“The federal government sent billions in unemployment aid to ineligible beneficiaries and outright fraudsters during the pandemic, according to a new watchdog report. At least $78 billion in jobless benefits, and potentially much more, were misspent during fiscal year 2021, according to a Tuesday report from the Government Accountability Office (GAO).
“Not only is the system falling short in meeting the needs of workers and the broader economy, but the potential for huge financial losses could undermine public confidence in the stewardship of government funds,” said GAO head Gene Dorado in a press release yesterday, who called the report’s findings “extremely troubling.”
The Congressional watchdog agency has rated the unemployment insurance system as “high risk” for waste, fraud, and abuse and called on lawmakers and the administration to undertake immediate reforms.
The federal government’s unemployment insurance system—jointly administered by the Department of Labor and a patchwork of state agencies—has long struggled with making improper payments. This problem only got worse during the pandemic, when Congress dumped billions more into an expanded number of unemployment assistance programs.
The GAO found that the improper payment rate jumped from 9 percent in the pre-pandemic fiscal year 2020 to 18.9 percent the next year. That means nearly one in five unemployment insurance dollars went to an ineligible or overpaid beneficiary.
There are multiple reasons for this sharp rise in improper payments.
The GAO reports that some states’ legacy 40- and 50-year-old information technology systems used to administer benefits weren’t up to the task of identifying potential fraud or overpayments. These same systems also struggled to handle totally new benefit programs covering self-employed workers like rideshare drivers, who typically aren’t covered by unemployment insurance.
Federal rules on who was eligible to receive benefits were also “untimely and unclear,” according to the GAO report. Some state officials told the agency they’d already set up programs and started sending money out the door by the time Labor Department guidance came down.
The massive increase in available unemployment funds also increased the rate of improper payments. Federal funding for unemployment benefits jumped from $86.9 billion in fiscal year 2020 to $410 billion in fiscal year 2021.
States often struggled to hire enough people to administer these new benefits. The staff they did hire were often undertrained.
The huge increase in unemployment benefits also became a target for fraudsters. The GAO reports that 146 people have pleaded guilty to federal charges of defrauding unemployment systems. In California, for instance, the state paid an estimated $400 million on fraudulent claims made in the name of state prison inmates.”
“Dating back to its founding in 1934, the Export-Import Bank of the United States has had a pretty specific mission: subsidize the export of American-made products by extending cheap credit to foreign companies looking to buy our stuff.
Whether the bank serves any legitimate purpose is another matter entirely. These days, the Export-Import Bank mostly acts as a slush fund for politically connected American corporations like Boeing and General Electric that would have no trouble doing business abroad but are more than happy to benefit from its largesse, doled out in the form of low-interest loans to potential buyers. Sometimes it also blows American taxpayer money on propping up government-run monopolies in foreign countries.
Still, the mission has always been clear. It’s right there in Executive Order 6581, which President Franklin Delano Roosevelt signed in 1934 to authorize “a banking corporation…with power to aid in financing and to facilitate exports and imports and the exchange of commodities between the United States and other Nations.” The bank’s current mission statement, too, clearly spells out a goal of “supporting American jobs by facilitating the export of U.S. goods and services.”
Now, quietly, the Ex-Im Bank is taking on a new—and entirely domestic—project.
At a meeting last week, the Ex-Im Bank’s board of directors voted unanimously to approve a so-called “Make More in America” initiative. The press release announcing the new program is a gobbledygook of crony capitalist doublespeak virtually devoid of specifics about how the program will operate or what it will cost. The new program “will create new financing opportunities that spur manufacturing in the United States, support American jobs and boost America’s ability to compete with countries like China,” Reta Jo Reyes, the bank’s president and board chair, says in the statement.
