draws down trust, the basic currency of the safety net. A program endures only so long as the public believes resources are going where they should—that benefits reach the people who qualify and no one else, whether the ineligible claimant is an immigrant without lawful status or a citizen gaming the rules. Once that belief is gone, widespread support for the most generous safety net curdles into frustration at one more institution betraying the people it was meant to serve. Fraud that goes unpunished invites more of it. The answer is to rebuild institutions worthy of the public’s confidence and to impose real consequences on those who plunder them for private gain—evenhandedly holding the small-time cheat and the big-time schemer to one standard, enforcing the rules without fear or favor, up the income scale and down it. That is the discipline any lasting compact demands of itself.
The case for policing fraud holds whatever the size of these programs. You can believe them too lavish or too stingy, but whatever their size, all should be able to agree that they must be honestly run—program integrity is prior to the fight over parameters. Yet it is ground that supporters of a generous safety net too often abandon, waving off fraud as a stalking horse for cruelty and treating any scrutiny of a program as an assault on the people it serves. That reflex fails the citizen who actually depends on a safety net that can hold, which is all of us, whether we need it now or simply recognize that we might at some point down the road. — Daniel
GOVERNING AFTER A REVOLUTION
Five years ago today, American Compass published Five Principles of Tech Governance:
A free and flourishing nation defends its children and provides a protective sphere within which they can develop into capable citizens.
A free and flourishing nation ensures that each citizen has a private domain inaccessible by the market and the state and obscured from public view.
A free and flourishing nation places its citizens in control of its technology, not the other way around.
A free and flourishing nation has the confidence to insist that its markets and media respect individual agency and promote common understanding.
A free and flourishing nation asserts its sovereignty over the markets in which its citizens participate.
These hold up remarkably well for the AI onslaught that has ensued, perhaps a reminder that principles are upstream of technology and we ought to establish them independent of tech progress. As we concluded then, and remains true today: “Technology leaders present their product designs and business practices as both necessary and inevitable, and any drawbacks as merely the price of progress. But permitting technology to operate in ways that undermine our nation’s social foundations and political freedoms is a political choice.” Read the whole thing.
Bonus link: Britain Announces Social Media Ban for Children (New York Times).
GOOD READS FOR YOUR WEEKEND (ER… MONDAY EVENING)
Vegas Was Once America’s Bargain Vacation. Now It’s a Luxury Destination: Like the U.S. economy broadly, Las Vegas increasingly relies on a smaller group of well-off people (Wall Street Journal). Sorry if we sound like a broken record on this one, but as the dynamic becomes increasingly prevalent, the reported stories are bringing it to life. “Executives told investors on the company’s recent earnings calls that they can make more money by charging fewer customers more” is a good summary of where the invisible hand is pointing, and no, this equates to neither a higher standard of living nor full participation in economic life for the typical American.
JD Vance on the Morality of the Trump Administration (with Ross Douthat, New York Times). Promoting his new book, Communion, the vice president again joins the “Interesting Times” podcast for a discussion about his own faith, life in the Trump administration, and the prospects for a peace deal in the Middle East.
The Paradox of Work (Rob Henderson). “People say they want comfort but feel better when tasked with challenges that match their skills,” writes Henderson. “Free time sounds appealing, but it has no built-in structure. You have to shape it yourself, and most people let time pass them by rather than use it to cultivate their skills, talents, or interests. Most people don’t have an inner Mozart just waiting to be unlocked.” This truth helps to explain the limits of “revealed preferences” in the market and the importance of constraints, obligations, and formative institutions for human flourishing. As we say in Reclaiming American Citizenship:
We reject naked consumerism. The folly of unquestioned deference to “revealed preference” in the marketplace has revealed how easily we can lose all sense of higher purpose, succumb to mind-numbing entertainment, and slide toward utter dependence on outside support. We choose instead a nonnegotiable commitment to agency, competence, self-determination, and the use of technology to enrich lives rather than monetize their decay.
