This is one of those things I think almost entirely flies under the radar. When people think about what does the federal government do that I think about national defense and I think about some of the most security. Something that eclipses both of those things in size is aid to state programs. Now the bulk of this is welfare and the bulk of that in turn is Medicaid. The federal government currently delivers more than $1 trillion per year to state and local governments. This is a number that has been growing considerably faster than the size of the economy for quite some time now. And unfortunately one of the largest problems we have is with accountability. So for example if there is a charity that you work with or donate to that could be say a religious organization, it could be local food bank, it could even be a larger national charity. Americans are capable of achieving extraordinary things when they have the freedom and opportunity to do so. This is American Potential. Welcome to the American Potential Podcast. I'm your host David Fromm. So we're going to be talking about housing on this next episode and really the challenge is that a lot of younger people, not so young people are having about affording housing. So Matt you live in rural Colorado and you're in that demographic of millennials who are having a hard time affording a home. What's your experience in those of your friends like? Well and you know I, looking at a lot of what some of my friends have experienced and have gone through. And I'm at least speaking for sort of the younger end of the millennial generation now. And it's affordability. Affordability has just been a major problem when it comes to buying houses. Houses are really expensive but so is everything else. So when you look at your ultimate budget the amount of house you can get if you can get a house is not a lot. And at least here in Colorado you know a few years ago I saw there was a lot of challenges with both availability and price. Prices were high and then availability was low. I mean there would be a house that would go for sale and 100 people would go check it out immediately and within a few seconds it was under contracts. You couldn't even get the house. Now at least here where I'm at the availability is kind of, there's at least a little more of it but those prices are just sky high again and at least speaking for people in my age range it is a big topic. It's something we talk about a lot. And along side that I went home for 21, 22 years, a few different homes and housing issues have never been the top of my list of things that get me really animated. But I was meeting with a team of ours, an American prosperity team and they were talking about their legislative agenda coming up and what they were working on the state legislature and one of the young really sharp guys mid-20s he wanted, he spoke up and said I want to work on our housing issue, our housing reform policy and I was like man that seems weird like why you know and then the other young people in the room were like yeah no I'd love to be involved in that too. And the reason is that it's what they're living, that in their lives right now their experience is like I can't afford a home and I can't kind of take that next step in what we always considered the American dream of being a homeowner and that's why they were going to work on it and that's one of the reasons why we're working on housing reform policy throughout the nation and state legislatures throughout the country. So when you donate to charity or tie it to a church you're really saying I trust you to use the money wisely and if it isn't you usually stop giving. But with taxes we don't get that choice. The government takes its share before we even see our paychecks. So when you see headlines of fraud happening with taxpayer funded programs in different states it's beyond frustrating. But the real question is how bad could this be? Well let's find out with our guest today David Ditch who is a senior analyst for the Economic Policy Innovation Center otherwise known as EPIC. David thanks for joining us. Thanks for having me. Thanks. Well hey tell us what the Economic Policy Innovation Center EPIC does. It's been around for a little over two years. We focus on trying to provide quality policy solutions to directly to Capitol Hill based on the needs of both what's going on legislatively and also what are some of the biggest problems facing the country. Well I guess trying to provide good economic policy solutions to Capitol Hill is a badly needed niche that you're filling then. There's definitely a need for that. We were able to be very hands on during the crafting of the reconciliation package that passed last year with sex cuts and also historic welfare reform. We're trying to do much the same this year on issues like appropriations and the forthcoming highway bill. It's fabulous. Yeah and I know I mean EPIC has been a great partner to Americans for Prosperity. So I'm happy for us to kind of do our distinct things but also you know we at the end of the day we want to see the same policies realized and so it's been a great partnership and I'm thrilled to talk about or maybe I shouldn't say thrilled maybe that's the wrong word here. I'm excited to dive into some of the work that you've done and the knowledge that you can bring forward about what we've heard in the news about so many waste, fraud and abuse at a really incredible scale where charities are really abusing the system and taking federally funded money and totally misappropriating it. So I kind of wanted to step back and start with you know characterizing what programs are out there, what the federal government does with regard to aid to state programs. So you know generally how much does a federal government spend on aid to state programs you know at our current state? This is one of those things I think almost entirely flies under the radar when people think about what does federal government do they might think about national defense and might think about something like social security something that