Executive Summary
The United States faces serious fiscal challenges. Correcting the nation’s unsustainable fiscal course will require difficult policy decisions. Policymakers must address the factors driving structural deficits—for example, by reducing expenditures on major entitlement programs or enacting substantial tax increases to dramatically increase revenues to pay for federal programs. These decisions will involve significant tradeoffs.
But one area of potential government savings that should warrant broad bipartisan support is increasing government efficiency, such as by preventing fraud and misspending in government programs and generally making the taxes that Americans pay go further by making the government work better. Such reforms have the potential to save hundreds of billions of dollars annually and, over time, meaningfully reduce the nation’s deficit spending. While the Trump administration has prioritized increasing government efficiency, executive action is not enough.
This report presents recommendations for Congress to increase government efficiency. Congress should:
1. Strengthen the federal government’s financial controls and transparency to prevent fraud and misspending. Nonpartisan watchdogs estimate that the government loses between $233 billion and $521 billion annually to fraud. The federal government made at least $162 billion in improper payments (including $135 billion in overpayments) in 2024.
2. Review and rescind unnecessary, unobligated funding. In 2025, the Treasury Department identified $1.6 trillion in unobligated balances—funds that Congress appropriated but that have not yet been committed to be spent. Much of this funding could instead be saved and returned to the Treasury to reduce the deficit—for example, the more than $23 billion in unspent COVID-19 relief funds and more than $20 billion in broadband grants that states have chosen not to apply for. Congress must also require federal departments and agencies to show the American people how their tax dollars are being spent.
3. Prevent fraud and misspending in federally funded, state-administered programs. Roughly $1 trillion, or about one-third of state government spending, comes from the federal government. Major federally funded, state-administered programs have been found to be highly vulnerable to fraud—for example, the unemployment insurance program is reported to have lost more than $100 billion during the pandemic.
4. Leverage AI to streamline regulations and government operations. States and municipalities have used AI tools to conduct retrospective regulatory reviews to streamline government codes and reduce red tape. A White House report issued during the Biden administration identified how certain government positions could be disrupted by AI.
5. Modernize federal information technology. Approximately 80 percent of the more than $100 billion the federal government spends on IT is devoted to operations and maintenance, including for legacy IT systems. Federal agencies’ inability to effectively modernize IT systems has resulted in substantial waste of taxpayer dollars and imposed real harm.
6. Reform the federal civil service to improve public accountability. The federal government spends $360 billion annually on more than two million executive branch civilian employees. Ensuring that federal workers are accountable for their performance has been a longstanding challenge.
7. Review and address watchdog recommendations. More than 18,000 recommendations from the Government Accountability Office (GAO) and inspectors general (IGs) are currently open. GAO has estimated that enacting its recommendations for federal agencies could save “between $106 billion and $208 billion,” while addressing its “open matters for Congressional consideration” could yield roughly $170 billion or more in savings. Congress should strengthen the way that it works with GAO and IGs and better use watchdog recommendations to inform reforms to increase government efficiency.
