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With a new majority, House Republicans have put oversight of pandemic relief at the top of their agenda and are speeding legislation to recover billions in taxpayer losses from fraud related to pandemic unemployment benefits. I’m here. The bill, due in the House in the coming weeks, will provide financial incentives for states to recover losses. But Democrats are against that approach, favoring an increase in the federal budget instead. Billions of dollars are at stake as Congress decides which approach to take.
The pandemic and government shutdowns have unleashed unprecedented demand for unemployment benefits since March 2020. Congress responded with a record increase in federal benefits, including adding $600 a week to all state and federal unemployment checks. Claims for those checks soared to 33 million, he said, in June 2020. This is more than double his previous record. In all, nearly 1.6 billion weekly unemployment checks worth $900 billion were paid by his 2021 Labor Day. During that time, a person who received only average benefits nationwide could receive $46,000. This does not include stimulus checks or other government benefits. These huge payouts and serious weaknesses in federal program design have attracted criminals to steal the system.
A hearing last month by the House Ways and Means Committee reconsidered the stark results. The hearing, which Chairman Jason Smith called “the greatest theft of taxpayer dollars” in history, included the testimony of U.S. Department of Labor Inspector General Larry Turner. Turner said the “lowest” estimate of unemployment benefit wastage during the pandemic is now $191 billion, including both fraud and erroneous payments. However, fraud losses alone add up to at least $60 billion. Both numbers are definitely on the rise, with private sector experts estimating the total amount of taxpayer rip-offs he puts at a staggering $400 billion.
Both state and federal benefits are paid by state agencies. Democrats in particular complain that these institutions are underfunded, and they’re right. Since the 1990s, under both Republican and Democratic presidents and Congressional majorities, real spending on administering unemployment benefits has declined steadily. These same state agencies now bear the responsibility and costs of recovering pandemic misspending. However, under current regulations, when a state recovers spent federal funds, it must return 100% of what it recovers to the federal government. This gives states no incentive to track down the majority of pandemic scams.
GOP targets billions with COVID scams with new bill
Democrats argue that the March 2021 $1.9 trillion U.S. bailout plan includes $2 billion nominally in the Labor Department to help states fight fraud. But two years later, all of these funds have not been deployed, with $260 million dedicated to “promoting equity” in future benefits. President Biden is now doubling down on that Washington-led approach, proposing $1.6 billion in new federal funding. His proposal includes him $600 million in investigations and prosecutions, another $600 million in fraud prevention, and another $400 million for victims of fraud.
But it does not call for national action. And if the problem is solved by throwing federal money into this problem, you’d think his first $2 billion would solve the problem. But so far, that approach has delivered only pennies to the dollar in terms of recovery. It’s been over 18 months since federal pandemic benefits expired, and he’s probably only recovered $5 billion of his $400 billion misspend.
Republicans are proposing a markedly different approach. The House Ways and Means Committee recently approved HR 1163, the Unemployment Fraud Taxpayer and Victim Protection Act. The law will prevent further fraud through better data matching and identity and income verification, closing a loophole that has been wide open during the pandemic. But the law’s primary focus is to encourage states to recover pandemic profits lost through fraud. It allows states to retain 25%”, overriding current policy that “has little incentive to pursue costly investigations and prosecutions” involving federal funds.
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States will use some of the collected funds to offset costs, improve program integrity, and modernize systems that left benefits vulnerable to fraud in the first place. Recognizing that program misspends often exceeded 10% before the pandemic, the measure also allows the state to devote his 5% of future recoveries to those ends.
The importance of this law is high as the clock is ticking to recoup the wasted pandemic funds. Doing so promises taxpayers a much better return than doing nothing. Or just throw more money at the current Washington-centric approach that has failed to recoup the billions, possibly tens of billions, of dollars lost to pandemic fraud.
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