The NY Pension Fund pays hundreds of different managers to actively invest. Candidate Drew Warshaw argues this level of diversification is self-defeating, as it effectively recreates the market index but with massive fees and a worse tracking error, resulting in significant underperformance compared to simple, low-cost index funds.

The government paying over a billion dollars to dead people is not just fraud; it's a symptom of profound operational failure. The inability of the Social Security Administration and the Treasury to share a simple "death master file" points to a systemic breakdown in data management and accountability.

While politicians can ignore massive fraud to maintain patronage systems, the financial markets will not. As the scale of waste in states like Minnesota and California becomes clear, bond investors will reprice the risk of municipal bonds, potentially triggering a fiscal crisis that forces accountability where political will has failed.

While outright fraud in government spending is low (under 1%), Buttigieg argues the real financial drain is waste from inefficiency. He points to project cost escalations and procedural roadblocks as far more significant sources of wasted taxpayer money than criminal fraud.

Instead of only auditing agencies that spend money, a more impactful strategy is to audit the regulators overseeing entire industries like insurance and utilities. Drew Warshaw suggests this meta-audit can uncover systemic failures in how monopolies and critical services are managed for the public interest.

The city wasn't simply bad at accounting; it effectively had no centralized system. Finances were tracked on scraps of paper and in drawers, making it impossible to know the true state of its debt. This systemic failure, not just policy choices, made the collapse inevitable.

A significant source of waste stems from "zombie payments"—recurring government funds that continue indefinitely without review. When the official who authorized the payment leaves, retires, or dies, there is often no system to shut it off, creating a perpetual drain of funds to companies or individuals who rarely report it.

When a public pension fund underperforms its benchmarks, the state is legally required to make up the shortfall. Candidate Drew Warshaw argues this funding comes directly from taxpayers through higher property and state income taxes, effectively creating a hidden tax to subsidize poor investment management.

A convergence of factors threatens the financial stability of state governments. Increased scrutiny of waste, fraud, and abuse, combined with the future exposure of massive unrealized pension liabilities, could lead to a crisis of confidence and severely restrict their ability to borrow in capital markets.