COVID Pandemic "Aid" Fraud and Waste Were Worse Than We Imagined: June 2023 Edition

I have said that before there is nothing like a temporary emergency to cause a permanent expansion of government largesse in our lives. The pandemic was a great example of this phenomenon. Such legislation as the CARES Act and the American Rescue Plan ended up costing the American government over $4 trillion. It goes beyond the fact that someone (i.e., the taxpayers) has to pay for such a monstrosity. What makes this such a jaw-dropper is how poorly government money was spent during the pandemic. 

The Paycheck Protection Program (PPP) was supposed to help keep businesses afloat during the lockdowns. What did PPP end up funding? The Small Business Administration (SBA) found that it funded $4.6 billion in "potentially fraudulent loans," although an independent audit put the figure of potentially improper payments at $189 billion. 

Then there was the pandemic unemployment insurance that was part of the CARES Act. How much fraud did that program generate? The Government Accountability Office (GAO) estimates that the fraud was was $60 billion out of the $878 billion allocated, or 6.8 percent. The Department of Labor calculated that pre-pandemic fraud rates were 10 percent. Given the lack of oversight of the pandemic unemployment insurance, it stands to reason that the GAO figure is an underestimation. 

Then there is an Associated Press analysis released earlier this month. According to AP's analysis, $280 billion was fraudulently stolen and another $123 billion was wasted or misspent. That brings the total to over $400 billion, or about 10 percent of what was spent by the government. AP laments that "that number is certain to grow as investigators dig deeper into thousands of potential schemes." How could this have happened? To quote AP: 

"Investigators and outside experts say the government, in seeking to quickly spend trillions in relief aid, conducted too little oversight during the pandemic's early stages and instituted too few restrictions on applications on applicants. In short, they say, the grift was just way too easy."  

If that were not enough, look at a report from the SBA Office of Inspector General released this week. This report looked at how the SBA handled the PPP and the Economic Injury Disaster Loan (EIDL). There was $134 billion in EIDL fraud and $68 billion in PPP fraud, or a total of $200 billion of EIDL and PPP money fraudulently stolen. Similar to AP's findings, SBA concluded that the SBA "weakened or removed the controls necessary to prevent fraudsters from easily gaining access to these programs" and that "the allure of 'easy money' in this pay and chase environment attracted an overwhelming number of fraudsters to the programs." I understand that there is bound to be at least some fraud. Any program managed by humans will have at least some imperfection. However, the lack of oversight makes the amounts lost to fraud and waste inexcusable. 

I will echo what I wrote last December: we should not let an emergency scare us into faulty public policy or to expand government overreach. Investigators have been overwhelmed and taking action to prevent fraud on such a scale seems elusive. It was bad enough that we had to put up with harmful lockdowns, ineffective face mask mandates, deleterious school closures, and futile travel bans, not to mention such stupid policy as Title 42 and the student loan repayment pause. Now we can add having taxpayers funding billions in payments to conmen (I'm sorry, con-people, it is 2023 after all), hucksters, and scam artists.

Two More Systematic Reviews Confirm That the Cost of COVID Lockdowns Was Too Dear

The COVID pandemic saw lots of fear and panic, but no more so than it did with lockdowns. Millions were ordered to stay home with the idea of slowing the spread of COVID and saving lives. As more data come in and more studies are conducted, it becomes clearer over time that lockdown proponents were severely mistaken in their so-called logic. 

The latest in research shows the painful reality that lockdowns were even less effective than previously believed. A new systematic review and meta-analysis from the Institute of Economic Affairs published by professors from Johns Hopkins University and Lund University looked through nearly 20,000 studies (Herby et al., 2023). Their three levels of screening narrowed it down to 32 relevant studies. Out of the 32 studies, 22 were used to create a meta-analysis. 

Similar to the 2022 Johns Hopkins meta-analysis, the authors separated the studies into three groups: stringency index studies, shelter-in-place-order (SIPO) studies, and non-pharmaceutical intervention (NPI) study. Depending on which type of study one uses gives a different estimate. Since I live in the United States, I will give the estimates for the United States. The authors calculated that stringency index studies put the lives saved at 4,000 deaths. The SIPO studies put it at 3,000 in the United States, whereas the NPI studies put the lives saved at 16,000 deaths. This means we have a range from 3,000 to 16,000 deaths. 

