Opinion: Yes, They’ll Waste Our Money Again

By John Hood

RALEIGH — We will probably never know how much of our money was squandered during the pandemic by reckless politicians. But here are two damning numbers to start with: $400 billion and $855,000 per job year.

The first is a reasonable estimate of unemployment-insurance payments either improperly paid or stolen by fraudulent claimants. As you may remember, one early congressional response to the onset of COVID-19 was to add a bonus of $600 a week to UI checks and to make it easier for people to claim those benefits.

Essentially, politicians turned UI into an honor system. Of course, dishonorable people pounced.

A few days ago, the U.S. Department of Labor’s inspector general announced that at “the low end” $191 billion was paid to people who didn’t qualify but that missing data and delayed reporting prevented a full accounting. Matt Weidinger, an American Enterprise Institute scholar and former staffer at the U.S. House Ways and Means Committee, puts the total amount of improper UI payments at closer to $400 billion, or 40 percent of the total. “Significant shares were likely stolen by overseas criminal gangs, including in China and Russia,” Weidinger observes, and their schemes often began by stealing identities.

That’s what happened to me. I teach part-time at Duke University. A couple of years ago, university officials contacted me to ask why I, an adjunct faculty member, had filed an unemployment-insurance claim. I assured them I’d done no such thing. I submitted paperwork to Duke and reported the incident to law enforcement. Alas, it is my understanding that at least some UI payments were paid to my identity thief, anyway.

Now for the other number: $855,000 per job year. That’s the estimate AEI scholar Stan Veuger and University of California-San Diego economist Jeffrey Clemens put on the amount of COVID-era federal aid distributed to states and localities to prevent government layoffs divided by the number of positions that could reasonably be construed as “saved” per year by that aid.

As I’ve argued many times before, the federal government’s multi-trillion-dollar fiscal response to the pandemic was panicky and excessive. North Carolina was among the jurisdictions that received far more (borrowed) federal cash than was needed to cover revenues lost or new expenditures truly necessitated by the disease itself and the economic consequences of COVID-era shutdowns.

The best defense of all this is that politicians were mistaken but acting in good faith, that hindsight is 20-20. It’s a poor defense. Critics warned at the time that expanding the eligibility and amounts of UI benefits would have adverse consequences, both wasting money and slowing reemployment, and that states and localities didn’t need the massive sums Congress was about to throw at them. But many politicians had long sought to expand unemployment insurance and the federal government’s role in funding state and local governments. They capitalized on the crisis — with other people’s capital.

The only way to prevent this from happening again is to erect legal guardrails. Veuger and Clemens suggest, for example, that Congress should either institute preset formulas instead of a discretionary process for granting aid or that federal grant programs should be converted to loans that states and localities must repay.

Such steps are worth taking but we need to be thinking even bigger. With unemployment insurance, for example, we ought to devolve the program more comprehensively to state governments, forbid any extended benefits funded by Washington, and make it more expensive for states to borrow federal funds when their UI trust funds run out. That will encourage state policymakers to police fraud more aggressively and keep their benefits in line with fiscal realities.

More generally, we need to get the federal government’s finances under control. There should be a constitutional requirement that its operating budget be balanced, and that it borrow only to fund physical capital such as federal buildings and military assets.

Let’s do something. The next crisis will again test the willpower of politicians. They’ll fail again.

John Hood is a John Locke Foundation board member. His latest books, Mountain Folk and Forest Folk, combine epic fantasy with early American history (FolkloreCycle.com).

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17 Comments

  1. We would be a much stronger nation if the government did not hand out any money for the needy, but instead left us to rely on charity, compassion, and reward for hard work by getting out of the way.

    • Most government payments for the needy are for children. What hard work should they be rewarded for — going to school?

      Yes, I know your response Carl will be that their parents or guardians are the ones that should be working hard. But children should not be the ones to suffer as the result of those individuals.

  2. Let not forget that Trump and McConnell along with Democrats passed and signed these bills to give our money away without safe guards for fraud just to buy our votes.

    • Does joco used contracted transportation companies to transport students like wake county does? I honestly don’t know.

    • Never if we can help it. We learned a long time ago that throwing money at a problem doesn’t fix it when money isn’t the problem. We have cultural issues, not financial ones.

    • The amount spent for Ukraine represents less than 2% of federal spending. It is a small price to pay…. unless you’d like to be the next Chamberlain!

      • It is a European problem. What’s in it for the United States? Nothing except for diverting munitions and weapons from our existing stocks that have to be replaced. Considering all of the problems that we have right here-you know, homelessness, people struggling to make ends meet, and a wide open border, that money would be better spent here. But hey, that’s what the US does best–p*** money away. That 2% could be put to better use here.

        • “Not our problem…” pretty much exactly what Chamberlain said 90 years ago, too. But hey, some people never learn and still think that you can defeat a bully by doing nothing!
          And while they’ve tricked you into worrying about a measly 2%, they given $645M (nearly 9x what has been given to Ukraine) to subsidize oil and gas companies (even while they’re posting record revenues) and more than $1T (over 5 years) to subsidize electric cars. They’ve fooled you into worrying about inconsequential things. #VoteOutIncumbents

          • Don’t lecture me about about Chamberlain. That dude was a weakling. My point is this: I’m always amazed at how this country somehow can manage to throw taxpayer dollars at frivolous endeavors and leave us holding the bill.
            Also, if the West was sooooo concerned about stopping Putin, then why aren’t we supplying the aircraft like the Ukraine keeps asking for? Russian aircraft operate with relative impunity since they don’t face any real opposition in the air.
            Putin has one thing that Ukrainians don’t-numbers. When he decides to take that country with his professional troops and not those conscripts- he will. “Inconsequential” is not a term that I would use when the prospect of a conflict with Russia is more real now than I can remember at any point in my lifetime.

          • @KimJongUn: Again, if taxpayer expenses are your true concern, then then $80B for Ukraine is *nothing* compared to the other expenses. Let’s put the outrage where is REALLY belongs (e.g., $645M to subsidize oil and gas companies more than $1T for EVs) — but you’ve completely skipped that. As for stopping Putin…. if you’re afraid to do the right thing, you’ve already lost. Bowing down to bullies is NEVER the correct approach — most people learn that in grade school. At some point the USA has to make a decision: Are we going to defend allies and stop dictators or not? Do we care about freedom in the world or not?

      • I didn’t skip the subsidies for fuel. Although, personally, I’d rather see more investment in fossil fuels and let this green energy crap wither and die.
        Aside from that, I think that you made a valid point about grade school and bullies-Lord knows I dealt with them enough as a kid. The only language that a bully understands is violence. So, maybe we should just go ahead and place troops in the Ukraine and when the Russians kill some in an airstrike or cruise missile strike, then that will give us the reason we need to hit the Russians. Or maybe, we should just go ahead and hit them first.
        As for our “allies,” they’re only that because we foot the bill defending them. We bailed them out twice in the 20th Century, so what’s a third time?

  6. And with a $3B *surplus*, the RINOs in the NC Leg (looking at you Moore & Berger!!!!!) want to increase the state spending by 19%! While they fool you with false reports of drag queens taking over the state and transgender students athletes rewriting the record books, they continue to spend YOUR money without a second thought It is time to vote out the ENTIRE General Assembly and start over. #VoteOutIncumbents

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