California’s Expanded COVID Unemployment System Corrupted By $2 Billion in Fraud, Report Finds

Foundation For Economic Education - December 08, 2020

Government bureaucrats aren’t exactly known for their efficiency even in the best of times. But in the response to the economic crisis from COVID-19 and pandemic lockdowns, elected officials have sent taxpayer money flying out the door with even less diligence than usual.

The latest example comes courtesy of California. A new report from Bank of America, which contracts with the state, estimates that more than $2 billion in fraud is plaguing the state’s expanded pandemic unemployment benefits system. The bank has identified 640,000 potentially fraudulent accounts.

“The bank said there were also ‘numerous cases’ in which multiple cards, including hundreds in some instances, have been sent to a single mailing address,” the Los Angeles Times reports. “Other issues identified include multiple cards using a common contact phone number or address, and benefits issued to infants or children as well as centenarians or other elderly people not likely to be working.”

This revelation comes just days after officials admitted the state sent an estimated $400 million in fraudulent unemployment benefits to current prisoners. The Times says this “tsunami” of fraud is “fueling street crime,” as the dollars are funneled to criminal enterprises and gangs.

California’s fraud-rife unemployment system is no outlier. Its dysfunction is part of a national trend.

The March COVID-19 stimulus bill passed by Congress extended unemployment benefits to new categories of workers and added a federal $600 weekly augmentation to existing state-level payouts. This was done so hastily and haphazardly that an astounding $26 billion was lost to fraud, according to the fiscally-conservative Foundation for Government Accountability. For context, that’s more lost to fraud alone this year than the entire unemployment system paid out in 2019.

In a particularly galling example, Michigan unemployment worker Brandi Hawkins was charged with allegedly having distributed more than $2 million in fraudulent funds. That’s right: $2 million swindled from taxpayers by just one person! One can only wonder how many more like Hawkins got away with it.

Why does endemic fraud so consistently plague government welfare systems? It’s due to a simple principle explained by Nobel-prize-winning economist Milton Friedman in his book Free to Choose.

He identified the four types of spending. You can spend your money on yourself, in which case you’ll be quite judicious with it. You can also spend your money on someone else, or someone else’s money on yourself. In either case you’ll still have a strong incentive to spend the money responsibly.

Yet Friedman identified a fourth scenario.

“If I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get,” the economist wrote. “And that’s government.”As long as California voters keep voting for progressive legislators who think the government can solve all our problems, billions of their dollars will keep getting flushed down the drain.

In this case, legislators rushed to expand unemployment benefits to convince voters they were doing something to help people amid a crisis. Yet the government bureaucrats handling California’s unemployment program weren’t particularly concerned about where billions of taxpayer dollars actually went. 

But that’s Big Government for you in a nutshell. As long as California voters keep voting for progressive legislators who think the government can solve all our problems, billions of their dollars will keep getting flushed down the drain.



* This article was originally published here
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