$191 Billion in Improper Payments

$191 Billion in Improper Payments

The president during an event in Wisconsin on Wednesday
Reuters
By Yuval Rosenberg and Michael Rainey
Wednesday, February 8, 2023

Happy Wednesday! Who predicted that Social Security and Medicare would dominate the post-State of the Union discussion? Here’s a look at the fallout from Biden’s big speech.

Biden and GOP Clash Over Social Security and Medicare

Rabble-rousing Republicans keep giving President Joe Biden wins.

In a particularly tumultuous moment in his State of the Union address Tuesday night, Biden accused a handful of Republicans of planning to wipe out some of the nation’s bedrock social welfare programs, Social Security and Medicare.

“Instead of making the wealthy pay their fair share, some Republicans – some Republicans want Medicare and Social Security to sunset,” Biden said.

Republicans in the chamber responded with a round of jeers and catcalls in protest, with one lawmaker — the flamboyantly dressed bomb thrower from Georgia, Rep. Marjorie Taylor Greene — shouting, “Liar!”

Biden, who noted that it was only a minority of Republicans promoting such a proposal, said he’d be happy to provide proof of his claim. “Anybody who doubts it, contact my office,” he said. “I'll give you a copy. I'll give you a copy of the proposal!”

Biden then embraced the uproar, saying it provided proof that Republicans and Democrats agree that Social Security and Medicare should be exempt from cuts – an important issue as Republicans press for reductions in federal spending in exchange for raising the debt limit. “So, tonight, let's all agree – and we apparently are – let's stand up for seniors,” he said. “Stand up and show them we will not cut Social Security. We will not cut Medicare.”

It was a bit of presidential jiu-jitsu that has been widely chalked up as a double win for Biden, taking those programs off the table and showing that he can spar with Republicans as he gears up for a re-election bid.

Is there a GOP plan? Although he didn’t name any specific lawmakers on Tuesday night, Biden made clear in remarks delivered in Wisconsin on Wednesday that he was referring in part to a proposal from Sen. Rick Scott, the Florida Republican who last year issued a “Plan to Rescue America.” Under Scott’s plan, all federal legislation would expire every five years — including the legislation authorizing Social Security and Medicare, among many other programs.

Biden has attacked the proposal for months and used it as a foil during last year’s midterm elections. Scott has pushed back against the notion that sunsetting the legislation means that the programs would be eliminated, since Congress could reauthorize them again. But the fact remains that his plan would do just as Biden said: sunset Social Security and Medicare while exposing the programs to the whims of a new Congress every five years.

“The president was correct here,” said CNN’s Daniel Dale, in a fact check of Biden’s claim. “He was not lying.”

So why are Republicans expressing such outrage at Biden’s comments? For one thing, Scott’s proposal — which originally included a controversial plan to raise taxes on millions of Americans who he says don’t have sufficient “skin in the game” — isn’t exactly popular in the GOP, and does not express any formal party agenda. Senate Minority Leader Mitch McConnell (R-KY) quickly rejected the Scott proposal when it appeared last year, even as he refused to provide an agenda of his own. “We will not have as part of our agenda a bill that raises taxes on half the American people and sunsets Social Security and Medicare within five years,” McConnell said.

In addition, House Speaker Kevin McCarthy (R-CA) has said Republicans will leave Social Security and Medicare aside as they press for spending cuts amid a burgeoning debt ceiling showdown. Those programs should be “completely off the table,” McCarthy has said, though there are questions about whether McCarthy’s view is fully shared within the quarrelsome House Republican caucus.

Still, it’s worth noting that Scott’s plan has drawn some support within the GOP. Sen. Tommy Tuberville (R-AL) said earlier this year that he was “on board” with the proposal. Sen. Ron Johnson (R-WI) has expressed approval, too, and even offered his own plan in which all federal legislation would sunset every single year.

More broadly, many Republicans over the years have expressed doubts about Social Security and Medicare if not out outright opposition to the programs, which were created under Democratic presidents, pushing the country toward “socialism” in the eyes of many conservatives. President George W. Bush famously attempted to privatize the Social Security system in 2005, a popular idea among conservatives that has recently been revived by former Vice President Mike Pence as he maneuvers for the 2024 Republican presidential nomination. Sen. Mike Lee – the Utah Republican who appeared to be particularly offended by Biden’s comments Tuesday night, and who accused the president of lying about the Republican agenda – was once recorded saying that his objective in running for the Senate is to “phase out Social Security, to pull it up by the roots and get rid of it,” adding that, “Medicare and Medicaid are of the same sort and need to be pulled out.” Biden on Wednesday used those comments as evidence he was right.

Debt ceiling negotiations aside, many Republicans are currently mulling options for how to shore up the finances of Medicare and Social Security, both of which face funding shortfalls in the coming years as the baby boomers age and place an enormous strain on both systems. Most of their proposals involve some kind of cuts, such as raising the retirement age, capping payment levels and means-testing benefits — cuts that many say are essential for maintaining the viability of the programs.

