The level of waste and fraud in unemployment benefits during the pandemic is staggering, even by Washington’s wasteful standards.
The federal government has squandered at least $60 billion on fraudulent or improper unemployment payments in the past year, the Labor Department estimates.
That amount is roughly equal to the entire annual budget for the Department of Homeland Security and, according to congressional Republicans, about $1 out of every $10 spent on unemployment insurance during the pandemic. Republicans are raising alarm that the Biden administration is largely ignoring the problem.
The jobless payments, including an extra $300-per-week federal benefit that Democrats extended through Sept. 6, have been paid to death row inmates in California and fraudsters in Nigeria and Russia. The benefit is on top of state payments that average $320 per week.
Experts say scammers have exploited a provision in the CARES Act of March 2020 that allowed the self-employed, independent contractors and “gig” workers to file for unemployment benefits for the first time.
The flood of money into the unemployment system also has caused identity theft to soar.
Eva Velasquez, CEO of the Identity Theft Resource Center, told House Republicans on Monday that her organization reported a 4,800% increase in the number of unemployment identity fraud cases last year.
“I’m not misspeaking. That’s a 4,800% increase in just that case type,” she said. “We’re on pace to pass our 2020 numbers before the end of the second quarter this year. If anything, we’re seeing it increase.”
The rise in fraud is another side of the unemployment benefits surge that appears to be complicating the economic recovery.
The U.S. Bureau of Labor Statistics reported Tuesday that job openings rose 8% to a record high of 8.1 million in late March. The National Federation of Independent Businesses has reported that 44% of small businesses can’t fill the job openings they have.
Business groups and Republican lawmakers say the beefed-up federal unemployment benefits are discouraging some people from returning to work. Georgia and some other states are considering whether to cut off the extra federal payments.
Andy Card, who served as chief of staff to President George W. Bush, said Tuesday that he sees “uninvited consequences” for the economy resulting in part from massive government spending to aid the recovery from the pandemic.
“One of them may be that people aren’t going back to work the way they thought they would,” said Mr. Card, referring to the slowdown of hiring in April. “I think you’re going to have to pay attention to the unemployment rate and the job opportunities that can’t be filled. I think it’s going to have an impact on our economy.”
He spoke at a virtual forum hosted by The Washington Times on Mr. Biden’s next 100 days.
Mr. Biden has dismissed those concerns, although he did warn Americans this week that people must accept “suitable” job offers rather than keep collecting unemployment checks.
“We’re going to make it clear that anyone collecting unemployment who is offered a suitable job must take the job or lose their unemployment benefits,” the president said. But he said he believes a taxpayer-funded disincentive to work is not “the real problem” and that more people will go back to work if employers pay a “decent wage.”
“We still have 8 million fewer jobs than we did when the pandemic started,” Mr. Biden said. “For many of those folks, unemployment benefits are a lifeline.”
As Republicans seek to roll back the federal unemployment benefits, they are highlighting examples of fraud.
The decision by Congress in 2020 to allow independent contractors to collect jobless benefits “created a once-in-a-lifetime opportunity for every scammer, fraudster and thief in the world, and they’ve jumped at the chance to take advantage of that opportunity,” said Douglas Swetnam, section chief of the data privacy and identity theft unit in the Indiana attorney general’s office.
Mr. Swetnam told Republicans at a House Ways and Means Committee minority roundtable that his section found a 1,500% increase in identity theft fraud reports last year in Indiana.
“We are on track to set a new record for 2021,” Mr. Swetnam said.
He said states were not equipped to handle the surge in benefits or fraud as scammers used personal information obtained from data breaches to apply for jobless benefits. The Labor Department and FBI cannot handle the huge volume of complaints, he said.
“We are finding when we offer, ‘Are there places we can send our fraud cases?’ The answer is, ‘No, we don’t have any capacity,’” Mr. Swetnam said. “It’s a real problem. There just aren’t enough law enforcement resources in place to pursue all the fraud cases.”
Indiana has processed nearly 1.3 million claims for unemployment since the start of the pandemic, and the state estimates that 15% of those claims have been flagged for fraud.
Michael Rodgers, director of policy and public affairs in the Ohio attorney general’s office, said states are often limited in their pursuit of identity fraudsters on such a broad scale.
“The states really aren’t equipped to deal with fraud on an international basis and dealing with criminal elements, so we’re really looking to the Department of Justice on those issues,” he said. “The scope of the fraud is so overwhelming, it’s really hard, it’s been difficult for law enforcement to get their hands on it at this point.”
In California, estimates of the cost of unemployment benefits fraud range from $9 billion to nearly $30 billion. In April, a state task force investigating fraudulent unemployment claims involving prison inmates said 68 arrests had been made and that it opened 1,641 other inquiries.
Kansas reported the highest increase in identity theft in 2020, and more than 40,000 Kansans reported unemployment benefit fraud last year.
In New York, the state Department of Labor announced last month that it had prevented more than $12 billion in fraudulent claims from being paid out, an indication of how many people had their identities stolen.
At the House Republican roundtable on Monday, Rep. Jackie Walorski of Indiana called for an end to what she termed “this federal practice of ‘pay and chase.’”
“Generous unemployment benefits put in place by the CARES Act, including the additional $300 federal supplement, are discouraging work and making it hard for employers to hire, and they have become an easy target for criminals,” she said. “Unchecked unemployment fraud is delaying legitimate payments, diverting funds away from unemployed workers and turning thousands of Americans into unwitting identity theft victims.”
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