UI fraud shows folly of blind trust in government

If they weren’t so costly, the government’s failures would be almost impressive.

The Government Accountability Office recently released a report on unemployment insurance fraud during the coronavirus pandemic. As part of its $6 trillion spending spree, Congress created four new unemployment insurance programs. These provided benefits far beyond what state-run programs previously offered. In some cases, laid-off workers received three times as much money for not working. Little wonder the labor shortage continues to linger.

This wasn’t the most wasteful part of this program. The GAO found “substantial levels of fraud.” That’s bureaucratic understatement. The Department of Labor’s inspector general “testified in March 2022 that the unprecedented infusion of federal COVID-19 relief funds into UI programs during the pandemic gave individuals and organized crime groups a high-value target to exploit.”

State agencies reported $4.3 billion in UI fraud. The Department of Labor’s inspector general also found “at least $45 billion in UI payments from March 2020 through April 2022 have some indication of potential fraud,” per the GAO. It could be even higher. The programs doled out around $878 billion. The DOL’s inspector general estimates fraud is between 7.6 percent and 8.6 percent of total spending. That would be more than $60 billion.

That’s the normal amount of fraud. A previous GAO report found the rate of improper payouts during the coronavirus crisis could have been 18.9 percent, or more than $160 billion.

Expanded unemployment insurance turned into a full employment act for fraudsters.

The House Oversight Committee will hold a hearing this week to probe this. “The Biden Administration has allowed fraud to run rampant in federal assistance programs, and Democrats in Congress conducted little oversight. That changes with our House Republican majority,” committee Chairman Rep. James Comer, R–Ky., said.

Oversight is long overdue on spending both parties eagerly supported early in the pandemic. But there’s a larger lesson here.

Many Americans want the government to solve whatever problem concerns them most. This report demonstrates the government’s incompetence at the most basic of matters — like not sending criminals billions of dollars. And don’t expect things to improve either.

“DOL has not yet developed an anti-fraud strategy based on leading practices in GAO’s Fraud Risk Framework,” the GAO found.

Government has an important role to play, but it’s far from a genie-in-a-bottle that can magically solve all of society’s ills.

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