Matt Weidinger and Amy Simon of the American Enterprise Institute highlight problems with unemployment payments tied to the COVID-19 pandemic.

During the pandemic, improper payments on unemployment benefits led to massive taxpayer losses. And yet recurring questions about the administrative performance of the unemployment insurance (UI) system remain mostly unanswered. …

… Several facts stand out about these concerns. First, these questions are not inherently political; the pain of pandemic failures did not break along partisan lines. Everyone would benefit from making sure the nation’s federal and state unemployment benefits system is better prepared for the next time more Americans need timely access to these important, and highly cyclical, benefits.

Second, the pandemic experience reflects how a new group of stakeholders—federal taxpayers—bears many of the program’s responsibilities. In 1995, a Department of Labor (DOL) Unemployment Insurance Program Letter (UIPL) noted: “The success of the UI system as a whole is to be measured by service to its ultimate customers, principally claimants and employers.” But during the pandemic, American taxpayers bore the burden of several hundred billion dollars of federal general revenue that was directly and brazenly stolen by adversarial nation-states, cybercrime gangs, and sophisticated fraudsters. The opportunity cost of that lost federal revenue was enormous and offsets much of the good that extraordinary federal benefits were able to accomplish.

The interests of federal taxpayers have not traditionally been considered in UI performance operations because past benefits were generally supported by state payroll taxes. However, recent congressional responses to recession and the pandemic emergency indicate that large general revenue–funded federal programs could reappear in response to future recessions. That suggests that the interests of federal taxpayers should be considered more directly and that public transparency on performance is even more warranted. This is particularly true because programs supported by federal general revenue displayed the highest rates of improper payments and fraud during the pandemic.