eclipses both of those things in size is aid to state programs. Wow. The bulk of this is welfare then the bulk of that in turn is Medicaid. The federal government currently delivers more than $1 trillion per year to state and local governments. This is a number that has been growing considerably faster than the size of the economy for quite some time now and unfortunately one of the largest problems we have is with accountability. So for example if there is a charity that you work with or donate to that could be say a religious organization, it could be local food bank, it could even be a larger national charity. If that charity is doing something bad with your money you're good chance you're going to find out about it and you're going to send your money elsewhere. If it's going to a government program you have no ability to monitor all the $1 trillion all the different places that money is going to or even you can bring it down more at the state level. You don't know all the different places that the state is sending the money and unfortunately in many cases the states don't have a strong incentive to prevent waste, fraud and abuse because so much of it is coming from the federal government and is therefore a quote unquote tree to them. Yeah so I live in the state of Illinois. Hardly a bastion of fiscal accountability or responsibility or freedom or low taxes or anything that we would like to see. And I've seen just you know when the one big beautiful bill or you know we call the family working family tax cut act went through you know there's accountability measures in there that I know you guys worked on that are basically seem very common sensical when somebody thinks about them and what we're seeing is that the state you know the state government of Illinois for instance was like these are draconian these are terrible people are going to starve. What we're and I know Medicaid is part of this too what were what are those programs that are that have tried to instill more accountability in these state programs the federally funded state programs that were in the working family tax act or elsewhere. So the welfare reforms in this package were the largest in frankly possibly in the history of the world. Wow. If you can go back to the 1990s there was a very famous welfare reform that was enacted a compromise between Republicans in Congress and then President Clinton which saved about a hundred billion dollars. was credited with helping to push people off welfare roles and into work helped the 90s economic boomlet to you feel a little more productive. Unfortunately over time certain welfare programs weren't very reformed or certain reforms sort of fell by the wayside. Now we need we needed to do you know welfare reform 2.0 so to speak the one big beautiful bill package included reforms to both Medicaid and to supplemental nutrition program or food stamps which are designed to give states strong incentives to reduce improper payment rates because these program for other funded at the federal level they are implemented at the state and local level. So one of the things that I think has been very misunderstood there is this talking point that these reforms have led to dramatic cuts to the programs. The fact of the matter is that these programs are now going to be better tailored better focused on the truly needy but also in particular for the Medicaid program. It's not a matter of an absolute spending reduction it's a matter that the rate of gross has been lowered. Despite these reforms Medicaid spending is still going to be higher every single year moving forward it's just it's going to be growing about in line with the economy rather than growing twice as fast as the economy. So Medicaid is essentially funding so that the neediest lower income folks can get health care. That's what it pays for. Yeah. But you know there's some real fraud taking place there. Can you kind of talk about that and maybe if you have any examples of what's going on there. So the sort of official estimate for improper payments in Medicaid is around $30 billion per year. That should be serious money although here in the swamp it's not. However my colleague Rachel Gressler along with Brian Blaze of the Paradigm Health Institute did some analysis. They believe that the true scale of fraud in the Medicaid program might be closer to $150 billion per year. To be determined how much that will be reduced by the reforms that were passed last year. However unfortunately I don't believe those reforms are going to I don't think it's possible for any handful of reforms to address a problem that's at that large of a scale. There was a resource that I was you made aware of in the last couple months. In 2025 the Department of Justice released a national health care fraud takedown report and it highlighted different instances of Medicaid fraud that are being prosecuted. The largest of which a Pakistani man was charged with a $650 million scheme related to substance abuse treatment being performed out of Arizona. A man in California was charged with $269 million in fraud. When we think about fraud schemes we might think about numbers that are literally $11,000 that much. You know hundreds of thousands of dollars was a big scheme. So what are they doing in that fraud? What specifically are they doing to commit fraud? They're submitting fraudulent requests to state government saying that we provided this service to this person at this time when in fact in many cases no service was provided or perhaps they provided a small service but then they're adding additional services that they claim were provided. State governments are paying for these quote unquote services and then the federal government is reimbursing the vast majority of the cost. Again, this is the number one reason why this is a problem. If this was all coming out of pocket of state governments, because state governments have to be accountable for every tax dollar because state governments can't run up a massive deficit every single year the way the federal government can, they have incentives in