$1.4 Billion in Coronavirus Stimulus Went to Dead People

$1.4 Billion in Coronavirus Stimulus Went to Dead People

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Plus: jobless claims remain stubbornly high
Thursday, June 25, 2020

Treasury Sent $1.4 Billion in Coronavirus Stimulus Payments to Dead People: Report

The Trump administration sent almost 1.1 million coronavirus relief payments totaling nearly $1.4 billion to Americans who had died, the Government Accountability Office says in a report published Thursday.

In their rush to send out more than 160 million emergency “economic impact payments” worth $269 billion — and to meet the CARES Act requirement that the payments be sent out as “rapidly as possible” — the Treasury Department and Internal Revenue Service used many of the procedures developed to send stimulus checks in 2008. As a result, while the IRS typically uses data such as the Social Security Administration’s death records to prevent improper payments, the agency did not filter out people who had died from the first three batches of coronavirus relief, accounting for 72% of payments disbursed as of the end of May.

The IRS was aware that some payments may go to people who had died, according to the report, and officials raised questions about that possibility with Treasury while the CARES Act was being drafted. But IRS lawyers initially determined that it did not have the legal authority to deny payments to people who had filed their tax returns, even if they had since died, according to the report. Treasury officials told the GAO that, once they learned that payments had been made to dead people, the department and IRS determined that the deceased aren’t entitled to coronavirus relief money.

The government filtered out payments to the dead starting with the fourth batch, and the IRS announced in early May that payments to dead or incarcerated people should be returned. The GAO says that the IRS does not have a plan in place to notify ineligible recipients of how to return the payments and recommended that the agency “should consider cost effective options” for such notifications. The IRS agreed with the recommendation. GAO also recommended that Congress allow the Social Security Administration to share its death records with Treasury and its Bureau of the Fiscal Service, which distributed the payments.

Why it matters:
“The number of economic impact payments going to decedents highlights the importance of consistently using key safeguards in providing government assistance to individuals,” the GAO report says.

But the political significance of the report goes beyond efforts to root out improper payments. It comes as the administration and Congress consider another round of coronavirus payments and could affect that decision: “The news that so much money has gone to the dead could add to reluctance from some Republicans to agree to more direct relief payments,” The Washington Post’s Erica Werner writes.

The prospect of such a backlash has some advocates for additional coronavirus stimulus concerned. “[T]here's going to be more scrutiny on the $1 billion that ended up going to recently deceased people than on the $500 billion that went to corporations, isn't there?” tweeted Michael Linden, a fellow at the left-leaning Roosevelt Institute.

Ernie Tedeschi, a former Treasury economist in the Obama administration, suggested that the broader context of the coronavirus relief effort really matters here. The improper checks amount to less than 1% of the total coronavirus relief payments. “This strikes me as a fairly *low* error rate, given that stimulus checks totaled almost $300 billion, and for the sake of speed were sent out automatically based on prior-year tax returns,” he tweeted.

Some low-income families got too little:
“The report also includes new data showing that many low-income families were shortchanged on payments,” The Wall Street Journal’s Richard Rubin reports. “Some 450,000 households that used a special IRS online tool for people who typically don’t file tax returns didn’t get the $500 payments for children that they should have. According to GAO, IRS is working to get the money to those households by the end of July.”

PPP problems:
The finding of $1.4 billion in improper payments is just one part of a sweeping 400-page report on the federal response to the pandemic. The GAO also warns that the $660 billion Paycheck Protection Program is vulnerable to fraud because the Small Business Administration (SBA), in an effort to streamline the loan process and get money out quickly, allowed borrowers to self-certify that they were eligible. GAO also raises the possibility that people may be getting wages paid from PPP loans and enhanced unemployment benefits provided under the CARES Act at the same time.

GAO warns that “the limited safeguards and lack of timely and complete guidance and oversight planning have increased the likelihood that borrowers may misuse or improperly receive loan proceeds.” The report calls on the SBA to develop plans to and address potential fraud in the small business rescue program. It also calls out the SBA for failing to provide critical information, including details of loan data, though the SBA pushed back on that criticism, saying it provided 420 pages of documents and made officials available for interviews with the GAO.

Waiting for spending data:
GAO also says that total federal spending data on the $2.6 trillion appropriated for coronavirus relief efforts are not yet available because the White House Office of Management and Budget told federal agencies they did not have to report coronavirus-related obligations and expenditures until July. “It is unfortunate that the public will have waited more than 4 months since the enactment of the CARES Act for access to comprehensive obligation and expenditure information about the programs funded through these relief laws,” the report says.

