If the Department of Government Efficiency (DOGE) can stop our Social Security system from sending checks to dead people, that would be a plus. Yet a far more important task is to stop the system from overpaying people who are very much alive.
Last year the Social Security Administration admitted it had identified 2 million beneficiaries who have been overpaid and sent them “clawback” letters, demanding the government’s money back. Some of these claims go back several decades, and they can amount to hundreds of thousands of dollars.
As revealed in a recent episode of 60 Minutes, in one case the agency sent a clawback letter to a 32-year-old man, living on Social Security and disabled by cerebral palsy. The agency claimed that 21 years earlier, when he was 11 years old, his mother was overpaid $4,902 on his behalf—and the government wants its money back! In another case the agency demanded more than $300,000 from a disabled woman living on her Social Security benefits. In a third case, the agency demanded to be reimbursed for an overpayment that was 45 years old.
In all these cases, the agency admits that these mistakes were made by the government, not by the beneficiaries. Further, if its demands are not met, Social Security threatens to stop sending the beneficiaries as much as half of their monthly benefit checks.
Why Should Taxpayers Care?
Aside from the human tragedies clawback letters create for the people who receive them, there are three practical reasons why taxpayers should care.
First, our government has wasted millions of dollars by sending out checks for the wrong amounts—money that in most cases will never be recovered. Second, when the government demands its money back it is often going after people who had no idea they were overpaid and who are living on a fixed income. Forcing a retiree to sell his house or cash out his IRA to pay a surprise bill from the government seems especially cruel in many cases. That’s inconsistent with Social Security’s role as a safety net.
Third, virtually no one on Social Security knows whether their check is the “right” amount. That means every beneficiary is at risk of receiving a clawback letter, and that creates a level of insecurity that is the opposite of the purpose of the Social Security system.
Although the dimensions are much smaller, Social Security acknowledges it also has a history of sending checks to people who are dead. We don’t have to rely on Donald Trump or Elon Musk for verification. The agency’s Inspector General recently discovered as many as 217 dead Oregonians were receiving checks. In one case, a dead beneficiary received checks for 15 years.
While the agency overpays some people, it underpays others. According to the Office of Inspector General, more than 13,000 widows and widowers collectively have lost $130 million in Social Security benefits because of mistakes in claiming spousal benefits. Married couples also lose thousands of dollars because they make mistakes in claiming spousal benefits. More often than not, these mistakes are made because of bad advice from Social Security personnel.
Note: If people make a mistake in claiming benefits, they are generally not allowed to correct it—even if the mistake was not their fault. Yet, as noted, if Social Security makes the mistake, it demands its money back.
Why is Social Security Making So Many Mistakes?
Why is Social Security making so many mistakes? For two reasons. First, the system is enormously complex. It has 2728 rules and hundreds of thousands of pages explaining the rules, governing just 13 basic benefits. Second, it relies on human resources rather than computer programs to make decisions.
The most important revelation from DOGE so far is not the finding of large amounts of fraud, waste and abuse. It is the finding that so many agencies (including the IRS and the FAA) are using computer programming language that the private sector abandoned decades ago. The main language used to run Social Security’s core systems, for example, is a 60-year-old program called COBOL (Common Business-Oriented Language). There aren’t that many people alive who are still able to program in COBOL.
That Social Security does not have a computer program that can tell its own employees as well as beneficiaries the right amount of their monthly benefit is truly amazing. What is even more surprising is that the private sector not only has a very accurate Social Security benefit calculator, it also tells viewers how to claim benefits in a way that maximizes their lifetime income.
The private calculator, developed by Boston University economist Laurence Kotlikoff, is available to everyone for $49. Yet think of how much misery could be avoided if the government created something similar—or simply leased the private program—and made it available to everyone for free.
It was Prof. Kotliioff who first discovered the problem of clawback letters. He created an online portal where people could submit their personal horror stories, many of which appear in a book he co-authored with financial advice columnist Terry Savage.
Changes Can Be Made
Going forward, there are three changes that merit urgent attention. First, we need to bring Social Security’s computer systems into the 21st century. There is no reason why the country’s most important retirement system isn’t using the same software available to private financial firms.
Second, there should be a reliable online calculator that allows Social Security personnel to avoid mistakes and prospective beneficiaries to make informed judgments about claiming benefits.
Third, there should be a one-year statute of limitations on Social Security clawback claims while we are waiting to get an accurate computer system in place.
DOGE can help with the first two of these reforms. Congress is probably needed for the third.
