Congress recently passed legislation to add a weekly $300 boost to unemployment insurance (UI) payments. Congress passed a similar boost back in March 2020 of $600 that expired in July. Before it expired, the boost had terrible effects.
In March, as businesses and elected officials were first responding to the COVID pandemic, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The massive omnibus contained a lot of controversial provisions, with one being the $600 weekly UI boost. The extra $600 was supposed to help individuals as the mandated lockdowns began in early 2020, but the unintended consequences were predictable.
Really, the $600 boost turned out to be more lucrative than work for many recipients. On average, recipients of the boost were paid the equivalent of more than $50,000 per year. For many, this made remaining unemployed more enticing and comfortable than finding a new job and earning a living.
The problem didn’t stop there. After states were able to reopen safely and businesses could begin operating again, employers reported that workers were refusing to come back. Collecting $50,000 per year to couch-surf was a strong motivator. In fact, the $600 boost was the primary reason workers refused to return to work.
Refusals to return to work or accept suitable work are clearly fraud. But it’s an added problem to the existing, consistent fraud within UI, such as ineligible out-of-state claims and people registering for benefits using fake identities. Even Arkansas Governor Asa Hutchinson was targeted for unemployment fraud last year.
He’s not the only high-profile target of unemployment fraud. And what’s worse: He’s not even the only high-profile elected official who was targeted in 2020. Just like the Arkansas governor, the former lieutenant governor of Michigan, Brian Calley, was also targeted by unemployment fraudsters. And in Ohio, both sitting Governor Mike DeWine and sitting Lieutenant Governor Jon Husted were recently targeted for unemployment fraud.
And the stories only get bigger and more bizarre. In Washington state, a Nigerian fraud ring named “Scattered Canary” allegedly stole as much as $650 million in unemployment benefits from the state’s system, as estimated by the state’s Employment Security Department (ESD).
This summer, while millions of Americans were out of work, rapper Nuke Bizzle recorded “EDD,” a song about stealing unemployment benefits from Californians made jobless by the pandemic. His alleged “swagger for EDD” would have cost California taxpayers $1.2 million had he not made the spectacular decision to outline the crime in a music video.
You can read all about Mr. Bizzle and the highest-profile unemployment fraud stories from the most recent Foundation for Government Accountability (FGA) research paper: Outrageous Unemployment Fraud in 2020—And How to Fix it.
The UI system, already filled with tons of fraud stories like these, spanning from average Joes to sitting governors, was squeezed for even more fraud because of the $600 boost. We shouldn’t expect anything else from the new boost.
What’s ironic about both of these boosts is that neither are supported generally by the American people. According to Foundation for Government Accountability (FGA) polling, few voters supported reviving the bonuses, even if the amount was reduced to $300 as it was in this most recent legislation. In fact, only 33 percent of Americans supported reviving a UI bonus if it was brought back as $300 per week instead of $600 per week.
Why did Congress just pass a largely unsupported policy which, when last used, unnecessarily harmed the U.S. economy?
The $600 boost had terrible effects on the economy, causing a worker shortage and prolonging recovery. It’s likely that the new $300 boost will have the same, or similar consequences: it will likely hamper the economic comeback this country needs. After pressure from businesses and taxpayers, Congress decided against extending the original $600 boost and allowed it to expire on time at the end of July in 2020. And, when it did, unemployment claims fell drastically, as more and more people went back to work.
We need to make sure this boost expires on time as well.
As long as the boost does expire, there will likely be a dramatic improvement in the national economy and in the strength of small businesses, just like there was in July 2020 after the $600 boost expired.
Joe Horvath is a senior fellow at the Foundation for Government Accountability, where he focuses on unemployment insurance reform and transparency for students.