The bottom line: The government sought to respond to the coronavirus pandemic with unprecedented speed and fiscal power. Transparency and accountability about those efforts still need more work, GAO says. “Consistent with the urgency of responding to serious and widespread health issues and economic disruptions, agencies have given priority to moving swiftly where possible to distribute funds and implement new programs,” the report says. “As tradeoffs were made, however, agencies have made only limited progress so far in achieving transparency and accountability goals.”

More Job Losses Suggest Economy Will Need Another Boost

Nearly 1.5 million people filed for state unemployment benefits last week, the Department of Labor announced Thursday, bringing the 14-week total for first-time claims to about 47 million.

The latest data shows that new unemployment claims continue to move lower — but just barely. Initial claims peaked at 6.9 million in late March and have fallen every week since, but the latest figure of 1.48 million was higher than expected and marks the 14th week in a row that more than 1 million people have made a claim for state unemployment benefits.

The aggregate numbers are considerably worse. In addition to state initial claims, about 730,000 people applied last week for Pandemic Unemployment Assistance (PUA), a temporary program created by Congress for workers who ordinarily do not qualify for unemployment payments.

Taken together, that brings the week’s total of first-time jobless claims to about 2.2 million.
Joseph Brusuelas, chief economist at the consulting firm RSM, said Thursday that by his calculation, more than 2 million people have filed for unemployment aid of some kind every week for the past 10 weeks.

Worries about a stall:
The improvement in the job market appears to have slowed, said Bloomberg’s Katia Dmitrieva, even though it’s clear that some businesses are rehiring. “It looks like jobless claims declines have stalled. Signals a few things: huge churn in labor market (hiring vs. firing), and that second wave of layoffs in white collar jobs and non-restaurant/retail.”

The job market is “not really improving,” said Heidi Shierholz of the Economic Policy Institute. “I do think that people are getting hired back, but we are continuing to see an absolute hemorrhaging of jobs,” Shierholz told The Washington Post. “Just record levels of people.”

Implications for the next stimulus package:
Some economists said the data shows that the economy will need more stimulus from Congress. “If one was looking for confirmation, on whether further aid for the unemployed and the economy is necessary, its sitting out in plain sight,” said RSM’s Brusuelas. “Aid for those negatively affected by the pandemic expires on July 31 which due to those waiting on confirmation is setting up as the most significant fiscal cliff in American economic history.”

Quote of the Day

“Our best estimate right now is that for every case that’s reported, there actually are 10 other infections.”

– CDC Director Robert Redfield, in a call with reporters on Thursday. That would bring the number of U.S. cases to at least 23 million.

‘Lobster King’ Trump Extends Farmer Bailout to Maine

The White House on Wednesday ordered the Department of Agriculture to provide financial assistance to lobstermen in Maine, who have been hurt by President Trump’s trade war with China and the European Union. The funds will come from the $30 billion bailout program the Trump administration has created to aid farmers caught up in the conflict.

In a tweet Wednesday evening, the president falsely claimed that President Obama had “destroyed the lobster and fishing industry in Maine.” The White House memorandum on “protecting the United States lobster industry” makes it clear, however, that Maine’s lobster industry is being hurt by retaliatory tariffs from China, imposed in response to Trump’s tariffs on Chinese imports to the U.S.

In a celebratory tweet, trade adviser Peter Navarro — who was crowned the “lobster king” by Trump earlier this month for his role in negotiations with the European Union, which currently imposes tariffs on American lobsters — paid tribute to the president, saying he was the real crustacean sovereign. “Promises made, promises kept by the true Lobster King. @POTUS signed a historic executive order to provide relief for our GREAT American lobster fishermen. Stay tuned!”

Senior Economic Adviser Leaving White House

The acting chairman of President Trump’s Council of Economic Advisers, Tomas J. Philipson, will leave his post and return to the University of Chicago at the end of June.

Following the departure of deputy director Andrew Olmem last week, the three-member panel will be down to one member, Tyler Goodspeed, who is trained as an historian.

Another top economic adviser, Kevin Hassett, who preceded Philipson as CEA chair before stepping down a year ago, also said recently he would be leaving the White House again after another stint advising the president.

Why it matters:
“The departures come at a critical time for the White House and the country,” The Washington Post said, citing the severe recession, massive job losses, the resurgence of coronavirus in much of the country, and the trillions of dollars the government has spent and may spend again to aid the economy. “Losing two top economists in the midst of the crisis could push more of the analysis of future steps onto other advisers who don’t have the same background or expertise,” the Post added. “Still, Trump isn’t known for relying on the guidance of economists as much as his own instincts.”

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