other parts of state government to be a lot more economical, to be a lot more cautious, to make sure there is not widespread fraud. But when the federal government is covering 70, 80, 90% of the cost depending on the particulars of a given Medicaid patient, there is much less incentive and in fact in many cases state governments actively desire to increase the amount of money that goes out the door in Medicaid because they view it as an economic stimulus because of how heavily they're being reimbursed by Washington DC. Wow. So, is this also similar to what we saw in Minnesota and now I've started to see in California and other places we started to see in the news a number of sensational like really unbelievable schemes to just keep taking in the federal money into different states and then using it for fraudulent purposes. Is this the same kind of program? Yeah. And what's happening, we're seeing in places like Minnesota is oftentimes person or a group of people who really dedicate themselves wholesale to fraud will find multiple different avenues for committing fraud against the federal government. So, for example, it can be a combination of Medicaid and food stamps and different social programs related to children. So, for example, there are programs related to childcare, there are programs related to education. And again, it's the same thing where there is either completely fraudulent bills being submitted to the state governments or just padded bills. Children might not be going to a particular childcare center or they might only be going a couple hours a week with their state governments being billed for a large number of hours for every single one of these children. And again, there is a set of reforms that are coming down the pike. The reforms that were passed last year are going to be implemented over the course of a few years. However, unfortunately, there is more work that does need to be done because there are still some holes in the system. Certain policies weren't able to be worked into the package given the push to pass it by July 4th. In other cases, there were certain things that were still sort of weren't fully baked in terms of legislative text, which is one of the reasons why we at Epic are really hoping that Congress will pass a second reconciliation package this year. Well, that would be great. I know this was an historic bill, but there's definitely more that needs to be done because it's such a giant problem. So let's move over to SNAP, the Simple Mental Nutrition Assistance Program or Food Stamps. You wrote an article that shared some stories about the Department of Justice prosecuting people. What's that story and what's the deal with how we are looking at reforms with SNAP and what else needs to be done? So we're looking at around $100 billion of food stamps spending in fiscal year 2024 and an estimate of about $9 billion in proper payments. Again, $9 billion is real money if you look at it in terms of the average household. It's going to be tens of thousands of households worth of economic productivity. Just as an example, the federal government charged a scheme where it was not only a group of people, but also a federal employee who works in the anti-fraud part of the food stamp program. They defrauded the government in tune of $66 million. Again, just to say, it'd be one thing if it was $600,000 or $6 million, but $66 million just from a relatively small group of people, that is the scale of fraud that is possible given how much money flows through these programs. This is not always easy to detect. One of the things that's important to keep in mind is that there is waste fraud and abuse. Some of it is illegal and some of it is illegal fraud, but some of it is what I would call legal fraud. Programs like food stamps are set up with a very clear purpose for helping the disadvantaged, the needy, the vulnerable. Yet, if they're poorly designed or poorly implemented, these programs are often ending up benefiting people who are well off. In some cases, millionaires are able to benefit from food stamps. One of the largest problems is broad-based categorical eligibility. A lot of words, what does that mean? What it means is that if someone meets a handful of criteria independent of things like assets and income, they are deemed automatically eligible. For example, someone who receives some form of government assistance, other form of government assistance, whether it's a housing or energy assistance, are deemed to be automatically eligible for food stamps. The definition of assistance can be gained by a state from the point where if someone receives an informational pamphlet on available benefits, that pamphlet is deemed a benefit in and of itself and therefore someone who can be living in a $2 million house and qualify for food stamps just for receiving a pamphlet. Again, the state governments are willing to play these types of games, are willing to tolerate this kind of abuse, this kind of legal fraud because the money is primarily coming from the federal government and then it's being spent in the state and local grocery stores. Therefore, they view it as this fraud is a shot in the arm for the local economies, which they would never go along with if they were covering a full freight. Totally. Yeah, there's different incentives that work there and definitely lack of accountability. So, the working family tax cut, I know had some reforms here that some of the states really cried bloody murder about, but could you describe what those common sense reforms were? Some of the reforms are having to deal with just, again, targeting the improper payment levels, targeting some of the eligibility rules. For example, their eligibility rules relating to working. And in this case, it's not even work. There's a phrase they use called community engagement, which is some combination of work and volunteering and even education. You're doing these types of activities for just 20 hours per week, 80 hours per month or so. And your income is still low. You can qualify for these benefits. Again, to me, this is common