President Joe Biden has asked Congress for $1.6 billion to hire additional investigators, inspectors general, and prosecutors to go after criminals who looted taxpayer money during the pandemic.
Since the outbreak of COVID-19 more than three years ago, governments at all levels have provided enormous sums of money for items such as ventilators, mRNA vaccines, boosters, plexiglass barriers, hand sanitizers, and masks. In addition, the federal government spent more than $5 trillion on what turned out to be fraud-ridden financial aid programs to address the economic hardship caused by the state-imposed lockdowns, school closures, and other restrictions on commercial activity.
Rampant Fraud
By March 2022, the federal government had authorized $14.1 trillion in COVID-related spending, according to the Committee for a Responsible Federal Budget. Of that sum, some $3 trillion has yet to be spent, according to recent estimates cited by Raymond J. March, an assistant professor of agribusiness and applied economics at North Dakota State University.
After Congress expanded unemployment benefits during the pandemic to include new categories of workers, state unemployment departments were overwhelmed with applications, many of them from people who were ineligible for benefits. Fraudsters used stolen identities to claim benefits. The Washington Post on March 3 cited a recent federal estimate showing roughly $191 billion in false unemployment payments.
In 2020, the Small Business Administration began managing what would become more than $1 trillion in loans and grants to cash-starved companies. Criminal elements lost no time in exploiting the situation. In January of this year a federal pandemic watchdog estimated the SBA had awarded roughly $5.4 billion to companies that used potentially ineligible Social Security numbers, the Post reported.
Lack of Oversight
In March 2022, NBC News reported the theft of as much as $80 billion of the $800 billion handed out by the SBA in the COVID relief plan known as the Paycheck Protection Program (PPP), citing government sources.
The PPP authorized banks and other financial institutions to make taxpayer-backed loans to businesses, which were to be forgiven if the money was used for COVID-related business expenses. Instructed by Congress to process the loans quickly, the SBA failed to carry out due diligence.
“Experts say millions of borrowers inflated their numbers of employees or made up companies out of whole cloth,” NBC reported.
The waste of resources extended far beyond what criminals were able to loot from federal relief programs.
In New York City, officials are quietly trying to auction off medical supplies bought during the pandemic but never used. For example, the city paid $12 million for 3,000 “bridge vents” to serve as backups for ventilators, under then-Mayor Bill de Blasio. The devices were never used and are described as “non-functioning medical equipment sold as scrap metal” after being purchased for $24,600 by a Long Island junk dealer, The City reported on March 5.
In addition, The City found New York’s Department of Citywide Administrative Services has been trying to unload COVID-related Personal Protective Equipment (PPE) and medical supplies such as gowns, face shields, hand sanitizer, KN95 masks, and N95 masks. The auctions have been largely unsuccessful.
Enormous Losses
The misdirected COVID-19 spending involves countless bizarre decisions by giant government bureaucracies put in charge of the public health, says Joel Zinberg, M.D., a senior fellow at the Competitive Enterprise Institute in Washington, D.C.
“Word has trickled out—despite the best efforts of officials to hide it—that New York City purchased $224 million in COVID-19 supplies that were never used and are now being disposed of for pennies on the dollar if they can be sold at all,” said Zinberg. “Why the city [government] didn’t repurpose the supplies for its own health care system, the New York City Health and Hospital Corporation, remains a mystery. That probably would have made too much sense.”
The waste of taxpayer dollars is still going on, says Zinberg.
“Tales of waste fueled by wildly inaccurate and alarmist predictions of COVID-19 disasters are heard around the country,” said Zinberg. “The Biden administration purchased 170 million doses of the bivalent booster without assessing how many would be used. Only 53 million doses have been administered in over six months, and new vaccinations have slowed to a crawl. And the administration doubled down, spending another half a billion dollars to promote the vaccines, to no avail.”
‘Senseless and Destructive’
The fraud associated with the PPP is a vivid but rather small component of governments’ mistakes in dealing with COVID, says Joel Griffith, a research fellow at The Heritage Foundation’s Thomas A. Roe Institute for Economic Policy Studies.
“The fraud should be prosecuted,” said Griffith. “But we should not allow politicians to act as if fraud is the primary problem related to COVID-19 spending. Even if fraud were entirely eliminated, the hundreds of billions of spending on PPP, and trillions on ‘COVID-19 relief’ elsewhere, were economically destructive. Politicians borrowed from future generations, and our central bank printed incessantly in an effort to mask the reality that closing society is both senseless and destructive.”
Bonner Russell Cohen, Ph.D. (bcohen@nationalcenter.org) is a senior fellow at the National Center for Public Policy Research.
