With COVID-19 spreading and government-imposed shutdowns, too, Congress was in a panic to pass something quickly to keep the U.S. economy from a total meltdown.
It didn’t have time to fret much with the details in the multitrillion-dollar relief package approved in March. But like most things done in haste, there were going to be problems — some of which the crafters of the legislation anticipated but accepted as a cost of getting the money flowing right away.
One area that is showing itself to be problematic is the souped-up unemployment benefits for the record number of Americans who lost their jobs.
Rather than trying to take into account past earnings and regional variations in cost of living, Congress settled on a $600 per week additional benefit for everyone who was thrown onto the unemployment rolls. For many workers, especially those in modestly paid jobs, the size of the extra benefit has creating a disincentive to return to work. They can earn considerably more by staying home than punching a timeclock — at least until the additional benefit runs out
The pandemic unemployment assistance is also wide open for fraud, since there is little initial documentation required to qualify. As Mississippi Today recently reported, checking a box labeled “unemployed due to the pandemic” usually gets the benefits coming. And because state government workers are drowning in a sea of claims, they are not able to fully vet the applications.
Compounding the complications is that for the first time ever, the self-employed and contract workers qualify for jobless benefits. With no employer to fact-check what a claimant says, state unemployment offices are mostly operating under an honor system.
The attitude of the government seems to be that it will claw back the ill-gotten gains later. That may not be all that easy if the money has already been spent. Plus, since some of these fraud schemes may be based in other states or even other countries from where the claims are being filed, it may be difficult to track down many of the swindlers.
One estimate says the anticipated fraud could exceed what all the states combined paid out last year in unemployment benefits. That’s a lot to pay for speedy turnarounds, even in a crisis.