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Archive for May 19th, 2022

Government spending, almost by definition, is wasteful. But it’s worth distinguishing between two types of waste.

  1. Money that is spent properly but inefficiently.
  2. Money that is diverted by crooks and scammers.

Today, we’re going to focus on the second type of waste.

I’ve previously written about widespread fraud affecting programs such as Medicare, Medicaid, food stamps, welfare, disability, and the earned income credit.

Now let’s augment our previous analysis exposing how coronavirus-related spending has been a windfall for criminals.

We’ll start with a report from the Washington Post , authored by Tony Romm and Yeganeh Torbati. It contains a headline that begins with a quote that could apply to just about anything the government does.

Testifying at a little-noticed congressional hearing this spring, a top watchdog for the Labor Department estimated there could have been “at least” $163 billion in unemployment-related “overpayments,” a projection that includes wrongly paid sums as well as “significant” benefits obtained by malicious actors. …In many cases, the criminals stole the unemployment funds using real Americans’ personal information. They bombarded states with applications filed in the names of actual workers or people in prison — sometimes to such a degree that, in the case of Maryland, fraudulent claims came to outnumber real requests for help..

You won’t be surprised to learn that some bureaucrats did not want to stop the fraud.

Some of the malicious actors potentially even avoided detection, at least for a time, after the Labor Department refused to supply information needed to assist federal fraud investigations.

And you also won’t be surprised to learn that some states allowed far more fraud than other states.

In California, state officials acknowledged in October 2021 that they may have paid out more than $20 billion in undeserved unemployment payments to criminals. That included at least $810 million that had been wrongly paid to applicants whose information matched the names of people in prison.

The Wall Street Journal also opined on the topic of wasteful covid-related spending, but its editorial focused on the $1.9 trillion boondoggle that was pushed through by Biden.

…what happened to the $1.9 trillion for Covid Democrats passed last March? Most went to transfer payments, including child tax credits, enhanced unemployment benefits and stimulus checks. About a quarter subsidized state and local budgets and schools. Democrats appropriated a mere $80 billion for public health, only $16 billion of which was available for vaccines and therapies. …Democrats skimped on vaccine and therapies in order to ladle benefits to their political constituencies.

The bottom line is that Biden used the pandemic as an excuse to squander $1.9 trillion, even though at most only $80 billion of the money was for anything that was even vaguely related to vaccines and treatments.

From an economic perspective, that legislation was a spectacular failure.

I wonder whether we’ll ever learn how much of the remaining $1.82 trillion was wasted?

I’m guessing the answer is $1.82 trillion, but we won’t know how much was lost to run-of-the-mill waste and how much was lost to outright fraud.

P.S. Don’t forget that all government spending, even the small fraction that is spent wisely and efficiently, imposes economic costs. For more information, click here, here, here, here, here, and here.

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