This latest development at the Ex-Im Bank is another aspect of the sprawling federal effort that began under President Donald Trump and continues under President Joe Biden to subsidize American manufacturing. The creation of a “domestic financing program” at the Ex-Im Bank was part of a series of supply chain recommendations made by the White House in June. A few days before Christmas, the Ex-Im Bank filed a vague notice in the Federal Register outlining plans to implement the program.
But there has been little clarity about what the program will aim to do, which businesses might stand to benefit from it, or how its results will be judged. In the announcement last week, the Ex-Im Bank only said that the new program will “immediately make available the agency’s existing medium- and long-term loans and loan guarantees for export-oriented domestic manufacturing projects.””
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“the government will throw taxpayer dollars at investments that private capital markets have deemed too risky.
But how will the government decide which projects to fund? Toomey also asked the bank to explain what steps will be taken to “ensure that domestic transactions will not be influenced by political pressures.”
The Ex-Im Bank’s response to that query is even more worrying. There don’t appear to be any safeguards in place. “Financing is available to all qualifying applicants based on criteria established by law and agency practice,” Lewis wrote in reply.
Translation: Any company with the resources to hire the attorneys, accountants, and lawyers necessary to decipher the bank’s policies and sufficiently schmooze decision-makers can get paid.
“There is no reason that taxpayers should have to back domestic financing when we live in a highly developed market economy in which promising businesses have access to capital on competitive terms,” says Toomey.”
“Child care costs exceed those of a mortgage or college in many states. Access to affordable child care is one of the biggest barriers to women’s work, and there’s increasing evidence that the cost of raising children is a barrier to having more kids as well, according to a New York Times survey. Low quality early childhood care situations have lifetime ramifications for children, including worsened health and economic trajectories and an increased likelihood of needing future government assistance.”
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“The evidence of improved outcomes for children from universal preschool and universal child care is mixed at best. The preponderance of evidence shows the largest gains for at-risk kids and unclear results for everyone else, and state-based programs haven’t been around long enough to suss out long-term effects.
Moreover, providing generous subsidies to nearly all American families, irrespective of need, will make child care more expensive by increasing demand, which will necessitate larger subsidies over time. This is a recipe for spiraling costs; look no further than our experiments in health care or college to see how quickly costs inflate when the government makes something “affordable.” Exacerbating these dynamics, the administration’s proposal will also constrain child care supply by mandating higher wages and skill levels from providers who already have thin margins as well as potentially limiting religious providers. Faith leaders across religions (Catholic, Muslim, Christian and Jewish) have expressed concern that their ability to continue to provide care will be negatively impacted by BBB. Those providers make up a huge portion of child care providers: A Bipartisan Policy Center poll from last year found that 31 percent of working-parent households used center-based care, and over half, or 53 percent, of these families used one that was affiliated with a faith organization.
To be sure, most parents will be shielded from the effects of rising costs because of the generous subsidies they are receiving, making the policy seem like a win-win on the surface, though they might be affected by the reduced choice providers. But nothing is free. Taxes on the rich and corporations can only go so far, and at some point that money will also need to go toward the historic debt we’ve accumulated. Estimates from the Committee for a Responsible Federal Budget and Moody’s suggest that the BBB child care provisions alone will cost nearly $1 trillion over 10 years once fully implemented, far exceeding the money to be provided by the tax increases that Democrats have proposed to fund the legislation. The people likely to pay for BBB and the runaway spending in Washington are the very children whom such policies are supposed to benefit.
Policymakers can do better. Republicans should up the ante on what Democrats have proposed with an alternative child care proposal — one that is more targeted, sustainable and also more transformative — by providing greater support and choice to parents.”
“For the past six months, families with kids have received monthly payments from the federal government as part of the expanded child tax credit — a policy that has slashed child poverty in the US.
If Congress doesn’t act, however, this measure is set to expire for future payments near the end of the month. The last monthly payment was scheduled to go out on December 15, after which these installments will end.”
