Why You Can't Ignore The Financial Impact of COVID-19 - Davison, Laura
The cloud hanging over us right now due to the pandemic will gradually decrease, but we will be paying for this for years. Our national debt was already overwhelming before we spent another $2 trillion. We will have to pay for this at some point. The question is not if taxes will go up, but when, and by how much?
According to a report by a government watchdog: The federal government’s quick action to supply stimulus payments in the wake of the coronavirus crisis led to more than a billion dollars of fraudulent payments.
Understandably, the government wanted to get funds out of the door quickly. However, without imperative safeguards in place, funds aren't allocated to the intended places or used for the intended purposes. Audits found that the IRS sent $1.4 Billion in stimulus checks to dead people. Still, the government has yet to spend much of the $2.6 Trillion that Congress has approved in response to the pandemic. So far, only $643 Billion has gone to the six largest programs; Corporate Bailout Fund, Small Business Loans, and funding for Health Care Providers.
The report is the most comprehensive assessment to date of the government's efforts to combat the health and economic consequences of the pandemic.
Here are the key takeaways:
"The IRS should contact relatives of the deceased"
The IRS issued about 1.1 million economic stimulus payments worth $1.4 Billion to people who have recently died, which largely when to the next of kin. The IRS has said that recipients of those payments should return the money, but many people may be unaware that they are required to do so.
The report recommended the IRS look at "Cost-effective options for notifying ineligible recipients on how to return payments." The IRS hasn't said whether it would require that the money be returned or how it plans to enforce its position that the payments should be sent back.
"PPP is still a black box"
The GAO said it "Encountered the most difficulty trying to obtain information" from the Small Business Administration, which has overseen the approval of more than 4.7 million forgivable Paycheck Protection Program loans totaling $561.5 billion. Spokesman Church Young said the agency agreed to provide the requested loan data but wants a meeting first to discuss how the GAO will restrict proprietary and personal information.
The GAO report highlighted that while the SBA and the Treasury have promised to review all PPP loans of more than $2 million and potentially others, they have yet to provide adequate details on how that will be done. The PPP was created to get money to small businesses fast through lenders relying heavily on certifications by borrowers. But it was also afflicted by late guidance that changed multiple times - especially the rules on how loans can become grants - escalating the chanced that borrowers to abuse loan proceeds or not have their loans forgiven as they expected.
“Because of the number of loans approved, the speed with which they were processed, and the limited safeguards, there is a significant risk that some fraudulent or inflated applications were approved. In addition, the lack of clear guidance has increased the likelihood that borrowers may misuse loan proceeds or be surprised they do not qualify for full loan forgiveness," the report said.
"Unemployment Insurance and Fraud"
There’s likely to be billions of dollars in unemployment insurance fraud this fiscal year as unemployment claims have surged to more than 42 million, up from 5.1 million last year when there was $2.7 billion worth of fraudulent payments, the report said.
There is a debate coming up in July that lawmakers will decide whether or not to expand the CARES Act for a second stimulus package, something republicans are pushing to wind down, while Democrats say the benefits should remain until the unemployment rate drops.
"Pandemic Air Travel Could Drastically Change"
The GAO is urging Congress to mandate that the Department of Transportation create a plan for passenger and cargo airlines to prevent the spread of disease from abroad — after department officials said it wasn’t their job.
The report said that the DOT wanted to pass the responsibility to Health and Human Services and the Department of Homeland Security, but the GAO said transportation officials should take the lead.
“The United States will not be prepared to minimize and quickly respond to future communicable disease events and garner international cooperation in addressing pandemics without such a plan,” according to the report.
Davison, Laura. “IRS Sent $1.4 Billion in Stimulus Checks to Dead People, Audit Finds.” bloombergquint.com. Mark Niquette, 25 Jun. 2020. Web. 2 Jul. 2020.