During the pandemics, more and more people lost their job. At the beginning of the pandemic, states started to use a new federal benefit program created by the CARES to give out unemployment benefits. However, not every transaction was done correctly. Some people received more money than they should have. In an article from CNBC, Greg Iancurci writes how states can solve this problem.
According to Iancurci, the problem occurred because of the quick changes of the pandemic, the program being newly created, the high number of claims, and applicants making mistakes when they applied for the financial aid. The CARES, however, does not offer states a safety valve to forgive the overpayments. Some states tried for households to pay the "extra" money back to the state. However, there is a problem with this plan, because most households have already spent that money. In May 2021, Labor Department officials made rules so that states could ignore the overpayments in certain situations if they wanted to. The Labor Department also asked the states to pay back the "extra" money that they collected from the households. Michele Evermore, an advisor for the unemployment insurance at the Labor Department, explains why they do not want households to have to pay the "extra" money back. She says: "Otherwise, potentially millions of claimants have been or will be issued overpayment notices that will cause them to make drastic decisions with regard to how to reimburse states with money they do not necessarily have." This guidance from the Labor Department is optional, so states do not have to follow this guidance. However, Iancurci points out that the money used for aids is federal and not state money.
The certain situations where states can choose to waive the overpayments are when people did not respond correctly to application questions assessing the eligibility for the unemployment insurance, or when the state was at fault for the extra high payment. For example when the state miscalculated the amount of payment someone should receive.
I was shocked my the amount of money the US government issued to its citizens. Of course, some people exploit this opportunity, so they received the funs they should not have received. It was one of the reasons for high inflation last year. I wonder whether people who broke a law, will be penalized.
ReplyDeleteTo add on, the added unemployment insurance has caused the rise of frictional unemployment due to people being able to hold out for better jobs longer. People also are able to freeload off of the checks from unemployment insurance. I believe the government passing the CARES act was another big mistake and will have crippling effects on the strength of the U.S. dollar in the long and very long run.
ReplyDeleteIf COVID continues to stun our economic growth and a new wave of stimulus packages, or unemployment benefits is deemed needed, I wonder if the government will change the way people claim these. Or if they will do more next time to penalize people taking advantage of the system.
ReplyDeleteThere are definitely flaws within this system that cause it to be easily exploited and that cause it to make mistakes. Though a pandemic was not something anyone could have predicted, there should have been a better system in place in case of something like this so that it did not have to be rushed and thrown together at the last minute.
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