The Inconvenient Truth About COVID-19 Relief Scandals

Raise your hand if you’re surprised that the trillions of dollars spent on COVID-19 relief gave way to billions of dollars in government waste, fraud and abuses. I’m not, but based on recent reporting, you might think this type of carelessness with taxpayers’ money has never before happened. These types of fraud and waste are unfortunately common byproducts most government programs.

Too much focus on waste and fraud misses a more important problem: Lots of the COVID-19 spending that doesn’t qualify as wasteful or fraudulent was nonetheless misspent.

People all over the country panicked when the pandemic hit in March 2020. Everyone agreed that it was the right thing to pump the nation with as much money as possible as quickly as possible. As a result, nearly everyone—married, unmarried, employed, unemployed, through businesses small and large—got cash through the $2 trillion CARES Act.

Some people raised the possibility of fraud. We were told there was not enough time to implement sufficient measures to prevent it. The CARES Act did however create a Pandemic Response Accountability Committee, an oversight mechanism. The enormous relief bill made it difficult for the committee to complete its task. This was compounded by the fact the program had to be functional before the committee could begin looking at the spending. The committee was essentially behind the curve from the beginning as dollars were flooding in from Washington.

Congress then added two additional relief bills totaling about $3 trillion, including extensions to some programs under the CARES Act. It’s now clear that an enormous amount of the eventual $5 trillion was spent “improperly,” and that some was downright fraudulent.

According to the Labor Department alone, at least $163 trillion of the $873 billion in unemployment benefit benefits was spent in error. Only a small fraction of this sum was recovered. Even worse, a large portion of $163 billion was claimed in error by organized fraudsters and scammers from the United States, as well as countries like China and Russia.

All this waste and fraud is a sign that these government programs were not designed correctly. While the federal government justified increasing state unemployment benefits at the start of the pandemic it was reckless to increase the benefits by $600 per week. This resulted in 76% of those who received such benefits earning more by not working than they did by working. It was also irresponsible not to extend the program after the economy reopened.

The same applies to the generous three rounds of $1.200, $600, and $1.400 individual payments that were paid to people who had received enhanced unemployment benefits or never lost their jobs. Most recipients of these funds didn’t need them. Only 15% of those who received the first round said they had used it or planned on spending it. There were also other benefits to these checks.

The end result was that, according to Marc Goldwein at the Committee for a Responsible Federal Budget, COVID-19 benefits were so generous that a family of five could have received $25,000 independently of the parents’ employment status. This non-fraudulent spending is helping to fuel inflation.

The money is then distributed to corporations. That spending accounted for a significant portion of COVID-19 relief. Indeed, whether through the airline bailouts or the Payroll Protection Program, shareholders collected trillions of dollars in government handouts they didn’t need. For example, most of the PPP funding went to companies whose workers were able to work remotely and were not at risk of losing them jobs.

Finally, billions of dollars went to state and local governments, including for schools that stayed closed, even though many of these governments’ revenue growth equaled or exceeded pre-pandemic levels.

Although there was fraud, the malfeasance occurred only because the programs were created and intended to be accessible to all regardless of need. This reckless “design” is the true scandal.

Will Congress ever learn from its mistakes? I assume not, as it’s easier to complain about fraudsters than to acknowledge that the real scam is the entire process—a process that starts on Capitol Hill.


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