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Rampant Fraud Exposed Plaguing Stimulus Program

Yet free-spending leaders in Congress are looking to spend trillions more

By guest author Brad Polumbo
November 16, 2020

While the fight continues over the election results, Washington, D.C. is quietly negotiating the details of another COVID-19 stimulus bill. Democrats want trillions more while Republicans argue we should limit further expenditure to “just” $500 billion.

Neither side is taking time to reflect on just how poorly the first round of stimulus went.

Don’t forget that the $2 trillion CARES Act, passed in March in the immediate aftermath of the pandemic, exploded our budget deficit and wasted untold billions of taxpayer dollars. It sent billions in “stimulus” checks to dead people and created a broken super-charged unemployment system that paid most unemployed people more not to work. That same unemployment expansion ended up losing more money—$26 billion—to fraud alone than the entire unemployment system spent in 2019.

But the saving grace of the CARES Act was, supposedly, the Paycheck Protection Program, which was intended to help businesses stay afloat amid the pandemic. Yet new reporting from the Wall Street Journal shows that this too was corrupted by endemic fraud and abuse.

For background, the Paycheck Protection Program gave businesses taxpayer-backed “loans” to help them survive government-mandated shutdowns. The “loans” were “forgiven”—basically, they were cash grants—so long as companies abided by certain rules and requirements.

Yet they essentially used the honor system to determine eligibility. That’s right: They sent hundreds of billions of taxpayers dollars out the door with hardly any verification.

The result?

“The federal government is swamped with reports of potential fraud in the Paycheck Protection Program,” the Journal reports. “Evidence is growing that many others took advantage of the program’s open-door design. Banks and the government allowed companies to self-certify that they needed the funds, with little vetting.”

A federal watchdog within the Small Business Administration said there were “strong indicators of widespread potential abuse and fraud in the PPP.”

“The watchdog counted tens of thousands of companies that received PPP loans for which they appear to have been ineligible,” the Journal’s report continues. “[And] tens of thousands of organizations also appear to have received more money than they should have based on their headcounts and compensation rates.”

What did we get in return for all this expenditure and waste?

“It seems that a lot of that cash went to businesses that would have otherwise maintained relatively similar employment levels,” MIT economist David Autor said.

A study Autor conducted found that the Paycheck Protection Program only preserved roughly 2.3 million jobs—which comes out to $224,000 in taxpayer expenditure per job.

Unfortunately, Americans really ought not to be surprised that the COVID-19 stimulus package has proven a blunt, inefficient tool rife with wasteful expenditure. This flaw is, by its very nature, inherent in all forms of government spending.


It’s simple: People are inherently more responsible when they’re spending their own money. When government officials are spending other peoples’ money, they have much less incentive to be frugal and discerning.

Famed free-market economist Milton Friedman explained this principle adeptly.

“There are four ways in which you can spend money,” he said. “You can spend your own money on yourself. When you do that, why then you really watch out what you’re doing, and you try to get the most for your money.”

“Then you can spend your own money on somebody else,” he went on. “For example, I buy a birthday present for someone. Well, then I’m not so careful about the content of the present, but I’m very careful about the cost.”

“Then, I can spend somebody else’s money on myself,” the economist said. “And if I spend somebody else’s money on myself, then I’m sure going to have a good lunch!”

“Finally, I can spend somebody else’s money on somebody else,” Friedman concluded. “And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get. And that’s government.”

If the rampant waste and fraud that plagued the CARES Act prove anything, it’s that simply throwing more and more taxpayer money around without care is a terribly inefficient way of solving problems. Lawmakers should keep this reality in mind as they debate how much more of our money to waste away.

This piece was originally published on under the title New Reporting Exposes Rampant Fraud Plaguing Stimulus Program