The nonpartisan Government Accountability Office (GAO) yesterday added the Unemployment Insurance (UI) system to its list of programs at “high risk” for waste, fraud, and abuse. This designation should surprise absolutely no one, as the Department of Labor (DOL) Inspector General testified in March that the UI system paid out “at least” $163 billion in improper payments during the pandemic. Rep. Kevin Brady (R-TX) last year called that “the greatest theft of tax dollars . . . in American history.”

The designation was included in the first of three reports GAO released on the performance of the UI system during the pandemic. That report, titled “Unemployment Insurance: Transformation Needed to Address Program Design, Infrastructure, and Integrity Risks,” included several related findings:

• The UI system saw a
  massive increase in improper payments: “In
  fiscal year 2021, DOL’s estimated amount of improper payments for the UI
  program increased over ninefold, from approximately $8.0 billion in fiscal year
  2020 to approximately $78.1 billion in fiscal year 2021.”
• Those enormous figures
  are understatements, since “Total UI
  improper payments are not known partly because DOL has not yet reported
  estimates for certain pandemic UI programs.”
• Bigger benefits
  during the pandemic created a magnet for fraud: “The increased amount of benefits awarded and legacy IT systems’
  inability to adequately guard citizens’ sensitive information, gave criminals
  incentive to commit fraud.”
• Failing to address
  these weaknesses will only make matters worse: “Leaving
  these issues unaddressed will heighten the risk of the UI system not meeting
  fundamental program expectations of serving workers and the broader economy,
  and may undermine public confidence in the responsible stewardship of
  government funds.”

The report identified several “factors contributing to fraud risk in CARES Act UI programs,” with the top two being policies Congress designed, starting with the flawed initial eligibility rules for the fraud–riddled Pandemic Unemployment Assistance (PUA) program:

• “Reliance on
  self-certification. The CARES Act
  allowed PUA applicants to self-certify aspects of their eligibility and did not
  require them to provide any documentation of self-employment or prior income.”
• “Waiver of waiting
  period. . . . Based on federal laws and in an effort to
  speed claims processing, DOL encouraged states to temporarily suspend the
  existing waiting period for benefits and the CARES Act generally provided full
  federal funding for the first week of regular UI benefits to states that did so.
  . . . Waiving the waiting period meant that some states had less time to employ
  tools for fraud prevention and detection, according to NASWA officials.”

According to GAO, other factors contributing
to elevated fraud risk include low staffing levels, flawed legacy IT systems,
and variation in data analysis across states.

A second GAO report, titled “Unemployment Insurance: Pandemic Programs Posed Challenges, and DOL Could Better Address Customer Service and Emergency Planning,” offers further assessments of pandemic programs. A third report, titled “Pandemic Unemployment Assistance: Federal Program Supported Contingent Workers amid Historic Demand, but DOL Should Examine Racial Disparities in Benefit Receipt,” provides a more detailed review of the PUA program, which GAO found suffered from more fraud-related overpayments during the pandemic than all other unemployment benefit programs, combined.

The first report concludes with a series of policy recommendations “for UI transformation.” GAO was careful to note that the recommendations it listed come from “stakeholders participating in our panel discussion” and as such “their inclusion in this report should not be interpreted as GAO endorsing any of them.” The recommendations include permanent changes such as reviving a PUA-like program, expanding eligibility and benefit amounts, easing access to extended benefits, increasing federal funding for benefits and administration, and even federalizing the UI system. Those recommendations mirror recent proposals from liberal congressional leaders, including ones that would revive pandemic benefit programs based on automatic triggers. Congress should instead prioritize avoiding a repeat of the flawed policies it crafted in response to the pandemic, which were key “factors contributing to fraud risk,” as GAO noted.

Unsurprisingly, and also like recent liberal proposals, ideas for financing the wish list for bigger benefits reflected in the GAO report are few. GAO blandly lists various “considerations” policymakers should weigh in developing such a “transformation,” including “the risk to the taxpayer and likelihood of deficit financing.” It separately notes that federal pandemic unemployment benefits cost taxpayers over $650 billion—almost all of which was added to the deficit. Permanently reviving such massive spending programs not only invites more fraud, it also begs the question of just who would pay how much more in taxes every year to cover the enormous cost. That’s more than a passing consideration.

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