Speaking of which…
The Document That Could Define Post-Trump Conservatism (Henry Olsen, Washington Examiner). Olsen offers a thorough analysis of the Citizenship statement. “The very American idea that all people are created equal, and that people’s self-government exists to ensure that equality in theory becomes equality properly understood in fact,” says Olsen, “has been gaining ground, here and around the world, for the past decade. Expect it to continue to grow, and expect Compass’s magnificent articulation of that idea to be cited and drawn upon for years to come.”
Bonus link: Remarkably, Olsen himself has been making this case for more than a decade, dating at least back to his excellent 2016 essay for National Review, “Trump’s Faction”:
Virtually every one of the major concerns that move Trump’s voters can be tied together under the idea that America is an entity that exists apart from voluntary arrangements of its residents, and that this entity obligates all of its members to act on behalf of all the other members. In this view, citizenship is not simply voting and paying taxes: It is a membership by birth in a body that demands things from everyone and in return protects and supports everyone.
…
The implicit understanding conveyed by many in the ‘never Trump’ movement is that the country is little more than a land mass containing individuals rather than an entity with obligations to, and capable of imposing obligations on, those who belong to it.
BAD STUDIES
One of the sadder habits of the legacy institutions clinging determinedly to their neoliberal dogma is the constant effort to buttress their faith-based commitments with “analysis” that takes the form of serious economics but, in substance, amounts essentially to an unpersuasive press release. A couple of fine examples have popped recently from center-left and center-right…
On your left, from the fine folks at the Yale Budget Lab, it’s “Lower Immigration Means Lower Productivity Growth.” Economist Abhi Gupta obtains this result by observing that restrictive immigration policy will change the country’s demographic profile, the changed demographic profile will have fewer businesses started, and fewer businesses started means less productivity growth. QED. As Gupta notes in Appendix C, Methodology, “the headline results capture solely the business-formation channel of immigration policy.” This is a very polite way to say that the headline is false. Gupta might accurately have published a piece titled “If Lower Immigration Leads to Fewer New Businesses, That Could Have a Barely Noticeable Effect on Productivity Growth, Other Things Equal, Which Of Course They Are Not.” At Breitbart, John Carney wades further through the mud.
Bonus link: Border Enforcement Does Affect American Workers’ Wallets (Wall Street Journal). Last week, we highlighted the Journal’s straightforward reporting on the many things economists had gotten wrong about the economic effects of immigration. This week, the editorial page runs a piece by former Bush administration Treasury and Labor official James Carter, who concludes, “when labor markets tighten, prices and wages respond. That isn’t ideology but simple supply and demand.”
Also notable: “A recent Federal Reserve working paper finds that unauthorized immigration accounted for roughly 30% of house-price growth and 20% of rent growth in the average metro area between 2021 and 2024. As that demand eases, so should price pressure.”
On your right, from the fine folks at Americans Advancing Freedom, it’s “Tariffs Tank Employment: Assessing One Year of Liberation Day Evidence.” This paper has problems. How bad is it? Well, they seem to have already taken it down from their website. Not to worry, though, your trusty Understanding America team had already archived a copy. Problems include a nonsensical methodology; writing that seems, well, not human-generated; failure to account for effects of immigration enforcement (beyond misusing the foreign- versus native-born BLS employment data); and peculiar findings like a slowdown in manufacturing employment, even though the level was falling twice as fast before Liberation Day as afterward.
We’ve inquired as to what happened to the paper and will update you on any further developments.
UGLY BUSINESS
Spotted: In the New York City subway, “Have Your Best Baby” (PickYourBaby.com). The IVF+ service helps you “choose the best embryo for you.” Brought to you by the good people of Beverly Hills Fertility, just $9,999/mo. Free egg freezing, but the company keeps half.
And hey, here’s an idea: Free egg-freezing, but the company gets half. It’s called “egg sharing,” kind of like ride sharing, see? But if that’s not for you, there’s also a “Keep” option: “Self-fund your egg freezing and keep the eggs retrieved, with access to discounts.”
