Government Report Shows $46 Billion Of Federal COVD Unemployment Subsidies Lost To Fraud

The immense amount of fraud involved with the federal government’s COVID-19 relief measures will take many years to unwind. The Department of Labor’s inspector general (IG) posted the most recent chapter in the story of abuse with a report on an investigation of unemployment fraud related to the pandemic.

The IG report focused on fraudulent claims filed in the name of dead persons, in multiple states, or using fake email accounts. It also examined fraudulent unemployment claims filed by federal prisoners.

The total amount of fraud is admittedly underestimated. The IG’s office was working with out-of-date information on federal prisoners and does not account for fraudulent claims made by many state prisoners.

The IG’s office also said that it had to “leverage data analytics” to address only the instances of fraud that are most threatening to the federal unemployment insurance program. The IG’s office has less than 140 criminal investigators to handle all the fraud claims around the country.

Because of limited resources, the IG report said the office is “focusing on large-scale identity theft schemes involving multiple victims and organized criminal groups, including street gangs.”

The IG’s press release touted the office had charged around 1,000 individuals in the investigation and had obtained convictions leading to more than 7,000 months of prison sentences in the aggregate. Those numbers pale in comparison, however, to the loss of more than $46 billion in taxpayer money to fraudsters.

Unfortunately, the unemployment insurance system is even more antiquated and prone to abuse than most government benefits programs. Individual states administer their own systems of unemployment benefits in partnership with federal subsidies. That allowed clever and even dumb scammers to game the system by exploiting communication breakdowns between state systems.

The Labor Department IG also lamented the failure of the Biden White House to provide needed resources to battle the immense amount of brazen fraud involved in federal unemployment subsidies.

The report shows that as a result of the sizable federal COVID unemployment subsidies, many people found it more economically rewarding to stay home than to return to work, or even seriously look for work. Of course, that incentive only encouraged greater unemployment and underemployment as employers nationwide continue to struggle to find competent and willing workers.

Sadly, the loss to taxpayers from the massive fraud will continue for decades and will affect the labor market and domestic production in ways that will never be adequately measured or understood.