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Opinion | Covid fraud abuse has a clear, and counterintuitive, lesson | #phishing | #scams | #hacking | #aihp


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The public might be drawing exactly the wrong lessons from reports that covid-19 relief efforts probably led to the largest fraud in U.S. history.

The takeaway is that we need to be investing in better government. Not less government.

Pandemic relief efforts have been riddled with fraud — in unemployment benefits; in small-business bailout programs; and in other spending and tax measures, passed under both the Trump and Biden administrations.

In the unemployment insurance system alone, an estimated $163 billion was paid “improperly,” thanks to some combination of accidental error and deliberate fraud. In the Economic Injury Disaster Loan program, tens of billions of dollars went to multiple applicants who shared the same accounts or contact information, a sign of possible fraud. Michael Horowitz, chair of the Pandemic Response Accountability Committee (created by the 2020 Cares Act and composed of inspectors general), recently said he would not be surprised if the total amount of fraud “exceeded $100 billion.”

While the scale of criminality may seem shocking, its existence was entirely foreseeable.

As ginormous relief programs were being built from scratch, fast, the Trump administration resisted oversight. Even if a more transparency-minded president had initially been in charge, though, the government still likely would have been pickpocketed.

That’s because, as I wrote back in April 2020, systematic underinvestment in government tech infrastructure created a situation ripe for poor performance and abuse. Government is as functional, or as dysfunctional, as it is designed to be; through a combination of incompetence, benign neglect and anti-government malice, we have designed our government to be maximally dysfunctional.

Catherine Rampell: The covid-19 pandemic has revealed another area of critical government underinvestment

Many government computer systems, both federal and state, are decades old. Agencies rely on disco-era computer languages that few coders know anymore, and some physical hardware is lapsing into disrepair. Such IT deficiencies not only doomed a lot of struggling Americans to long waits for needed assistance; they also left a lot of precious assistance dollars vulnerable to identity thieves and scam artists, who understood how to exploit the system.

For instance: Early in the pandemic, one of the biggest, most celebrated assistance efforts was the Paycheck Protection Program. As its name suggests, the federal program’s primary goal was to ensure that workers still received paychecks even when their small-business employers might have been forced to close down or furlough staff.

Alas, the government couldn’t readily determine who was getting paychecks from whom, or who had stopped getting paychecks because of layoffs and, therefore, who needed money. The government should have been able to figure out such things, given that companies must regularly remit payroll taxes for their employees, among many other ways administrative records illustrate who works where.

But again: Government IT infrastructure stinks. Databases don’t talk to one another.

So as a workaround, Congress created a program that basically operated on the honor system. Companies self-attested that they needed the money and that they would use it to pay their workers, or to offset rent or other expenses so that they could continue operating and thereby ensure people stayed employed.

Some companies really did need the money, which was a lifeline. Others didn’t, and used their government-granted windfall on Rolexes, Rolls-Royces or yachts. Some firms should have been too big to qualify but got money anyway. Still others, such as a purported potato farm in Palm Beach, Fla., didn’t exist at all.

Government doesn’t have to work this way. We could, instead, invest in a functional administrative state, one that uses basic 21st-century technologies. Governments could draw upon existing data already available to produce better statistics, better customer service, and less waste, fraud and abuse.

That’s why Democrats recently gave the IRS — which was itself tasked with administering some covid-relief programs that were plagued by fraud — $80 billion. Part of this money will be used to update and automate the agency’s archaic tech systems. This reasoning is also why some lawmakers have pushed, so far unsuccessfully, for modest upgrades to unemployment insurance systems.

Catherine Rampell: Why does the IRS need $80 billion? Just look at its cafeteria.

Improving state capacity is not exactly a sexy issue. There’s little short-term political gain to be had from overhauling government IT and procurement policies more holistically. Worse, public furor over reports of government waste, fraud and abuse — like those related to stolen covid funds — can become justification for starving the beast further, and giving government even fewer resources to perform necessary services.

Government dysfunction can thereby create the political conditions for even more government dysfunction.

The next time we have a crisis or recession (and there will be a next time), unlucky Americans will again need help. And Congress will have to choose between either refraining from helping at all (hey, look how much got stolen last time!) — or once again blindly helicopter-dropping money, and hoping some of it lands in the right hands.

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