Musk’s Fraudulent Fraud Squad

A tired trope gets a new lease of life

Fraud, waste, and abuse has become the rallying cry for Elon Musk’s dismantling of the federal government. During a recent Oval Office briefing about DOGE, Trump and Musk used the terms “fraud” and “fraudsters” a dozen times, claiming that their elimination of fraud could save up to $1 trillion dollars.

Musk’s social media is similarly laden with tales of fraud and abuse that his DOGE team has supposedly uncovered. Millions of dead people receiving fraudulent Social Security! “Illegals” living in high end hotel rooms paid for by FEMA! Corrupt USAID bureaucrats ripping off the government and enriching themselves! None of it is true.

Musk and Trump’s focus on fraud is nothing new. Fraud has always served as a powerful political trope, one that provides a rationale for cutting government. Accusations of fraud were used to discredit Black elected officials during Reconstruction. Ronald Reagan’s Welfare Queen was an especially effective trope directed against poverty-based policies. A recent poll suggests that 70% of Americans believe government expenditures are filled with waste, fraud, and inefficiency.

Trump and Musk’s fraud trope is distinct in three ways

First, Musk’s fake fraud claims are different from the past because he has built, and now is able to leverage, a propaganda machine to feed the fraud narrative. Ronald Reagan was an extraordinarily effective communicator, but Musk makes him look like an amateur. Musk can use DOGE to generate false claims about fraud, and how much money DOGE can save by tackling it. He then pushes those claims on his social media platform. The President and right-wing media obligingly repeat the claims. It is an integrated production function that converts conspiracy theories into government policy, and then conventional wisdom in MAGAland.

Second, as we describe below, the scale and scope of the programs they’re targeting are fundamentally different from the past. It’s not just to gut programs that benefit marginalized populations. They’re targeting a broad swath of government programs, including popular policies that benefit most Americans, and using the fraud trope to justify extreme and illegal actions, like shutting down entire agencies. This fits with a worldview that government is fundamentally corrupt, and must be captured and radically refashioned.

Third, the motivation is not really about shrinking government, rather it’s about state capture. The strategy is simple. Claim there’s fraud, dismantle the institutions that prevent fraud, and then capture public dollars for yourself. As Musk himself recently noted: “it's like, really easy to take advantage of the federal government. Very easy.” He should know. His companies have received at least $38 billion from government subsidies, loans and contracts. Their value, and his personal net worth, have ballooned since the election.

And here is the key point: Musk is the one committing an unprecedented fraud on the American people, conning it out of a functional government. He is systematically lying, claiming that there is widespread fraud and abuse, then leveraging those lies to remake government in ways that benefit the broligarchy.

Purpose 1: Targeting core programs in unprecedented ways

Part of what’s unusual about about these fraud claims is the breadth of programs they’ve targeted and the dramatic actions justified by claims of fraud. Lets take two examples. With USAID, they’re targeting a program that does not have broad support but proposing an unprecedented action: shutting down an agency that has existed since 1961. With Social Security, they’re focusing on a nearly universal and immensely popular public program. (To keep this post to a reasonable length, we will embed fact checks, but not explain them all. As Brandolini’s law notes: The amount of energy needed to refute bullshit is an order of magnitude bigger than that needed to produce it).

USAID

Here are some lies Musk has told to justify dismantling USAID

• Musk said that former USAID Administrator Samantha Power was “walking away with 30 million dollars”arguing that “there are quite a few people in the bureaucracy who have ostensibly a salary of a few hundred thousand dollars but somehow managed to accrue tens of millions of dollars in net worth while they are in that position.” But it’s a lie. Musk made the accusation after Power published a New York Times article defending USAID. His attacks likely reflect a Trumpian strategy of trying to silence critics with unfounded smears.

• Musk said that USAID was sending $50 million in condoms to Gaza (which Trump adjusted to $100M going to Hamas). Just a lie. Made up.

• Musk claimed that FEMA was spending money to put migrants in “luxury hotels.” Not true. Strikingly, DOGE went so far as to engage in an unprecedented and likely unlawful claw-back these funds from New York.

Accusations of fraud and abuse are especially effective in an information vacuum. Most Americans don’t really understand what USAID does. On average, they believe about one quarter of the federal budget goes on foreign aid. The reality is that its about 1%. If someone you trust is telling you the agency you know little about is rife with fraud, you might just believe it. A recent poll found that over 60 percent of Americans think foreign aid is largely wasted on corruption.

Why does this matter? Trump and Musk are using fraud as a rationale to engage in actual illegal behavior—by effectively shuttering USAID without Congressional approval. President Trump, after being challenged about the legality of the closure, made this argument: "if there's fraud, these people are lunatics. And if—if it comes to fraud, you wouldn't have an act of Congress.” Musk called USAID “a criminal organization. Time for it to die.”