IN HAPPIER NEWS…
GM in Talks to Supply Weapons Parts to Lockheed Martin (Wall Street Journal): “General Motors is in talks with Lockheed Martin about making parts for the defense contractor’s weapons, according to people familiar with the matter. ... To replenish supplies, Trump administration and Pentagon officials have pressed weapons makers to accelerate production, while seeking to enlist other manufacturers, including GM.” Good. As Oren and Mark DiPlacido explained in Big Stick Economics, “suppliers for all the components of missiles must also make other things too, so that they have viable commercial businesses in times when large numbers of missiles are not being built.”
And a legislative fight to keep an eye on: Schumer Proposes Ex-Im Bank Revamp As Expiration Deadline Looms (Bloomberg).
SURVEY SAYS
A few poll results that caught our eye:
Semafor: “Most Americans will celebrate the upcoming 250th anniversary of America’s independence, but Republicans are more likely than Democrats to plan on marking the milestone. Eighty-eight percent of Republican voters said they plan to celebrate, according to new Gallup polling, while 60% of independents and 54% of Democrats said the same.”
Reuters: “Some 38% of respondents in the poll—including 40% of Democrats and 26% of Republicans—said they didn’t think the U.S. will exist as a single country 250 years from now. Just 62% thought their nation would last.”
Brad Wilcox: “What’s best for the kids? Striking new numbers from Pew on work/family re: the kids: Only half (49%) of parents who both work full-time say it’s good for their children versus 85% of parents with mom at home who say their arrangement is good for their children.”
Finbarr Bermingham: “Eye-opening findings in Bertelsmann Stiftung survey on the eve of EU leaders debate on China. 77% in the EU feel their countries need to reduce dependency on China ‘even if it hurt your economy in the short term,’ including 80% in Germany, 84% in France, 72% in Spain.”
CHECKING IN ON CHINA
Maybe all those EU poll-takers have a point?
China Shock 2.0: Surging Chinese Exports Threaten Europe’s Economy, Raising Concern at G7 Summit (Associated Press).
A Trade War Between the EU and China Seems Inevitable (The Economist).
Hedge Funds Bet Against European Carmakers on Chinese Competition Fears (Financial Times).
But can they get more than a pinkie promise? Europe Rallies Around Tough New China Strategy Ahead of Key Summit (South China Morning Post):
From free marketeers to long-term interventionists, EU countries of all stripes are converging on the need for urgent action to prevent a Chinese-driven European deindustrialisation ahead of a key summit in Brussels, multiple sources said on Wednesday. A broad coalition of members now support the development of a tough new trade strategy that could involve multiple new instruments and a more rapid-fire, strategic use of existing weapons. One of the tools could be modelled on US President Donald Trump’s Section 301 tariff measures, which have been used against both the EU and China. The idea was first floated by French President Emmanuel Macron, and while there are still concerns over its compatibility with global trading rules, others have expressed interest.
But wait, The Economist’s market fundamentalists have a better free market plan: Couldn’t we just wait for China to change? For Its Own Sake, China Should Change Its Growth Model.
Meanwhile in the United States, the lack of a clear strategy continues to pose challenges. Rules against Chinese vehicle content are beginning to bite—U.S. firms are reshoring production, foreign suppliers are working to circumvent Chinese control—but companies like Ford that have gotten a bit too cozy with the Chinese Communist Party are now asking for exceptions. US Connected-Car Rule Prompts Ford, Other Automakers to Seek Licenses for China-Built Models (Reuters). How about a nice hot cup of “no”?
And, US Holds Off Blacklisting China’s DeepSeek, More Than 100 Firms Deemed Security Risks, Sources Say (Reuters). Is it too much to ask that the Department of Commerce move against obvious foreign security threats with anywhere near the alacrity it moves against American national champions? Ah well.
Enjoy the week!
How about enforcing the tax code just as vigorously as Cass and Trump support looking for spending fraud? Aren’t those issues on different sides of the same coin?
In a logical country, liberals would be the most aggressive against fraud because it would leave more room for other goals. It has always baffled me that there's such a blind spot among them.