Let's forget for a moment how lockdowns were supposed to save up to 2 million lives if we were to believe the Imperial College modeling that scared the United Kingdom into lockdowns. How much did that save in economic cost? It might sound callous to some to put a monetary value on human life, but it is standard practice in the actuarial industry, as well as the field of public policy. Insurance companies put the value on the low end because they want to pay out less. Government agencies put a higher value on it because it helps justify government programs. For argument's sake, let's go with the higher amounts. FEMA puts the value of a human life at $7.5 million in 2020 dollars, whereas the EPA puts it at $10.05 million in 2020 dollars. With inflation-adjusted dollars, let's change that $10.05 million to $11.82 million. Multiply that by 16,000 individuals, that puts the price of lives saved from lockdown at $189.12 billion. 

Nearly $200 billion sounds like a lot of money. At the same time, we have to remember that there is no such thing as a silver bullet policy that will solve our woes without any costs. Like with any other form of public policy, there are tradeoffs. Lockdowns were de facto bans on labor performing work across large swathes in the economy. According to a study from University of California-Riverside (Tellis et al., 2022), consumer spending decreased by 7.5 percent and GDP decreased by 5.4 percent. This translated in $28,000 less in GDP per capita. Multiply that $28,000 by an estimated 331.45 million Americans in April 2020 (Census). What did the lockdowns end up costing? An estimated economic cost of $9.28 trillion.  

If we only look at it from that strict cost-benefit lens, it would come out to a cost-benefit ratio of about $49. That means for every dollar in benefit, we had to pay $49 dollars. However, it is all but certain that my back-of-the-envelope cost-benefit ratio is an underestimate of what lockdowns actually cost. 

A professor of the Universities of Washington and Edinburgh conducted his own systematic review of 600 studies (Bardosh, 2023) that was released late last month. He showed that the costs were "substantial, wide-ranging, and will leave behind a legacy of harm for hundreds of millions in the years ahead." Some of those costs are ones I have covered before, including non-COVID excess mortality, mental health deterioration, child abuse and domestic violence, widening global inequality, food insecurity, lost educational opportunities, unhealthy lifestyle behaviors, social polarization, soaring debt, democratic backsliding, and declining human rights. 

I first took issue with lockdowns in March 2020 one week before they began and I was right to do so. In practice, lockdowns showed us that multiple sectors of the economy cannot be shut down for months on end without long-term consequences. Not only were lockdowns cost-ineffective (see Harvard analysis here). As we see in the previous paragraph, they have come with considerable costs that have yet to fully materialize. Ignorance was no excuse to implement such harm on millions of people. It is not a stretch to say that lockdowns were the worst peacetime public policy decision in human history. 

How Government Subsidies Caused Overfishing and Why Governments Need to Scale Back

Throughout history, fish have been caught and eaten by humans because fish can be a good source of protein and other nutrients. As important as they are to multiple cultures, we are reaching quite the dilemma with fishing, mainly that of overfishing. Overfishing is when the number of fish removed from all the bodies of water is greater than the species' ability to reproduce and replenish the losses. This is not to be confused with overfished, which is "the condition of a fishery that occurs when the spawning stock biomass of the fishery is below the level that is adequate for the recruitment class of a fishery to replace the spawning class of the fishery." So think of overfishing as a more extreme version of overfished.  

According to the Food and Agriculture Organization (FAO), 64.6 percent of fishery stocks were at biologically sustainable levels in 2019. This figure was 65.8 percent in 2017 and 90 percent in 1970. This means that 35.4 percent of fisheries are experiencing overfishing. As we can see below from data compiled by Oxford University, the percent of unsustainable fishing practices has increased since the 1970s. 

It is true that an increase in the global population attributes to overfishing, which helps increase demand. At the same time, the libertarian Mercatus Center reminded me with a recent article in its Discourse Magazine that there is a major culprit driving the overfishing: government subsidies. The United Nations Conference on Trade and Development (UNCTAD) found that governments around the world spend $35 billion on fishing subsidies annually, and that $20 billion of those subsidies contribute to overfishing. An article in Marine Policy estimates that to be about $22 billion, $13.9 billion of which is from Asian countries (Skerritt and Rashid Sumaila, 2021). China, Japan, and South Korea are responsible for 44 percent of these subsidies on a global level. 

