Undoing the Covid ‘Taxpayer Heist’

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When the pandemic and lockdowns first arrived, lawmakers sent checks out the door without worrying much about who was cashing them. The result was no surprise: Fraudsters claimed a bigger-than-ever share of benefit payments over the past two years. Now with the emergency long past, House Republicans plan to recoup as much misspent cash as possible.

GOP members of the House Ways and Means Committee introduced a bill this month to track the flow of wasted funds and fix the practices that enabled leakage. Citing the Labor Department, they say at least $163 billion of the $873 billion spent on unemployment insurance was spent in error, including “a significant portion attributable to fraud.” Only about $4 billion has been recovered.

This isn’t the result of careless error. Since summer 2021 federal investigators have identified large operations that mounted unemployment fraud schemes, including criminal groups in China, Nigeria and Russia. These groups, along with millions of individuals, claimed funds by lying about their employment status or filing under false identities.

Rep.

James Comer,

a co-sponsor of the antifraud bill, calls this “the greatest heist of American taxpayer dollars in history.” Yet the state governments that disburse funds have done little to make taxpayers whole.

The bill gives states an incentive to uncover fraud by letting them keep up to 25% of the federal funds they recover. State workforce agencies could then use the cash to modernize the systems they use to screen applications, helping to lower the error rate. Another 5% of recovered funds could be spent directly on administering unemployment programs.

Waste is often tough to track, but states have succeeded when they’ve made it a priority. The bill’s authors credit California, which has already identified $11 billion in fraudulent payments and is scrutinizing another $20 billion in suspicious claims. More states will follow if Washington gives them a reason.

The bill also places new requirements on states to head off future fraud. Instead of the current patchwork of verification systems, states seeking federal funds would have to check applications against the largest national databases. Criminal rings will find it harder to pilfer dormant identities if every application is run through the Social Security Administration’s Death Master File.

Plenty of waste and theft can be chalked up to the fog of war that surrounded Covid’s early days. But Congressional Republicans also note how the unprecedented increase in the size of unemployment awards encouraged the criminal rush. “Generous $600 weekly federal supplements made unemployment a lucrative target for fraudsters,” says Rep.

Kevin Brady.

The same bonus payments that discouraged workers from returning to work also made an irresistible mark for scammers.

Americans who worked through the lockdowns will likely applaud the crackdown on unemployment fraud, as will those who struggled to return to the workforce. Democrats haven’t shown much interest in the fraud problem, but they still could while they retain power. If they don’t, the GOP bill will make a good campaign theme and priority if they win in November.

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