Curbing US Corruption Through the Budget Process

Can the budget process be used to curb corruption more effectively? To answer the question this paper draws on innovative methods to estimate the costs of corruption and other efficiency losses using a fiscal space framework and applies them to the United States as a country test case. The hypothesis is that by presenting anti-corruption as a source of fiscal space may help policymakers address corruption more systematically through the budget process. To draw out the hypothesis, the paper opens with literature reviews on U.S. corruption and the definition of corruption and updates key concepts and introduces both traditional and novel metrics for measuring corruption within the budget cycle. By analysing where and how corruption occurs – across economic classifications, government sectors, functions, and throughout the public finance system (“Follow-The-Money Corruption Cycle”) – the paper quantifies these losses and benchmarks them against G20 countries. The findings reveal the United States loses approximately $1.4 trillion each year to corruption and inefficiency, with the greatest losses in Social Protection ($349 billion, 1.50% of GDP) and Health ($346 billion, 1.47% of GDP). State government losses ($592 billion, 2.52% of GDP) slightly exceed central government losses ($571 billion, 2.45% of GDP). Four Fiscal Space scenarios are modelled. The baseline scenario, which excludes increased taxation or debt and limits third-party funding, finds efficiency improvements as the only major source of fiscal space ($1.4 trillion or 5.9% of GDP). In a more expansive scenario, fiscal space could rise to $4.7 trillion (20% of GDP) if tax rates, NATO targets, and public debt thresholds are increased, though at much higher risk. The study finds declining reliability in the US federal budget since 2000, indicating growing institutionalized corruption, uncoordinated political manoeuvring and weakened performance and policy-based decision-making. Additional analysis covers government functions and spending patterns, highlighting persistent borrowing for current expenditures. Further research will refine metrics and reconciliations as the method is piloted in other countries, with future papers to focus on policy responses and reforms.