Social Security

While targeting stigmatized populations is nothing new, Musk has upped the ante. He is also targeting Social Security, the “third rail” of politics. Trump has long respected Social Security’ political strength, promising never to cut benefits. It turns out, however, the promise was conditional. As he recently warned, “Social Security won’t be touched, other than if there’s fraud or something.”

Trump is not saying people are getting too many benefits, or that we need to cut the program. Instead he says: “It's all a scam, the whole thing is a scam" but he’ll save it by eliminating fraud. “The good thing about Social Security and what I read is if you take all of those numbers off because they're obviously fraudulent or incompetent... all of a sudden we have a very powerful Social Security with people 80 and 70 and 90 but not 200 years old.”

Trump repeated these claims at a Cabinet meeting: “you see people who are 200 years old who are being sent checks.”

Musk provided the ammunition. He claimed that millions of people are fraudulently receiving Social Security benefits, that he had “uncovered the biggest fraud in history.”

Once again, none of it was true—the numbers reflected how decades-old software managed missing data. It also reflected how little DOGE employees understand these administrative data and, somewhat embarrassingly for a tech group, how Cobol software works. People in the Social Security Administration knew about this, but DOGE is in the business of firing experts, not talking to them. There was even an Inspectors General report, but DOGE’s primary news source appears to be right-wing posters on X.

The reality is that ‘fraud’ is almost non-existent in Social Security. An examination of data from 2015 to 2021 shows that after accounting for overpayments and underpayments, and the recovery of overpayments, the loss rate is around .001%. As a point of comparison, the 2021 average retail shrink in the private sector, due to administrative errors, vendor fraud, shoplifting, and return fraud, was 1.44%.

This ignorance and outright deception is frightening given DOGE’s unprecedented access to Social Security data and treasury payment systems. The Acting Social Security Commissioner, Michelle King, resigned, apparently in response to her concern about DOGE’s access to sensitive data. President Trump responded by promoting Leland Dudek to Acting Commissioner. Dudek was a mid-level employee placed on leave for providing DOGE likely illegal access to Social Security data. But loyalty to Musk is a ticket to power in Trump’s administration.

Dudek has told SSA staff that he is seeking to cut the number of SSA employees in half. There is no financial emergency. This will predictability result in worse outcomes for SSA recipients.

Medicaid is up next. While not as popular as Social Security, Medicaid is still broadly popular and used by huge numbers of Americans. Speaker Mike Johnson emphasized fraud as the justification for passing a House budget bill that would force massive Medicaid cuts to protect regressive tax breaks. The strategy is trickling down to the state level, with Florida announcing its own DOGE.

Purpose 2: Undermining the government’s capacity to address fraud

It might seem hard to believe, but the government was focused on reducing fraud before now. So how they did miss the billions that Musk is uncovering? It’s because Musk and Trump are not actually focused on fraud, just on spending that they dislike. Jessica Tillipman, an expert on government procurement law at George Washington University said:

Nothing they have identified is, to my knowledge, evidence of ‘fraud’ or ‘corruption.’ Fraud and corruption are crimes. This administration simply has different spending priorities than the last administration. But to label all of it as fraud or corruption is extremely misleading.

The gross irony is that Musk and Trump are not just ignoring people who understand and try to prevent fraud, they are removing or silencing them. And more broadly they are undermining key agencies, including Consumer Financial Protection Bureau and the IRS, which can be most effective at addressing fraud perpetuated on government and the public.

Target #1: Inspectors General

In fact, the government employs a whole bunch of people whose entire job is to detect fraud. The Government Accountability Office has tracked potential fraud for decades. Within the executive branch Inspectors General are focused on waste, fraud and abuse. Trump has illegally fired an unprecedented number of them. Why? Trump dislikes any actors who might threaten to expose his wrongdoing. The day after an Inspector General overseeing USAID pointed out that Trump’s spending pause could lead to over $8 billion in fraud and waste, he was fired.

A government serious about fraud would be paying attention to those who have been taking the topic seriously. Instead, Musk and Trump's primary motivation appears to be to spread false claims about fraud.

Target #2: The Consumer Financial Protection Bureau

DOGE and the Trump Administration have also gone aggressively after agencies that are tasked with rooting out fraud and abuse in the private sector. The Consumer Financial Protection Bureau was the first agency in Musk’s crosshairs.

Musk had been a public critic of CFPB, specifically its regulation of tech companies movement into financial services, so called fintech. In 2021, Marc Andreessen was forced to close one of fintech companies he funded after CFPB had caught the company misleading and overcharging consumers and veterans. After Andreessen posted a screed against CFPB on X in November 2024, Musk commented: “Delete CFPB. There are too many duplicative regulatory agencies.” Andreessen became a Trump supporter who helped to staff DOGE. Musk, and Andreessen, got their way. As Trump neutered the agency, Musk launched a new payment system on X, which CFPB would have been responsible for regulating.

