The president’s tax compromise is threatening to spill into next year, thanks to an obstinate House and Senators who continue to tack on additional spending to their version of the legislation. The tax rate extension has received most of the deal’s hype because it fans partisan fires, but for 15.1 million unemployed Americans platitudes are irrelevant. The unemployment benefits extension included in the deal means a lot more to the jobless than a symbolic power struggle between left and right.
As of November 2010, 41.9% of the unemployed had earned the unwanted distinction of being “long-term.” There has been talk that extending unemployment benefits will reduce the desire to find work. This is an inevitable consequence of the billions expended on benefits at a time when we are told we can least afford the price tag. Fortunately, there is a better target for our anger than those most impacted by the recession.
Fraud and improper payments run rampant in federal entitlements, particularly those labeled “High-Error Programs.” Not surprisingly, Medicare Fee-for-Service, Medicaid, and Unemployment Insurance top the high-error list.  What may be a surprise to taxpayers is how up-front Uncle Sam is about the billions of dollars he misdirects every year.
PaymentAccuracy.gov reports that the Unemployment Insurance Program has an improper payment rate of 11.2%, totaling $17.5 billion. The goal for 2011 is to reduce that rate to 9.8% , a target that would be hilariously unacceptable in the private sector but is, perhaps, a lofty goal for government, where improper payments are treated as a mathematics problem:
Now, because many of the targeted programs – such as Unemployment Insurance and Medicaid – are paying out more benefits as the economic downturn creates more demand for these benefits, the total number paid out in improper payments increased to $125 billion last fiscal year even though the overall error rate declined. This is an unfortunate result of the recession and of basic math: the more that is paid out, the more paid out in error even if the overall rate declines. 
The Congressional Budget Office reported that an unemployment benefits extension will cost $34 billion in 2011. Legislators are at war over the wisdom of funding these benefits, forgetting their midterm election promises to cut waste, fraud and abuse. Redirecting $17.5 billion in improper payments would go a long way to defraying that $34 billion commitment, but the best Washington can offer is a meager 1.4% improvement in the hit rate.
States are still receiving unemployment insurance modernization incentives from a $7 billion Recovery Act fund. Acceptable uses range from benefits payments to administrative costs. Given the severity of the improper payment problem, one wonders what degree of oversight is maintained over both the use of these additional funds, and auditing efforts to ensure that states comply with program requirements.
It is difficult to imagine the billions that will be sacrificed once the new health care system goes into full gear, given that we have had years to perfect unemployment insurance and still cannot get the payments right. The recession has brought us few good things, but it has repeatedly taught us just how little value our government returns in exchange for our tax dollars.
When you are finished reading this, visit PaymentAccuracy.gov. You will be appalled.
1..Payment Accuracy. High-Error Programs. https://paymentaccuracy.gov/high-priority-programs, retrieved December 12, 2010.
3..The White House. Office of Management and Budget. Improper Payment Progress. November 16, 2010. http://www.whitehouse.gov/blog/2010/11/16/improper-payment-progress, retrieved December 12, 2010.