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“The Center on Budget and Policy Priorities, a think tank focusing on social programs, estimates 9.9 million children could fall back into poverty or deeper into poverty if the credit is not extended. It estimates, too, that poverty rates for Black, Latino, and American Indian or Alaska Native (AIAN) children, in particular, will be hardest hit. If BBB doesn’t pass, poverty rates would be 22 percent for Black children compared to 13 percent if it did, 21 percent for Latino children compared to 12 percent, and 18 percent for AIAN children compared to 10 percent.”
“The larger spending package would increase government debt at a faster rate, which would increase the amount the government has to pay in interest. In the $3.5 trillion scenario, higher levels of spending and higher amounts of government debt “crowds out investment in productive private capital. Less private capital leads to lower wages as workers become less well-equipped to do their jobs effectively,” the report states.
Now, the PWBM has completed an analysis of the $1.5 trillion framework that Manchin reportedly offered as an alternative. In order to do the estimate, PWBM analysts assumed that Manchin’s proposal would increase spending by about $540 billion for means-tested childcare programs, like universal pre-K; $439 billion for a five-year extension of the expanded Child Tax Credit; $260 billion for public infrastructure; and $260 billion for other assorted government spending.
That’s still a lot of money, and there are still some negative long-term consequences—but the most important part of Manchin’s proposal is that it does not require additional borrowing, and relies on smaller tax increases than what President Joe Biden has proposed. As a result, government debt would actually fall slightly over the next 30 years. The tax increases would reduce private capital by less than 1 percent by 2050—as opposed to the 6.1 percent drop that would come with the passage of the larger reconciliation package. Wages and national GDP would remain flat under the $1.5 trillion plan, instead of the projected decline under the $3.5 trillion plan.
What the report essentially says is that Manchin’s proposal would be less bad than the $3.5 trillion proposal.”
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“It is a little bit crazy that everyone in Washington is talking about $1.5 trillion as a small sum of money. What Manchin is willing to support would cost about $500 billion more than the Obama stimulus, even after adjusting for inflation. And this isn’t an emergency spending plan meant to float the country through a recession—it’s a massive increase in government spending at a time when the economy is growing significantly (despite the weirdness in labor markets and supply chains).”
“Democrats are reportedly considering a one-year extension of the expanded child tax credit, which pays parents $3,000 annually for every child (and an extra $600 for kids under age 6) and is paid out as a refund even for families that owe no federal taxes. Previously, Biden’s plan called for a five-year extension of the child tax credit. As I wrote in September, the five-year extension was a budget gimmick designed to make the tax credit appear to be roughly $700 billion less expensive than it otherwise would be within the standard 10-year budget window. In short, Democrats were signalling that the expanded child tax credit would be permanent, but they were only accounting for half of what it would actually cost to make it permanent.
A one-year extension would be mashing that same “gimmick” button even harder.
In a similar way, Democrats are also reportedly considering a shorter-than-planned extension of the expanded Obamacare subsidies made available during the pandemic. Instead of being extended permanently, those provisions would technically expire after three years—even though everyone knows they are likely to be extended past that sunset date.
“These proposals don’t actually shrink the package; they just shorten it,” says Maya MacGuineas, president of the Committee for a Responsible Federal Budget (CRFB), a nonprofit that advocates for balanced budgets. The CRFB estimates that the twin “blatant budget gimmicks” involving the child tax credit and Obamacare subsidies could hide between $1.5 trillion and $2.4 trillion in future spending, depending on other trade-offs in the final package. Even if the final bill is $1.9 trillion and requires no new borrowing on paper, the CRFB warns that the actual price tag could be as much as $4 trillion with much of the hidden cost financed by adding to the deficit.”
“There are some serious costs associated with means testing. Though they’re usually framed as ways of curbing government spending, means-tested benefits are often more expensive to provide, on average, than universal benefits, simply because of the administrative support needed to vet and process applicants.