Another article in Marine Policy shows the types of fishing subsidies (Rashid Sumaila et al., 2019). The harmful subsidies in question here are the ones that focus on "capacity expanding" activities, including building fishing vessels and fuel subsidies for fishing fleets. It does not surprise me to see such subsidies contributing to overfishing. This is what happens when a supply-side subsidy is at work. As we see in the supply and demand chart below, a supply-side subsidy has two main effects aside from costing taxpayers money. The first is that it increases the quantity consumed, which in this case means increasing fishing capacity. These subsidies also decrease the price of catching fish, which makes fish more affordable. In other words, the supply-side subsidies are causing overfishing to take place. In 2014, I brought this up with how we subsidize water with supply-side subsidies. The prices remain low and all the while, we are draining a value resource all the quicker. 

If overfishing is so bad for marine environments, why do governments shell out so much money? As a 2018 article from Science Advances shows, 54 percent of high seas fishing would not be profitable without government subsidies. Since coastal fishing communities do not see the same level of economic development as urban areas, governments see these subsidies as a way to support local economic development and the country's food chains.  

This might sound like a noble cause, but it is quite short-sighted. Not only does it wreak havoc on our marine ecosystems, but it also helps us make sure that we do not have sustainable fisheries in the long-run. How do we deal with this debacle? Like a "good libertarian," a big part of my response is for the government to get out of the way since it is government that attributes to the overfishing. I am not the only one who thinks that government is the cause. The World Trade Organization is working on a treaty to help reduce these subsidies that induce overfishing, which is certainly warranted in this case. In 2014, I covered another idea that would help with sustainable fishing: property rights for fisheries. By focusing on less government and more market-based solutions, we can help save our marine environment.

Student Loan Repayment Pause Was Not Only Bad for the Economy, But Also the Borrowers of Student Loans

The debt ceiling debate is over with a bipartisan deal called the Fiscal Responsibility Act of 2023 that President Biden signed on June 3. Part of that Act was putting an end to the pause of payments for federal student loans. This pause has existed since March 2020. Why did the pause come into being in the first place? When President Trump declared the COVID pandemic an emergency, he used his executive authority to waive the collection of interest and suspended student loan payments on all government-held student loans. The premise of this pause was to help borrowers weather the economic uncertainty that came with the harmful lockdowns and other onerous COVID restrictions. Similar to Title 42, Trump should not have enacted the pause and Biden should not have continued extending it for a few reasons: 

• The Left-leaning Brookings Institution finds in its analysis that the pause is regressive, which is to say that the pause has disproportionately benefited the most affluent of borrowers. The reason for this is people in higher-paying professions (e.g., doctor, lawyer) tend to borrow more at higher interest rates. 
• In September 2022, President Biden said that the pandemic is over. I would argue that it ended beforehand, but it still begs the question: why is this pause in effect well after the pandemic is actually over?
• As I explained in my August 2022 critique of student loan forgiveness, college graduates are in better financial shape than the average American.  
• The bipartisan Committee for a Responsible Federal Budget (CRFB) calculated that the pause has cost $5 billion a month, which would mean that it has cost about $190 billion to date. 
• In August 2022, CRFB showed that the student loan pause contributed to inflation by a) reducing the amount of income household use to pay off debt, b) increasing household wealth, and c) putting upward pressures on college tuition costs. This higher inflation will only make it harder for borrowers to pay off their debts.

One could argue that the economy could handle it and that it's about helping out the less fortunate with their financial instability. It certainly was the argument the Biden administration made late last year. There might be some intuition to that notion, but a working paper from the National Bureau of Economic Research entitled Debt Moratoria: Evidence from Student Loan Forbearance puts that notion very much into question. The researchers found the following:

We find a large stimulus effect, as borrowers substitute increased private debt for paused public debt. Comparing borrowers whose loans were frozen with borrowers whose loans were not frozen due to differences in whether the government owned the loans, we sho that borrowers used the new liquidity to increase borrowing on credit cards, mortgages, and auto loans rather than avoid delinquencies. The results highlight an important complementarity between liquidity and credit, as liquidity increases the demand for credit even as the supply of credit is fixed.   

