The news is awash in stories about welfare fraud—in Minnesota, but also across the country. 

The cost of this fraud is impossible for a person to imagine, as it reaches into the tens of billions of dollars—tax dollars, money extracted from our economy or put on the national debt to enslave future generations. 

Thankfully, Gov. Kevin Stitt has ordered a review of all Oklahoma welfare programs.

Yet none of this should surprise anyone. These programs are designed, intentionally or not, to be fleeced. Is it illegal? Sure, but laws on their own are “parchment barriers,” as James Madison would say. What matters are incentives. And the incentives in these programs are to sign more people up and push more money out. The odds of fraud recipients getting caught are extremely low. But have you ever heard of a government employee being reprimanded, let alone prosecuted, for approving and facilitating the fraud? As long as they’re not the recipients, they’re never held to account.

The incentive is not to sign up more qualified people, just to sign up more people. The incentive is not to spend within legal limits so much as just to spend more. Do the opposite, and your budget might be cut, or even your job.

This is not an easy problem for politicians—officials who must win elections. Spending more can always be cast as compassion. Signing people up to receive government benefits is one way to buy off future voters. Rooting out abuse is often attacked as mean-spirited or even racist.

The first step to addressing fraud, waste, and abuse is to acknowledge these incentives. It is not one-time audits or more severe penalties for people unlikely to ever get caught. One way to improve incentives is to limit the amount that can be spent in a particular program so that everyone knows that a dollar in fraud deprives someone else of benefits. Most federal welfare is “mandatory spending,” which has no limit short of national collapse. (Much of the COVID bailout funding was also mandatory spending, a radical departure from previous bailouts.)

An easier improvement would be to connect specific agency staff members to specific welfare approvals and then implement regular audits. Does a particular staffer almost never decline applications? That warrants an internal investigation. Did a recipient just get charged with fraud? Let’s see who approved that application and whether he actually did his job. Agency leaders and the Legislature should take an interest in whether staff are held accountable.

Even better would be changing the culture within agencies so that catching fraud, cutting waste, and simply helping people to transition off these programs is viewed as success. That will require both better incentives and thoughtful leadership. Yet doing so would serve the interests of benefit recipients and taxpayers alike.