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We Still Don’t Know How Much Taxpayers Lost Due to Pandemic Unemployment Assistance Fraud


April 8, 2024

One of the first programs Congress created to assist Americans thrown out of work by the pandemic was the unprecedented Pandemic Unemployment Assistance (PUA) program. PUA expanded unemployment benefits to millions of independent contractors, the self-employed, and others never before eligible for regular Unemployment Insurance (UI) checks. But in some of the worst policy choices of all time, lawmakers failed to require PUA to confirm claimants’ identity or prior work history and even allowed individuals to “self-certify” their eligibility for benefit checks. Identity thieves, domestic and foreign, had a field day using stolen personal information to fraudulently claim billions of dollars in taxpayer-funded benefits. Unfortunately, multiple federal reports still have failed to identify exactly how much taxpayers lost—despite two years passing since the end of the program.

The Department of Labor (DOL) issued the first report in the depths of Congress’s annual month-long August recess last year. DOL billed that long-awaited improper payments report as an “exhaustive study.” Yet it offered no details on how much taxpayers lost and buried its few findings behind lengthy descriptions of “context” and “actions taken” by DOL. In the end, DOL reported just three facts about PUA improper payments: the program’s overpayment rate was 17.0 percent; its underpayment rate was 1.5 percent; and 17.4 percent of PUA benefits “could not be determined as valid, overpaid, or underpaid.” Basic arithmetic produces the report’s headline takeaway: PUA’s improper payment rate was a staggering 36 percent—far above the 21.5 percent rate for other unemployment benefit programs.

The DOL report didn’t specify how much taxpayers lost to PUA improper payments, but a second report, issued in November 2023 by the Office of Management and Budget (OMB) on government-wide improper payments, attempted to do so. OMB simply multiplied the first report’s 36 percent improper payment rate against $121 billion in PUA spending to indicate the program issued over $43 billion in improper payments. But there’s something else very strange about OMB’s math: it appears to be missing billions of dollars in additional federal benefits paid, in many cases improperly, to PUA recipients.

The OMB report breaks out recent unemployment benefit spending into two types: spending by PUA, and all other unemployment benefit spending, which the report labels “Federal State Unemployment Insurance.” OMB lists federal PUA spending as $121 billion. Meanwhile, “everything else” sums to $585 billion across pandemic-era fiscal years 2020, 2021, and 2022. DOL separately reports that state UI spending in those years totaled over $212 billion, which suggests that federal spending should be the remaining $373 billion. However, that figure falls $170 billion short of the $543 billion in non-PUA federal spending that DOL currently reports.

That suggests three things. First, that the OMB data is missing a significant amount of federal spending on expanded unemployment benefits during the pandemic. Second, that PUA program spending doesn’t include $600-per-week federal Pandemic Unemployment Compensation (PUC) supplements paid to PUA recipients, as other OMB figures appear to include. And third, that as a result OMB’s PUA improper payment figures are only partial, since they don’t include improper PUC supplements paid to PUA claimants.

It’s not unreasonable to assume that the whole missing $170 billion reflects PUC supplements paid to PUA recipients, since PUA claims were heavily concentrated during the program’s first few months when $600-per-week PUC supplements far outweighed guaranteed minimum PUA payments averaging around $165 per week nationwide. Omitting that enormous figure would do more than diminish apparent spending on PUA recipients. It also would significantly reduce the amount of improper payments associated with the PUA program, since we know people who wrongly collected PUA benefits likewise wrongly received PUC supplements. Applying PUA’s improper payment rate of 36 percent to $121 billion in PUA benefits and a presumed $170 billion in PUC payments made to PUA recipients would more than double the amount misspent on PUA claimants from $43 billion to $104 billion. That in turn would increase OMB’s total improper unemployment benefit payments during the pandemic from $145 billion to over $200 billion.

Maybe there’s a perfectly good reason why $170 billion in federal spending appears to be missing from OMB’s report, which was issued over two years after pandemic programs ended. If so, neither the DOL nor the OMB report provides it. The Biden administration owes taxpayers a full accounting of exactly how much money was lost on the PUA program, including the large PUC supplements paid to PUA recipients. If the administration truly seeks to use information to “help guide future program design decisions,” reporting exactly how much was spent—and so dramatically misspent—on PUA recipients would be a good place to start.