Per the report, those who saw their federal student loans paused took on an average of $1,800 more in credit card, mortgage, and loan debt, while also taking on an extra $1,500 in student loans. That is the paradox here: pausing the federal student loans resulted in higher overall household debt and larger future debt burdens. Not only did it cost the taxpayers billions, but it did not manage to the help the people who the pause was meant to benefit. Whether it is minimum wage, lockdowns, Obamacare, or redlining, the student loan pause is another example of a larger trend of government policies harming those it was intended to help. 

Human Rights Campaign's "State of Emergency" for LGBT People Is Divorced From the Reality of Progress

Since 1980, the Human Rights Campaign has been an advocacy group for LGBT rights. For the first time in its forty-plus-year history, HRC declared a state of emergency for LGBT rights in its new report entitled LGBTQ+ Americans Under Attack. This report covers 75 anti-LGBT bills that have passed in 2023 year to date. By HRC's count, this is about double from what it was last year, which was the previous record. You would think an advocacy organization would have at least some idea of the issue that for which they are advocating and have perspective. Does HRC honestly think that out of all the past 40 years, this year is the absolute worst of them all for LGBT rights? If we look at the progression of LGBT rights over the past 40 years, the idea that LGBT rights are worse than ever is downright ludicrous:

• The Supreme Court ruled in 2015 that same-sex marriage is constitutional in all 50 states (Obergefell v. Hodges). 
• As we see below from data released last week, approval for same-sex marriage is at an all-time high of 71 percent (Gallup). 
• In 2022, Congress passed the bipartisan Respect Marriage Act, which codified same-sex marriage into legislation and ban the Defense of Marriage Act. 
• In 2019, the Supreme Court expanded employee discrimination protections to LGBT employees (Bostock v. Clayton County). 
• Most Americans no longer think that same-sex relations or same-sex adoption are morally unacceptable (Gallup), which is more than could be said twenty-plus years ago.
• Gay men and lesbians were banned from serving in the military from 1993 to 2011 vis-à-vis Don't Ask, Don't Tell. President Biden reversed Trump's ill-founded transgender military ban in January 2021. 
• Look at all the Pride celebrations and corporate marketing for Pride that take place throughout the United States. 

Without fail, these major strides in U.S. history are not only good for LGBT rights, but individual rights as a whole. So what is HRC getting so upset over that it feels the need to declare a state of emergency? 

Forget for a moment HRC's pie chart has a 25 percent of unspecified "Other discriminatory bills." That is simply poor data visualization and makes me wonder what they are hiding in such a large piece of the pie. That 25 percent set aside, I notice something about the remaining 75 percent: it is primarily focused on the transgender community. As we see with Gallup polling, support for the gay community has never been higher. Yes, there are still people who take issue with gay, lesbian, and bisexual individuals. At the same time, most of the legal hurdles have been cleared and much of the cultural barriers are down, as well. Even HRC recognizes the emphasis on the trans community. Out of the 543 bills filed, 220 of them (or 40.5 percent) are filed explicitly towards transgender individuals. As for the bills passed, we see an even larger emphasis on the transgender community. 

Back when the gay rights movement was fighting for equality (not equity), the argument was that the gay community wanted the same rights as everyone else and to be treated equally under the law, much like the Declaration of Independence idealizes. The gay rights movement used a libertarian "live and let live" argument that helped advance gay rights. 

What trans activists advocate for is more complex and is not simply a matter of "live and let live." Let's look at the pie chart above and see where the HRC takes issue. The largest specified piece of the pie is gender-affirming care. I personally do not care if a consenting adult decides to undergo the process to transition and not have the government pay for it. Children are a different story, and it is one that I point out since the gender-affirming care bans in the U.S. are almost exclusively towards children. As I pointed out last month, the systematic reviews on youth gender-affirming care coming from Europe show gender-affirming care is not evidence-based practice. Combined with the fact that most adolescents outgrow gender dysphoria, European practitioners are scaling back on providing gender-affirming care to youth. 

