Who Let the Fraud Out? DOGE Follows Trail to Three Blue States

Fake people, dodgy dates, and millions of dollars down the drain.

The Department of Government Efficiency (DOGE) recently discovered $382 million in fraudulent unemployment insurance (UI) claims whose payments, dating back to 2020, went to thousands of people younger than five and older than 115. In one case, somebody with a birth date in 2154 somehow acquired $41,000 in benefits. Elon Musk, head of DOGE, has now revealed that roughly 80% of these fraudulent UI payments were distributed in California, New York, and Massachusetts, three states with Democratic strongholds. That’s about $305 million. Many left-leaning pundits and officials seem to think Musk is hyperbolizing. Some say this discovery isn’t what he thinks it is, but their defense isn’t reassuring.

When DOGE Digs, the Past Returns

The pandemic era was a hectic time. Many states struggled to manage the bombardment of UI claims, but few crashed and burned as badly as California and New York did. The Empire State made $11 billion in improper unemployment payments during the COVID-19 crisis, according to an audit from state Comptroller Thomas DiNapoli in 2022. The state had neglected to update its outdated system despite repeatedly being advised to do so. Instead, it used “ad hoc workarounds” that “weakened oversight and ultimately contributed to an estimated billions of dollars in improper payments,” explained Politico after DiNapoli released his findings. The comptroller said the exact amount lost to fraudulent payments was unknown because the Department of Labor “refused to provide auditors with the data that would have enabled [them] to calculate the precise amount.”

Of course, that was an unprecedented situation. New York’s unemployment claims had skyrocketed to more than 3,000%. California’s claims during the pandemic jumped 2,300%. It’s estimated that the Golden State sent between $30 billion and $40 billion in payments to criminals. Scammers capitalized on the state’s inability to keep up and “pulled off one of the biggest suspected frauds in U.S. history while laid-off workers scrambled to survive,” explained CalMatters in 2023, a nonprofit news organization. It spent a year investigating the Golden State’s unemployment crash and found that hundreds of thousands of workers were cut off because of debit card freezes, which California’s Employment Development Department (EDD) and its debit card contractor, Bank of America, blamed on each other. Worse, while millions of Californians dealt with delayed payments and were improperly denied benefits, Bank of America was sharing 35% of its revenue with the EDD.

In fact, “Between January 2017 and May 2023 Bank of America got more than $577 million in revenue from the debit card program, of which over $208 million was paid to the EDD under a revenue-sharing agreement,” according to records obtained by CalMatters. Maybe this is why California didn’t update its system to allow direct deposits.

None of this explains giving benefits to fake people. But it does show just what a disaster those days were in two of the three Democrat-led states responsible for 80% of the wildly fraudulent payments.

Here’s the kicker: Under the Biden administration, the Labor Department apparently advised the states to “establish a pseudo-claim record and transfer all claim information regarding the impostor’s claim to the pseudo claim once the state makes a fraud determination,” according to a recent report by The New York Times. The point of this was supposedly to reduce harm to identity theft victims by tying “real cases of fraud in their data to make-believe people” in order to “keep track of fraud claims while detaching them from the identities of innocent people who might one day apply for unemployment benefits themselves.” This could explain why DOGE discovered so many off-the-wall birthdates – maybe.

Still, it’s hard to believe that, while falling apart and getting duped by an onslaught of scammers, these states had the time to create fake claim records to protect innocent people. Even if they did, was that the best use of their time back then? If they really wanted to protect their residents, perhaps they could have put more effort into dispersing money to people forced not to work. Either way, using dodgy dates to manage fraudulent claims doesn’t inspire much confidence in their ability to manage difficult situations. Plus, if true, it means they already knew about it and have yet to manage their data.

Perhaps blue states should consider following Republican-led ones and create their own DOGE-like entities to mitigate fraud, waste, and abuse. Of course, the hard part isn’t finding the issues but making a plan to fix them and then taking action. Outrage and finger-pointing won’t create better policies and procedures.