We’re still living with the crushing inflation worsened by the federal government’s overzealous pandemic-era “stimulus” spending. But that costly burden is made all the more maddening by the revelations that show just how much of that federal spending was actually captured by fraud and waste. A new Associated Press investigation lays bare the shocking extent of COVID fraud, labeling it “The Great Grift.”
Remember, first under the Trump administration and then again after Biden took office, the feds shoveled trillions in “stimulus” spending out the door in hopes of offsetting the economic carnage that government lockdowns on the economy had wrought. All told, they’ve dispersed $4.2 trillion in emergency aid, a jaw-dropping amount that, adjusted for inflation, is more expensive than FDR’s New Deal. And, in typical government fashion, these unprecedented sums were shoveled out the door with little care or regard.
“Fraudsters used the Social Security numbers of dead people and federal prisoners to get unemployment checks,” the AP explains. “Cheaters collected those benefits in multiple states. And federal loan applicants weren’t cross-checked against a Treasury Department database that would have raised red flags about sketchy borrowers. All of it led to the greatest grift in U.S. history, with thieves plundering billions of dollars in federal COVID-19 relief aid intended to combat the worst pandemic in a century and to stabilize an economy in free fall.”
All told, the AP investigation reports that fraudsters stole at least $280 billion, while an additional $123 billion was either misspent or outright wasted. And these are conservative estimates that the AP says are “certain to grow” as more information comes to light. This total of more than $400 billion means that the feds wasted or lost more COVID money than they actually spent on COVID-related healthcare expenses.
Compared to the overall COVID spending binge, about one in ten dollars spent was stolen or wasted, this analysis suggests. That’s all bad enough, but it looks even worse when scrutinized in a slightly different manner.
After all, not all pandemic-era programs were equally rife with fraud. Some, like the distribution of “stimulus” checks, went off at least largely to plan. Again, per the AP, about 99% of the IRS’ stimulus checks were sent out accurately. That does mean that there was still $8 billion wasted, with stimulus checks being sent to dead people and random foreign nationals. But, at least compared to the other programs, the stimulus checks were pretty efficiently distributed. So, too, the hundreds of billions distributed to state and local governments, while then wasted or spent in a suspect manner in many cases, were largely unaffected by fraud.
The investigation reveals that three programs were the main culprits when it came to fraud: the expanded unemployment benefits, the Paycheck Protection Program, and the COVID-19 Economic Injury Disaster Loan program.
Why were they so disastrously corrupted?
“In the haste, guardrails to protect federal money were dropped,” the AP reports of the loan programs. “Prospective borrowers were allowed to ‘self-certify’ that their loan applications were true. The CARES Act also barred SBA from looking at tax return transcripts that could have weeded out shady or undeserving applicants, a decision eventually reversed at the end of 2020.”
A similar lowering of standards occurred in the expanded unemployment benefits program. It’s all so bad that even officials from inside the government are holding their hands up and admitting defeat.
One government official described the COVID spending as a “sort of endless pot of money that anyone could access.” Meanwhile, the Justice Department’s acting director for COVID-19 Fraud Enforcement admitted to “an unprecedented amount of fraud.” Yet perhaps the most shocking statement came from DOJ Inspector General Michael Horowitz.
“If you open up the bank window and say, give me your application and just promise me you really are who you say you are, you attract a lot of fraudsters and that’s what happened here,” Horowitz said.
It’s maddening enough to think of how recklessly federal officials handled our taxpayer money during such a challenging time. But, as it turns out, the most fraud-rife spending programs were also the least effective “stimulus” initiatives of all.
At least the COVID checks eventually got some money back into people’s pockets. The Paycheck Protection Program’s “loans” — they were really grants — failed miserably at their intended purpose, which was to keep businesses afloat and avoid layoffs. An MIT economist’s analysis found that most of the money went to “preserve” jobs that weren’t actually in danger, and that the PPP ended up spending an astonishing $170,000 to $257,000 per job it actually “saved.” (Far more than most of those jobs pay in annual salary.)
Meanwhile, the super-charged, expanded unemployment benefits actually constrained economic activity. They paid many people more to stay at home than they could earn by working and, unsurprisingly, millions of people who otherwise would have re-joined the workforce instead stayed home and cashed checks (long after the actual threat of COVID-19 had passed).
That’s right: the feds lost more to fraud and waste than they actually spent on healthcare, their stimulus efforts largely failed, and they fueled crushing inflation in the process.
So, the next time an emergency rolls around and the federal government promises to save the day if we just give it enough power and enough of our money… remember how royally they screwed up the pandemic response. And maybe don’t just blindly go along with it.