After gender-affirming care, the next largest item is trans bathroom bans. This is one I happen to agree with HRC. I took a look at trans bathroom bans in 2016 and found them to be unnecessary, to say the least. 

Third on the list is banning the use of pronouns. On the one hand, banning people from using pronouns is arguably a First Amendment issue. On the other hand, the practice of asking for pronouns has its own issues, ranging from coercion and First Amendment violations to forcing others to accept your perception of reality. One side is trying to ban pronouns. The other side is trying to force the use of pronouns. Do you see where this can get tricky, especially for those of us who still care about freedom?

Tied in third place with the pronoun bans is trans sports bans. I have two main issues with allowing male-to-female transgender individuals participate in women's sports. The first is that of freedom of association and allowing for women to have their own spaces and events without individuals biologically born male. The second has to do with fairness and the unfair advantage that male-to-female transgender individuals have when participating in women's sports. The fairness aspect would help explain why support for trans athletes playing on teams that match their gender identity is declining (Gallup), even amongst Democrats.

Looking at the main types of bills, I come with two main takeaways. One is that the arguments and goals for trans activists are more complicated than the talking points of the Left or the Right. You cannot call someone a bigot or groomer simply for disagreeing with you. As much as is becoming a more prevailing view on the Left, not everything is bigotry. 

The second takeaway is that these do not constitute a "state of emergency." Could there be improvements? Of course! However, saying that the rights of the gay community or the trans community are worse than ever is as erroneous as saying that racism is worse than ever. At best, this is a ploy for HRC to continue to justify its existence. At worst, this sort of hyperbole is coalition politics that ignores the true progress made for individual rights in this country only seeks to widen the ideological chasms in this country. We can do better. 

The 2023 Debt Ceiling Deal Needed to Have Gone a Lot Further

Late last month, Speaker of the House Kevin McCarthy (R-CA) and President Biden announced a debt limit deal. At least for the time being, the Fiscal Responsibility Act of 2023 (FRA) has put an end to the debt ceiling debate. How happy should we be with the results of the FRA? By lifting the debt ceiling, we have avoided default, which is nice. Strengthening work requirements for SNAP benefits, also known as food stamps, will be helpful but would have been better if made permanent. Eliminating the federal student loan pause is well overdue. Congress is reinstating the Administrative PAYGO, which means that new regulations need to be paid for. Paperwork for environmental reviews has been reduced. 

What about overall spending? According to the nonpartisan Congressional Budget Office (CBO), the FRA will reduce the deficit by $1.5 trillion over the next decade. As the bipartisan Committee for a Responsible Federal Budget (CRFB) shows in its analysis, that may be slightly more or less depending on whether there are non-binding caps or side agreements. In any case, the FRA will provide a decline in the debt-to-GDP ratio. It is the first major deficit-reducing budget agreement in about a dozen years.

It might sound like a lot to reduce the deficit by $1.5 trillion over a decade. After all, only a government could amass that kind of money [in current dollars]. But keep in mind that we are expected to spend $79.99 trillion over the next decade and rack up an average deficit of about $2 trillion a year over the next decade (CBO). Remember that these CBO projections are based on current law. Given how politics have evolved in recent years, who knows what crazy new spending will be added to the fiscal crisis that we are already headed towards? Continued wars, an unexpected increase in healthcare costs, rising inflation, or higher interest rates could throw off CBO projections, as well. 

The truth is that the bill has not made substantial reforms on what is driving government spending, Social Security is but one large example of not passing necessary reforms to make the programs sustainable. Congress has failed to meaningfully address the debt crisis. Rather than pat themselves on the back, our politicians need to get back to work and focus on long-term fiscal sustainability so we do not continue the seemingly endless cycle of debt ceiling debate in the future. 

Do Economic Incentives for Vaccines Backfire? Not in the Short-Run

"If you pay someone to do something, they are more likely to do it." This economic principle rings true in practice. It is a basis for the labor market. While some people volunteer their time, people generally work if provided a salary and benefits. This concept holds outside of the labor market, such as when people are giving or selling organs to another. While the power of a financial incentive is sensible and provable, it ended up being controversial during the pandemic. 

