The trio of pandemic-relief stimulus packages authorized the transfer of more than $5 trillion from the federal government to individuals, businesses, nonprofits and state and local governments.
With that kind of money changing hands so quickly, some of it was bound to get lost in the shuffle. In this case, “some” turned out to be about $403 billion, give or take a few hundred million.
That’s roughly 10% of the $4.2 trillion distributed so far lost to waste, mismanagement and outright theft. That’s just south of a half-trillion taxpayer dollars squandered — and most of it is unrecoverable.
According to the Pandemic Response Accountability Committee, the federal government authorized $5.1 trillion in emergency aid measures — about $3.2 trillion during President Trump’s term and $1.9 trillion during President Biden’s time in office.
About one-fifth of that sum is yet to be paid out.
The four biggest categories, which account for the bulk of the spending:
- Individuals: $1.1 trillion
- Unemployment: $1 trillion
- Paycheck Protection Program: $778 billion
- State, local and tribal governments: $674.3 billion
One of the more comparatively modest spending categories was federal program administration and oversight, which received $92.1 billion. If the program planners had known just how badly oversight would be needed, they might have budgeted a little more for that.
The pandemic relief bills represented the largest rescue package in American history, and their sheer size was able to obscure an epic level of fraud that the Associated Press called “unprecedented.”
For example, the IRS’s effort to get stimulus checks to the right people was 99% successful. But 1% of an $837 billion program is $8 billion, which is how much the agency erroneously doled out to “ineligible individuals.”
When you’re dealing with hundreds of billions, 1% here and there adds up; and, according to an Associated Press analysis, it added up to $123 billion wasted or misspent. But more than twice that amount — $280 billion — was stolen.
To date, the U.S. government has charged more than 2,230 people with fraud-related crimes involving the massive plunder of pandemic-relief funds, and it is investigating thousands more.
Among the culprits are criminals and organized gangs that used stolen identities to secure loans and claim stimulus checks. But the list also includes a former Missouri state lawmaker, a U.S. soldier, a roofing contractor, church pastors and many other run-of-the-mill people who likely wouldn’t have risked stealing if regulators hadn’t made it so tempting to try.
The urgency of the moment and the enormous volume of claims compelled policymakers to remove guardrails designed to protect against precisely the kind of fraud that occurred on such a massive scale.
For example, to process cases faster, a Treasury Department database that would have raised warnings about shady borrowers wasn’t used to screen federal loan applicants.
To expedite what would have been 100 years’ worth of application processing, the overburdened Small Business Administration (SBA) allowed applicants to self-certify that the information they provided was true.
Those are just two examples of safeguards removed for the sake of expediency. While these actions enabled agencies to quickly get funds to the people who needed them, they also rang the dinner bell for those who would exploit the system in what the AP report called “the greatest grift in U.S. history.”
According to NBC News, the Paycheck Protection Program (PPP), in particular, was structured in a way that invited fraud, allowing thieves to rob the program of $80 billion, or roughly 10% of its funds.
The program authorized banks to issue forgivable government-backed loans to businesses that could be converted to grants if the money was used for qualifying business expenses. Millions of borrowers are believed to have overstated their numbers of employees or created imaginary businesses outright.
Congress required the SBA to get the money out fast by advising lenders that they wouldn’t be responsible for borrowers who didn’t comply with the program’s criteria. Many people simply took the names of existing businesses found on state websites or registered fake new ones to receive PPP support for nonexistent employees.
Then there was the $900 billion unemployment relief program, which a different NBC News report found to have lost between $87 billion and $400 billion to fraud — at least half stolen by foreign criminals.
Nigerian scammers, Chinese hackers and Russian mobsters reportedly used stolen identities to file false unemployment claims. Some individual fraud rings plundered millions of dollars each from dozens of states — and American taxpayers footed the entire bill.
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