The Department of Government Efficiency recently spotlighted unemployment benefits paid to tens of thousands of individuals whose reported birthdates indicated they were either children or dead. One claimant’s birthdate even suggested he or she hadn’t been born yet. As Elon Musk said, “Your tax dollars were going to pay fraudulent unemployment claims for fake people born in the future!” The $382 million DOGE identified that taxpayers lost on the associated improper payments is real money. But it’s also just the tip of a massive iceberg of fraud involving pandemic unemployment benefits—nearly all of which taxpayers will never recover.
The government’s response to the pandemic included offering record extended and expanded unemployment checks, which altogether cost state and federal taxpayers an unprecedented $900 billion in 2020 and 2021. Huge amounts of that were lost to criminals using stolen identities. Government experts estimate criminals stole up to $135 billion while private sector experts project $400 billion in losses to fraud. Whatever the true figure, only $5 billion in state and federal overpayments have been recovered in recent years.
Set against those massive losses, DOGE’s birthdate-based findings, while significant, reflect less than pennies on the dollar. For example, the $382 million DOGE identified is just one-tenth of one percent of what private experts previously projected in fraud involving pandemic unemployment benefits.
It gets worse. A recent Department of Labor (DOL) Inspector General report leaves little doubt that nearly all of these losses, which veteran lawmakers have called “the greatest theft of tax dollars in US history,” are long gone and will never be recovered.
The Inspector General’s report was released on April 1st, but sadly it’s no prank. It suggests that any hope of significant recoveries of pandemic fraud were always in vain. The reason? States, which processed extraordinary federal benefit expansions during the pandemic and are responsible for recovering any improper payments, never actually identified most presumed improper payments. And even when states identified improper payments, they were more likely to waive recovery than successfully reclaim misspent federal funds.
The Inspector General’s report focuses on improper payments involving three now-expired federal unemployment programs. For those programs, the report “estimated $118.1 billion in overpayments that should have been established.” That figure, however, is “much higher than the reported established overpayments of $36.9 billion.” As a result, “approximately $81.2 billion of potential overpayments were not established and, thus, were not pursued for collection.” As the Washington Times curtly summarized, that’s “more than $80 billion in likely bogus payments that the states haven’t even acknowledged, much less tried to pursue for collections.”
That’s without getting into the far greater misspending private sector experts see across all programs. And not only did states fail to identify most overpayments, even when they did, they were more likely to waive recovery than reclaim the lost money. Of the $36.9 billion in identified federal overpayments, the report finds states “waived more overpayments ($3.8 billion) than they recovered ($2.5 billion).” The Inspector General’s report offers a litany of reasons why significant additional recoveries of this money are unlikely.
There is plenty of blame to go around, and federal law contributes significantly to losses to fraud and failures to recover that money. For example, the Inspector General’s report reminds that Congress left the door wide open to abuse when it allowed one pandemic program’s “claimants to self-certify their eligibility for benefits without requiring verification of identity or evidence of employment or self-employment.”
The result was hundreds of billions of taxpayer dollars lost to fraud, with most never to be recovered. The DOGE findings thus offer disturbing new nuance on what was already a known disaster. They also challenge the administration, Congress, and the states to work together to fix these blatant problems before they recur.
If there is any good news here, it is that the solutions are obvious, and start with not repeating the worst mistakes of the past. Federal law should never again allow individuals to self-certify their eligibility, and benefits should never be paid before a claimant’s identity has been verified. Matching against prisoner, deceased individual, and other databases should be required, or else federal benefits should not be paid. And states should be allowed to keep some of the federal overpayments they recover, so they have an incentive to go after bad actors when misspending inevitably occurs.
The alternative is to allow the same mistakes to recur—costing taxpayers billions of dollars lost to fraud all over again. And that would be truly unforgivable.