Such states as Ohio and Maryland provided financial incentives to get vaccinated because they figured that people would be more likely to get vaccinated. There were others that were worried that the financial incentive could backfire and erode trust in public health officials. How so? Essentially, the thinking goes along the lines of "I never received money for a vaccine before. What is so bad about this that they have to pay me to take it?" Or alternatively, "If I should trust the vaccine, why do you have to pay me for it?" In September 2020, I recognized that while a financial incentive could theoretically help, there was also the hurdle of convincing people the vaccination production process was not rushed. I later illustrated in April 2021 how the vaccine development process was streamlined, as opposed to rushed. But again, the issue with such health campaigns is perception, not so much reality. 

How did it play out in practice? Did the vaccine incentives lower the likelihood of people taking vaccines? Last month, a systematic review of 38 studies covering the topic of economic incentives of vaccine uptake was released in Preventative Medicine (Khazanov et al., 2023). It looks like the answer is that it did not lower that likelihood. None of the 38 studies showed a negative impact on vaccine uptake. Most of the studies found that it positively impacted vaccine update. The authors concluded that "fears of incentives decreasing uptake are not supported by the evidence." 

Based on this systematic review, it seems that financial incentives do help with vaccination rates. There is one concern I find remaining: future vaccine campaigns. COVID is the first global pandemic in which the human race had to ask itself questions about incentivizing vaccination to stop the spread of a potentially deadly disease. Will the politicization of this pandemic affect future pandemics? Will people now expect financial incentive for future vaccinations? I can speculate until I am blue in the face, but I suppose time will tell.

The Argument for France's Short-Haul Flight Ban is a Load of Hot Air

There are those who think that climate change is the single greatest threat to mankind. Climate change activists think they are reaching for the stars in helping the world....or in France's case, reach for the skies. A couple of weeks ago, the French government banned flights that could be taken by train in 2.5 hours or less. The purpose of such a ban is to lower carbon emissions in the fight against climate change. Whether it is regulations encouraging electric vehicle production, banning gas stoves, or a carbon tax, we should ask about the merits of the policy of a short-haul flight ban. 

First, as I brought up in April, climate change is not a crisis. Using implausible assumptions in climate change modeling does not do any favors, especially when it comes to environmental policy. However, for argument's sake, let us assume that climate change is something we need to address urgently. The short-haul flight ban is still a problem, and I am not talking about my more general kvetch with economic bans. 

It is unlikely that this ban will have any major impact on carbon emissions. The three routes being prohibited under the ban are from Paris to three cities: Nantes, Bordeaux, and Lyon. These three routes account for 5,000 out of the 200,000 domestic flights (or 1 out of 40 flights). It is not simply a matter of how many flights, but how much fuel is burnt. A study from the Journal of Transport Geography shows that flights shorter than 500 kilometers across 31 European countries accounted for 27.9 percent of departures but 5.9 percent of fuel burnt (Dobroszkes et al., 2022). Airplanes are responsible for 2.5 percent of global carbon emissions (Oxford). Assuming that a) the European rates above apply to overall trends, and b) the whole world banned short-haul flights, 5.9 percent of 2.5 percent is only 0.15 percent of global carbon emissions. 

As Mercatus Center economist Veronique de Rugy points out, this ban comes with the other negative consequence of it being more deadly. Macron's idea of banning short-haul flights is to incentivize greater train usage. Forget that extra time spent on the train or that taking the train burns about 57 percent more fuel per capita than a plane ride (ibid). Harvard University found that the probability of dying in a plane crash is about 1 in 11 million; it is 1 in 5,000 for an automobile. That is an increased likelihood of death by a factor of 2,100! Given that at least some French citizens would divert their travel from plane to automobile, it would not be a surprise if we see an increase in French traffic deaths.     

I can think of larger examples of political theatre, whether it was the harmful lockdowns, ineffective COVID travel bans, plastic straw bans, or the Transit Security Administration's security checks at the airport. At the same time, France is trying to focus on low-hanging fruit that do not solve major problems while causing bigger problems. This potentially harmful symbolism is par for the course with political theatre. La plus ça change, la plus c'est la même chose.