sense. If you ask the typical American, should someone who doesn't work, doesn't try to work, just sits around at home, should they be getting welfare and is capable of work? I should also add there's the work capability aspect of that. Should they be on welfare, the person's going to, most Americans are going to say, heck no. Focusing the programs on people who are pregnant women or mothers of young children, they're disabled, rather than work capable who are actively choosing not to do anything with their lives. And again, states are not expected to implement these reforms, these eligibility issues overnight. It's going to take a couple of years in some cases to get things off the ground. However, when the Congressional Budget Office was calculating who is likely to no longer be receiving benefits from Medicaid, from food stamps, it is entirely groups of people such as illegal immigrants, work capable adults who are choosing not to work, or people who do not meet other kinds of eligibility requirements such as they make too much money, who are going to be using access as opposed to the people who really have no alternative but to receive welfare. So, let's turn over to another department, HUD, the Department of Housing and Urban Development. What have you discovered there? So, for HUD, out of roughly $50 billion in annual rental assistance, they are estimating that about $5.8 billion in questionable payments are floating around. And again, this is one of those tricky things. Is every dollar questionable payment fraudulent? There's a similar term, improper payments. Is every dollar of improper payment waste, fraud, and abuse? In some cases, yes. In some cases, it can be a little murky. It's one of the problems when these programs are being implemented at the national scale in a country the size of the United States. It's almost impossible to identify exactly how much fraud is going on. Yes, there are many instances in which people are receiving housing benefits that shouldn't be eligible. For example, someone might be receiving housing assistance, they might pass away, but then someone is still living in that residence collecting those benefits on behalf of the deceased person. And this isn't always easy for agencies to detect because one agency is in charge of collecting certain data and another agency is in charge of collecting other data. They don't always communicate with each other, so they don't always know, for example, if someone has passed away or if someone has moved and should no longer be receiving benefits for that particular residence. So again, in some cases, people are receiving payments from our government to cover housing costs in multiple locations. So the Biden administration did something when it came to childcare providers. This has been kind of a flash point in the news over the last few months, initially in Minnesota and then other states where childcare providers seem to be a kind of a favorite entity to try to execute this fraud. So what did the Biden administration do when it came to childcare providers and how does it need to be fixed? Here again, you would think that the number one thing you're checking in terms of is a childcare provider doing what they're supposed to be doing is attendance checks. And yet the Biden administration in 2024 issued a rule that weakened attendance verification, making it much easier to commit fraud. Fortunately, this is one of the many very destructive Biden administration rules that the Trump administration is targeting for reform. But unfortunately, it's not like on day one, they issue a new contrary rule. They have to go through an entire rulemaking process. Unfortunately, the federal government is a big shift and when you're trying to change course, those kinds of shifts take a long time to shift. Buddy, do you feel like the Trump administration, are they doing avert by rulemaking or is it really more through congressional action that they're trying to get their hands around some of this waste front abuse? Yeah, I think it's absolutely, it's a combination of the two things. So for example, last year when there were the negotiations about what would be in the one day of the political bill act, the president could have said, no, I don't want anything else just passed the tax cut, but no, he was comfortable. He understood that conservatives in Congress really wanted to promote a lot of reforms that would slow the growth of federal spending because ultimately the true cost of government is what it spends over and above what it taxes. He was comfortable with it and that's why we ended up getting both the tax cuts and the welfare reforms. So he was supportive of the welfare reforms and at the same time, they have been implementing actions in some cases, making reforms that have been needed for some time. In other cases, simply reversing bad policies implemented by the Biden administration. The bottom line is more progress was made in 2025 to reform the welfare state, again, then possibly any other time in the nation's history. And it is a testament to how bad things got that there's still more work to do even after everything that we accomplished last year. Well, David, I appreciate the work that you and your colleagues at Epic are doing to try to get some sanity here and kind of push some good reforms and good economic policy. I've been able to watch you guys over the last few years, the couple of years have been existence and you've been for a young organization, you've been super effective. So I really appreciate the hard work that you're doing. Appreciate that very much. Thanks. Well, folks, if you liked this episode and would like to stay connected, be sure to like and subscribe to our channel as well as follow us on Facebook, YouTube and Instagram. And always remember, freedom and liberty are easily taken for granted. Don't take them for granted. Go out there and defend liberty and freedom. Thanks for joining us and we'll see you on the next episode. Thank you for listening to American Potential. 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