Unemployment Fraud Scrutinized Ahead of Debate Over Renewing Federal Benefits

By The Center Square
The Center Square
The Center Square
The Center Square was launched in May 2019 to fulfill the need for high-quality statehouse and statewide news across the United States. The focus of our work is state- and local-level government and economic reporting. www.thecentersquare.com
September 2, 2021 Updated: September 2, 2021

Republicans in the U.S. House and Senate are demanding a federal investigation into unemployment benefits money lost to fraudsters, calling it the “greatest theft of American tax dollars in our nation’s history.”

The members sent a letter to the Government Accountability Office, asking the federal oversight group to investigate the fraud and arguing structural issues exist within the federal government that make the theft possible.

“It is concerning that responsibility for determining how much fraud has occurred lies scattered throughout a web of bureaucracies,” the letter reads. “The scattering of responsibilities suggests that Congress will be ill equipped to have adequate information to assess future unemployment insurance responses to large economic shocks; and, at the same time, ensure they are not plagued by gaping security holes that allow fraudsters an open window to use to unlawfully obtained taxpayer funds.”

The question of unemployment fraud takes on extra weight as lawmakers are expected to debate in the coming days whether to extend $300 weekly federal unemployment benefits, which expire Saturday.

The letter is led by Sen. Mike Crapo (R-Idaho), who leads Republicans on the Senate Finance Committee, and Rep. Kevin Brady (R-Texas), the leading Republican on the House Ways and Means Committee. Rep. Jackie Walorski (R-Ind.) also has been a leader on the effort.

They estimate fraudulent efforts have stolen between $89 billion to $400 billion and request GAO finds out exactly how much has been taken.

The members point out they asked the U.S. Department of Labor (USDOL) earlier this year to use funds to prevent this kind of fraud. Companion bills have been introduced in the House and Senate to address the issue but have not passed. Republican-led states around the country have turned away the extra federal benefits, citing evidence they have disincentivized many Americans from returning to work.

Businesses around the country have cited difficulty hiring workers despite widespread joblessness. Recent federal data showed there are more available jobs than workers in the United States.

“Yet, there is currently no federal effort in place to formally evaluate and estimate the true scope and severity of COVID unemployment fraud nationwide,” the letter reads. “We request that GAO, as part of its mission and ongoing work to reduce improper payments and safeguard federal funds, investigate, and provide a national estimate of funds lost because of fraudulent activity.”

The concern over unemployment fraud has been bipartisan. Senate Democrats expressed concern in June over a “fraudulent crime network” exploiting unemployment benefits.

“We all share a common goal of ensuring the integrity of the unemployment insurance (UI) program, and supporting a strong UI program is a critical component of the economic safety net during times of economic downturn, including during the COVID-19 pandemic,” several Democratic senators wrote in a letter to the USDOL. “Safeguarding state UI systems against unscrupulous actors who seek to exploit the current public health crisis for economic gain requires a holistic response by the federal government in partnership with states.”

The calls for investigation also come after a GAO report in July found states and territories overpaid unemployment benefits by $12.9 billion, though the GAO said most of those funds were overpayments, not fraud.

“The American Rescue Plan Act of 2021, enacted March 11, 2021, subsequently provided DOL with $2 billion to detect and prevent fraud, promote equitable access, and ensure the timely payment of UI benefits,” the report said. “As of May 20, 2021, DOL officials said that DOL was working to develop detailed plans for this $2 billion in coordination with the Office of Management and Budget, and noted that developing spending plans across 53 states and territories involves complex considerations.”

Whether an investigation will occur remains to be seen.

“Unemployment fraud takes resources away from American workers who deserve assistance and puts those resources directly in the pockets of fraudsters,” the Republicans’ letter reads. “Given that roughly a year-and-a-half has elapsed since the pandemic’s onset and given what appears to be the largest amount of unemployment fraud in history since March of last year, it is concerning that some seem almost indifferent to the massive fraud that has occurred.”

By Casey Harper

The Center Square was launched in May 2019 to fulfill the need for high-quality statehouse and statewide news across the United States. The focus of our work is state- and local-level government and economic reporting. www.thecentersquare.com