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WHY THE TRILLIONS IN COVID-19 RELIEF MONEY LED TO BILLIONS IN FRAUD
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Published June 24, 2022, 7:51 p.m. ET
At least $163 billion of the $873 billion of unemployment insurance benefits was
spent in error, according to the Labor Department. AP
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RESEARCH LABS
Raise your hand if you’re surprised that the trillions of dollars spent on
COVID-19 relief gave way to billions of dollars in government waste, fraud and
abuses. I’m not, but based on recent reporting, you might think this type of
carelessness with taxpayers’ money has never before happened. Sadly, such waste
and fraud are normal byproducts of most government programs.
Too much focus on waste and fraud misses a more important problem: Lots of the
COVID-19 spending that doesn’t qualify as wasteful or fraudulent was nonetheless
misspent.
When the pandemic hit the United States in March 2020, people all over the
country panicked. Everyone seemed to agree that the right thing to do was pump
the nation full of as much money as possible, as fast as possible. As a result,
nearly everyone — married, unmarried, employed, unemployed, through businesses
small and large — got cash through the $2 trillion CARES Act.
Some people did raise the potential for fraud. We were told that there was no
time to put in place measures sufficient to prevent it. However, the CARES Act
did create an oversight mechanism called the Pandemic Response Accountability
Committee. The committee had a difficult task due to the enormous size of the
relief bill, a hardship compounded by the fact that the program had to become
functional before it could even start looking into the spending. Dollars were
pouring forth fast from Washington, and the committee was basically behind from
the start.
Then Congress added another two relief bills totaling around $3 trillion and
including extensions of some programs implemented in the CARES Act. It’s now
clear that an enormous amount of the eventual $5 trillion was spent
“improperly,” and that some was downright fraudulent.
For instance, according to the Labor Department, at least $163 billion of the
$873 billion in unemployment insurance benefits was spent in error, and little
of this sum was recovered. Making matters worse is that a significant share of
the $163 billion was claimed by organized fraudsters and scammers in the United
States and countries like China and Russia.
Only 15% of recipients of the first round of stimulus checks said that they
planned to spend the money. AP
The inconvenient truth behind all this fraud and waste is that these government
programs never should have been designed as they were. For example, while the
federal government justifiably boosted state unemployment benefits at the
beginning of the pandemic, it was irresponsible to enhance the benefits by $600
a week. As a result, 76% of the individuals who received such benefits were
making more by not working than by working. It was also irresponsible to extend
the program long after the economy reopened and resumed growing.
The same is true of the overly generous three rounds of $1,200, $600 and $1,400
individual payments paid to people who either already received the enhanced
unemployment benefits or who never lost their jobs. Most recipients of these
funds didn’t need them. In fact, only 15% of people who received the first round
of checks said they had spent it or planned to spend it. And there were other
benefits on top of these checks.
The end result was that, according to Marc Goldwein at the Committee for a
Responsible Federal Budget, COVID-19 benefits were so generous that a family of
five could have received $25,000 independently of the parents’ employment
status. This non-fraudulent spending is now helping to fuel inflation.
Billions of dollars were allocated towards state and local governments,
including public schools despite them staying closed. AP
Then, you have the money dispensed to corporations. In one way or another, that
spending made up a huge share of the COVID-19 relief. Indeed, whether through
the airline bailouts or the Payroll Protection Program, shareholders collected
trillions of dollars in government handouts they didn’t need. Most of the PPP
funding, for example, went to companies whose workers were never at risk of
losing their jobs since they were well-suited to work from home.
Finally, billions of dollars went to state and local governments, including for
schools that stayed closed, even though many of these governments’ revenue
growth equaled or exceeded pre-pandemic levels.
24
What do you think? Post a comment.
Of course there was some fraud, but the malfeasance happened only because the
programs were created in the first place and designed to go to everyone
regardless of need. This reckless “design” is the true scandal.
Will Congress ever learn its lesson? I assume not, as it’s easier to complain
about fraudsters than to acknowledge that the real scam is the entire process —
a process that starts on Capitol Hill.
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* 6/24/22
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