Pandemic fraud higher than expected

You know a robbery is bad when it takes years to figure out how much was stolen. States have long known that they paid billions in fraudulent unemployment claims during the pandemic. But last week the federal government more than doubled its estimate in stolen payments to as much as $135 billion.

The new figure comes from a report released by the Government Accountability Office (GAO). The finding is a rebuke to the Biden Administration, which had previously put the fraud total as low as $45 billion based on surveys of state programs. Congressional Republicans suspected the estimates were low and asked GAO to conduct its own study.

The agency reached its estimate by assessing a sample of more than 2,500 unemployment insurance payments issued from 2020 to 2023. The Labor Department's previous tally relied largely on adding confirmed fraud cases reported by states, but GAO auditors say that produced a massive undercount. The oversight agency assumed a higher, more plausible fraud rate by comparing unemployment insurance to similar federal programs.

The $135 billion finding places the pandemic unemployment program in a new tier of government disaster. Fraud claimed 11% to 15% of the nearly $900 billion that Washington paid out over three years. The theft rate is another demerit for a program that caused incredible harm even when it worked as planned. Federal and state governments provided an incentive for millions of people not to work with a $600 weekly jobless bonus in 2020 and up to 79 weeks of total unemployment benefits.

The GAO reports that states had recovered only $1.2 billion of stolen payments by May, out of about $56 billion of identified fraud cases. Recoveries have been sluggish despite $1.4 billion in federal aid to help states track and penalize fraudsters.

House Republicans passed a bill in May that boosts the incentive to recoup stolen payments, letting states keep up to a quarter of the federal cash they get back. Yet few Democrats signed on, the Senate hasn't voted on it, and the White House blasted the bill as a threat to Washington's "well-functioning UI system."

Well-functioning? In a sane government, the fraud explosion would be a call to action. But in today's Washington all that matters to politicians is how much money they can spend, not whether it's wasted or stolen.

An editorial from The Wall Street Journal.