Recent reports suggest Democrats are preparing a second run at President Joe Biden’s stalled trillion-dollar Build Back Better agenda. Here’s a modest proposal for those looking to earn taxpayers’ trust in spending vast new amounts of their hard-earned money: Make sure existing programs are not being openly defrauded. The record spending on pandemic programs was accompanied by record fraud — including brazen scams run by inmates.
As they locked down the economy to “slow the spread,” lawmakers offered unprecedented $600-per-week bonuses to regular unemployment checks (which paid most recipients more not to work). They also created a first-time federal program benefiting nonworking independent contractors, self-employed people, and others never before eligible for weekly checks. Total claims quickly soared to over 30 million, far exceeding the prior record of 12 million recipients. Spending totaled almost $900 billion — or over 30 times the $27 billion per year paid out in unemployment benefits before the pandemic.
Record claims and spending were driven in part by record fraud. Recent testimony by the Department of Labor’s Inspector General pegged unemployment misspending during the pandemic as “at least $163 billion.” That astonishing figure will rise once higher rates of fraud involving the most widely abused benefits are fully understood. Some experts estimate total losses as high as $400 billion, which is more than half of the Pentagon’s annual budget.
What explains such extraordinary abuse?
The causes include federal policies such as sharply increased benefit amounts, new benefit programs, letting many claimants “self-certify” their eligibility, and delivering benefits before identities were confirmed. Those policies created a rich target that international crime rings and other identity thieves systematically exploited. Even tens of thousands of prison inmates got in on the action, facilitated by states that didn’t check inmate rosters before dispensing unemployment checks. A 2016 survey found only 35 states matched unemployment claims against their state prison rolls, 28 states compared with county jails, and just six states matched against federal prison data.
California was one of 15 states that didn’t match its unemployment benefit rolls against inmate rosters during the pandemic. The results have been sadly predictable. District attorneys across California described staggering fraud in state prisons, which they termed “the most significant fraud on taxpayer funds in California history.” They identified that 20,000 inmates in Golden State jails paid over $140 million in unemployment benefits between just March and August 2020. Nearly 20% of inmates on California’s death row claimed benefits, and the state sent an estimated $42 million in checks to out-of-state inmates. A January 2021 audit raised California’s losses associated with incarcerated individuals to $810 million because the state “has not had a system to regularly cross‑match … claims with information from state and local correctional facilities.”
In October 2021, the month after federal pandemic benefits ended, California Gov. Gavin Newsom signed legislation to require that in-state cross-match going forward. The Biden administration also announced the availability of a national prisoner database states could use to match against their unemployment rolls. But the database is incomplete, and matching would remain voluntary. On Capitol Hill, several Republican bills to require matching have gone nowhere (tellingly, one was assigned to the wrong subcommittee).
What’s needed is to make the national inmate database complete alongside a requirement that all states regularly compare their benefit rolls with it — as the former administration proposed and the DOL’s Inspector General repeated in recent testimony.
Those seeking trust in spending vast new amounts of taxpayer money should first prove they have been responsible stewards of current programs. With hundreds of billions of dollars flowing freely to international crime rings, other identity thieves, and even inmates, it’s hard to argue that was the case during the pandemic under both the Trump and Biden administrations. Biden rightly said in his recent State of the Union address that “we’re going after the criminals who stole billions in relief money meant for small businesses and millions of Americans.” He should show that’s more than lip service by ensuring that, at the very least, all states have systems to stop inmates from abusing unemployment benefits — before opening the spigot of federal spending again.
There’s plenty more to do to protect taxpayers from being ripped off. But if current programs can’t even prevent inmates from collecting weekly government benefit checks, why should taxpayers have confidence that new programs won’t be shamelessly ripped off, too?
Matt Weidinger is a senior fellow and Rowe scholar at the American Enterprise Institute.