At his appearance in Wisconsin, Biden continued to play up the idea of Republicans targeting the popular programs, while portraying himself as their defender. “They sure didn’t like me calling them [out] on it,” Biden said. “A lot of Republicans, their dream is to cut Social Security, Medicare. Well, let me just say this. It’s your dream, but I’m going to, with my veto pen, make it a nightmare.”

The bottom line: Biden was seeking to score political points in his State of the Union address by citing a marginal conservative plan that could undermine Social Security and Medicare. Despite Republican complaints, the plan does exist — as do questions about just how willing Republican lawmakers will be in the coming months to push for cuts to Social Security and Medicare in the long run.

But both programs face funding shortfalls, with Social Security’s trust funds projected to be insolvent by 2035 and the Medicare Hospital Insurance on track to be depleted by 2028. Lawmakers will have to address those shortfalls if they want to avoid abrupt benefit cuts in the programs.

Deficit Rose to $459 Billion for First Four Months of the Year: CBO

The federal budget deficit for the first four months of fiscal year 2023 totaled $459 billion, up $200 billion from the same period last year, according to an estimate published Wednesday by the Congressional Budget Office. Outlays were 9% higher and revenues were 3% lower, CBO projects.

The borrowing works out to $3.7 billion per day, according to the Committee for a Responsible Federal Budget.

President Biden said in his State of the Union speech that the budget blueprint he will release next month would cut the deficit by $2 trillion, likely over 10 years, without cutting “a single bit of Medicare or Social Security.”

Wrongful Pandemic Unemployment Payments Topped $191 Billion: Watchdog

At least $191 billion in pandemic unemployment benefits may have been paid out improperly, a federal watchdog told Congress on Wednesday at a House Ways and Means Committee oversight hearing titled “The Greatest Theft of Taxpayer Dollars: Unchecked Unemployment Fraud.”

The new total for wrongful payments is nearly $30 billion higher than a previous rough estimate of $163 billion. The updated number is based on applying the Labor Department’s latest estimate of the improper payment rate for the unemployment insurance program overall — 21.52%, up from 18.71% last year — to the $888 billion in total federal and state unemployment benefits paid during the pandemic.

Larry D. Turner, the inspector general of the Labor Department, told the House Ways and Means panel Wednesday that the improper payment rate for pandemic unemployment programs was likely higher than 21.52%. If so, that would mean that the improper payments could well total more than $200 billion —and while improper payments include overpayments and underpayments, intentional and unintentional, Turner said that a “significant portion” of the total is attributable to fraud.

Why it matters: The unemployment insurance program has some of the highest improper payment rates across the federal government, with estimates topping 10% for 15 of the last 19 years, according to Turner’s testimony.

“The unemployment system is particularly vulnerable because it is administered jointly by individual states and the federal government, resulting in a patchwork of rules and — in many states — outmoded technology that got overwhelmed during the heights of the pandemic,” Politico’s Nick Niedzwiadek notes.

The emergency unemployment programs enacted during the pandemic were particularly prone to abuse as lawmakers in both parties opted to impose fewer safeguards as they sought to quickly pump money into the economy to prevent a sharper downturn.

“Their efforts — signed into law starting under President Donald Trump — at one point added an extra $600 to workers’ weekly checks and provided new benefits to those who previously would not have qualified for federal help,” The Washington Post’s Tony Romm writes. “The money helped rescue the economy from the worst crisis since the Great Depression. But it also invited an unprecedented wave of theft and abuse, as criminals seized on the government’s generosity — and its race to disburse aid — to bilk state and federal agencies for massive sums.”

House Republicans, newly in the majority, are pledging to ramp up oversight of such programs. Jason Smith (R-MO), chairman of the Ways and Means Committee, pointed Wednesday to varying estimates of pandemic unemployment fraud.

“The range of estimates alone is sufficient reason for today’s hearing,” he said in prepared remarks. “ID.me, an identity verification company hired by many states, estimated an astounding $400 billion in fraud. That suggests thieves may have stolen almost half of the $878 billion taxpayers spent on unemployment insurance. The White House itself acknowledged that tens of billions were made in improper payments. They estimate $104 billion lost. More recently, the Government Accountability Office released its own report, making an early estimate that at least $60 billion went to criminals.”

What’s next: Republicans are looking to score political points with their hearings, charging that Democrats have been lax in their oversight, but in his State of the Union address Tuesday night, President Biden also pledged to give federal watchdogs more power. “Now, let’s triple the anti-fraud strike force going after these criminals, double the statute of limitations on these crimes and crack down on identity fraud by criminal syndicates stealing billions of dollars, billions of dollars, from the American people,” he said. “The data shows that for every dollar we put into fighting fraud, the taxpayers get back at least 10 times as much.”

Whether Congress will provide more funding for watchdogs to pursue such fraud cases is still unclear — but, as the Post’s Romm points out, many such requests have gone unheeded so far.

The bottom line: We still don’t know just how much Covid aid was lost to fraud, but the projections keep growing larger. Gene L. Dodaro, the comptroller general of the United States and head of the Government Accountability Office, emphasized that his agency’s estimate of $60 billion in pandemic unemployment insurance fraud was on the low end and that an estimate of the high end would be ready this summer.

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