But defanging CFPB doesn’t just personally benefit Musk and other DOGE supporters, it limits the federal government’s overall ability to monitor and reduce fraud for all Americans. From its inception to its effective death, CFPB recovered more than $20 billion dollars in consumer relief and $5 billion in civil penalties. Its activities included tackling junk fees, regulating megabanks, and protecting students and veterans from loan scams.

Musk may have “cut” spending at CFPB, but he did not save any money for the public. Instead, he simply made it more likely that they will be exposed to fraudulent practices.

Target #3: The IRS

The agency that can be most effective at reducing fraud, waste, and abuse is the IRS. Every year, we lose $600 billion to tax fraud—or what the IRS politely calls “the tax gap.” About 80% of this is concentrated among the wealthiest taxpayers. When accounting for corporate tax cheats this amounts to $1 trillion dollars annually. Cryptocurrency and large and wealthy corporations account for much of this.

A ProPublica investigation of tax records estimated that Musk paid no income tax and just 3.27% of his wealth growth. Much of the shielding of wealth may be legal, but some is in a grey area. Fewer IRS enforcement agents expands that grey area.

The Trump Administration has already fired 6700 IRS workers during the 2025 tax season. As with the CFPB, investments in tax enforcement more than pay for itself. Every $1 dollar the agency invests in enforcement generates $5 to $9 dollars in revenue.

Every IRS Commissioner from President Reagan to Biden warned how destructive these cuts are:

Aggressive reductions in the I.R.S.’s resources will only render our government less effective and less efficient in collecting the taxes Congress has imposed. It will shift the burden of funding the government from people who shirk their taxes to the honest people who pay them, and it will impede efforts by the I.R.S. to modernize customer service and simplify the tax filing process for everyone.

Purpose 3: Providing a veil of legitimacy for state capture

Trump and Musk are using DOGE to take a wrecking ball to the federal government in ways that benefit themselves, and others just like them. It is a pathway to state capture and crony capitalism.

But they need a justification, a rationale. The fraud trope has proven effective. You can almost choke on the irony. Trump, a convicted felon with a record of fraudulent dealings, bemoaned in his discussion of Social Security fraud “[w]e have a very corrupt country — a very corrupt country. And it’s a sad thing to say, but we’re figuring it out.”

Musk can now fire the federal employees who regulate his companies, and terrify those who remain. He can similarly threaten those who provide contracts to his companies. The threats do not have to be overt. But how many procurement officers or regulators will push back?

Lets take the FAA as an example. Musk pushed for the removal of the head of the organization, who had been critical of one of Musk’s companies, SpaceX. After his resignation, a spate of crashes drew attention to safety issues at FAA. What did DOGE do? They fired probationary FAA employees, including those working in safety roles. He announced SpaceX engineers would help fix FAA, which is now cancelling a $2.4 billion contract with Verizon and awarding it instead to Starlink, one of Musk’s companies. It can be very handy to be both the guy who is charged with defining what problems government has, and then selling it some solutions. It is a neat trick to turn a regulator of your companies into a customer.

Musk’s claimed savings are a fraud

Republicans are acting like Musk has discovered a secret weapon to uncover fraud. That is because they are inclined to believe such fraud exists, and that spending they disagree with is inherently wasteful and should be cut, legal niceties be damned. The same politicians who routinely treat scientists as the enemy now say “data doesn’t lie.”

Well, some data does lie.

whoops

Musk is not just making fraudulent statements about fraud, he is doing the same about the supposed savings he is making. There are three big problems with the claimed savings of DOGE:

• These savings never reflect the value of the services being cut; the IRS and CFPB show cuts that actually generated a net loss for the public. (Reporters, please don’t refer to them as savings, or “efficiency” which is about the ratio of inputs to outputs).

• Some of the claimed cuts are just illusory. One DOGE claim of an $8 billion saving was for $5.5 million, but who’s counting?

• Many savings are for contracts cancelled are claimed even though the money has already been spent. At least 40 percent of cancelled contracts will produce no savings.

And there is effectively no oversight of DOGE’s activities. The Trump Administration is addressing Musk’s conflict of interest by stating that he will simply let us know whether he has a conflict of interest. This is the government we have now. Musk falsely claims government is massively corrupt, uses those claims to engage in illegal actions, while he himself is shielded from any accountability.

For more on this topic, read public administration expert Don Kettl, who says that DOGE “puts in danger the progress that the government has made in reducing fraud, waste, abuse, and mismanagement—and it opens the door wide to even more.” Tim Snyder describes how the fraud trope is being weaponized:

The "Fraud" Fraud