And then there’s the burden means testing puts on those in need. Take the applications for SNAP, or food aid, for example. The most complicated state programs require individuals to meet a specific income threshold and complete certain asset tests. Individuals need to show that they don’t currently make more than 130 percent of the poverty line, or $16,744 for an individual, and have assets worth more than $2,500 (a requirement that varies based on age). According to mRelief, a nonprofit that assists SNAP recipients, the average applicant needs to either fill out a 17-page form or participate in a 90-minute interview, in addition to providing as many as 10 documents about their assets. Even the prospect of this can push people away.”
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“According to Georgetown University political scientists Pamela Herd and Don Moynihan, the administrative costs for programs like SNAP, the family assistance program known as TANF, and the Supplemental Nutritional Program for Women, Infants, and Children can range from 15 to 40 cents of each dollar of benefits distributed in the programs. That includes money used to interview people, check the documentation they provide, and ensure that their claims of need are valid.
In other words, even though the intention of means testing is to help people most in need, imposing strict qualification requirements can actually make it tougher for individuals who are eligible to get past the application process.
As Matt Bruenig writes for the People’s Policy Project, a progressive think tank, these administrative barriers have hurt uptake rates of programs like SNAP and Medicaid, none of which fully serve all the people who qualify for them”
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“Additionally, researchers have found that means testing stigmatizes people who are eligible for these programs, further reducing participation in them and fomenting biases toward low-income people.”
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“A pitfall that universal programs are able to avoid, too, is choosing a cutoff that fails to adequately estimate need. For instance, the income threshold for SNAP is $28,550 for a family of three. Because of this cap, people who make slightly more money than the cutoff are left out of the program — even if they could also use this support.”
“A peculiar thing happened last year during the Covid-19 pandemic: As large swaths of the U.S. economy shut down and unemployment skyrocketed, hunger rates held steady and poverty rates went down.
From the pandemic’s earliest days, Washington showed it had learned the lessons of past crises like the 2008 financial collapse, when policymakers responded with too little too late to help people get by and the economic recovery was hampered as a result. So as the country faced a once-in-a-century pandemic and the sharpest economic downturn since the Great Depression, Congress threw trillions at the double disaster, sending unprecedented levels of aid to American families and businesses.
Soon, a pattern was evident, thanks in part to real-time monitoring by the U.S. Census Bureau: When Washington doled out federal aid, hardship declined. When Washington let aid expire, hardship ticked back up.
In essence, the pandemic triggered a country-wide policy experiment aimed at keeping families fed and financially afloat. There have been big increases in food stamps and unemployment benefits. Three rounds of stimulus checks. Universal free meals at schools and new grocery benefits for kids who are learning virtually, or out of school during the summer. Hundreds of millions of food boxes flooded into churches and other nonprofits.
The latest tranche of aid may carry the biggest bang yet: six monthly child tax credit payments that will be dispersed through the end of the year. The first two rounds of payments that went out in July and August fueled a dramatic reduction in the rate of American households with kids who report sometimes or often not having enough to eat in the past week, according to the Census Bureau.
All that aid appears to have worked.
“Lo and behold, if you give people money, they are less poor,” said Elaine Waxman, an economist and senior fellow at the Urban Institute who has closely monitored how low-income households have fared throughout the crisis.”
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“the U.S. has long been seen as an outlier for its comparatively limited safety net, and is sometimes referred to as “the reluctant welfare state.” Other wealthy countries, like Canada and the United Kingdom, have more generous unemployment programs and provide allowances to help with the costs of raising children, on top of providing health care and other benefits that are broadly available, even to middle-income households.
By contrast, in the United States, there has been a much greater focus on ensuring aid goes primarily to low-income households that have met strict eligibility and income requirements. America’s two biggest safety net programs, Medicaid and the Supplemental Nutrition Assistance Program, or SNAP, (still known to many as “food stamps”), have fairly low income caps and are squarely aimed at providing in-kind benefits like medical coverage and food — not giving people money to spend how they see fit.”