“The signal that we’re taking is that it’s likely to take longer for us to gain confidence that we are on a sustainable path down to 2 percent inflation,” Mr. Powell said in May, after price increases had stalled for months. Inflation has recently cooled again, and policymakers are waiting to see if the trend […] More
Some voters blame the American Rescue Plan for fueling price increases. But the growth it unleashed may be helping the president stay more popular than counterparts in Europe.The $1.9 trillion economic stimulus package that President Biden signed shortly after taking office has become both an anchor and a buoy for his re-election campaign.The American Rescue Plan, which the Biden administration created and Democrats passed in March 2021, has fueled discontent among voters, in sometimes paradoxical ways. Some Americans blame the law, which included direct checks to individuals, for helping to fuel rapid inflation.Others appear upset that its relief to people, businesses and school districts was short-lived. The Federal Reserve Bank of Dallas reported recently that several business contacts in its district “expressed concern about the winding down of American Rescue Plan Act dollars and whether nonprofits and K-12 schools will be able to sustain certain programs without that funding.”Polls show that Americans continue to favor Mr. Biden’s opponent, former President Donald J. Trump, on economic issues. Often, they indicate that only relatively small slices of the electorate believe Mr. Biden’s policies have helped them or their family financially.At the same time, though, the stimulus may be lifting Mr. Biden’s chances for November in ways that pollsters rarely ask about.Economists say the relief package, along with stimulus measures Mr. Trump signed into law in 2020, has helped accelerate America’s recovery from the pandemic recession. The United States has grown and added jobs in a way that no other wealthy nation has experienced after the pandemic.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More
Three years of relief from payments on $1.6 trillion in student debt allowed for other borrowing and spending — and will shift into reverse.A bedrock component of pandemic-era relief for households is coming to an end: The debt-limit deal struck by the White House and congressional Republicans requires that the pause on student loan payments be lifted no later than Aug. 30.By then, after more than three years in force, the forbearance on student debt will amount to about $185 billion that otherwise would have been paid, according to calculations by Goldman Sachs. The effects on borrowers’ lives have been profound. More subtle is how the pause affected the broader economy.Emerging research has found that in addition to freeing up cash, the repayment pause coincided with a marked improvement in borrowers’ credit scores, most likely because of cash infusions from other pandemic relief programs and the removal of student loan delinquencies from credit reports. That let people take on more debt to buy cars, homes and daily needs using credit cards — raising concerns that student debtors will now be hit by another monthly bill just when their budgets are already maxed out.“It’s going to quickly reverse all the progress that was made during the repayment pause,” said Laura Beamer, who researches higher education finance at the Jain Family Institute, “especially for those who took out new debt in mortgages or auto loans where they had the financial room because they weren’t paying their student loans.”The pause on payments, which under the CARES Act in March 2020 covered all borrowers with federally owned loans, is separate from the Biden administration’s proposal to forgive up to $20,000 in student debt. The Supreme Court is expected to rule on a challenge to that plan, which is subject to certain income limits, by the end of the month.The moratorium began as a way to relieve financial pressure on families when unemployment was soaring. To varying degrees, forbearance extended to housing, auto and consumer debt, with some private lenders taking part voluntarily.By May 2021, according to a paper from the Brookings Institution, 72 million borrowers had postponed $86.4 billion in loan payments, primarily on mortgages. The pause, whose users generally had greater financial distress than others, vastly diminished delinquencies and defaults of the sort that wreaked havoc during the recession a decade earlier.But while borrowers mostly started paying again on other debt, for about 42.3 million people the student debt hiatus — which took effect automatically for everyone with a federally owned loan, and stopped all interest from accruing — continued. The Biden administration issued nine extensions as it weighed options for permanent forgiveness, even as aid programs like expanded unemployment insurance, the beefed-up child tax credit and extra nutrition assistance expired.Student Loan Repayment Dropped PrecipitouslyMonthly payments received by the Treasury, annualized
Source: Goldman Sachs analysis of Treasury Department dataBy The New York TimesTens of millions of borrowers, who, according to the Federal Reserve, paid $200 to $299 on average each month in 2019, will soon face the resumption of a bill that is often one of the largest line items in their household budgets.Jessica Musselwhite took on about $65,000 in loans to finance a master’s degree in arts administration and nonprofit management, which she finished in 2006. When she found a job related to her field, it paid $26,500 annually. Her $650 monthly student loan installments consumed half her take-home pay.She enrolled in an income-driven repayment program that made the payments more manageable. But with interest mounting, she struggled to make progress on the principal. By the time the pandemic started, even with a stable job at the University of Chicago, she owed more than she did when she graduated, along with credit card debt that she accumulated to buy groceries and other basics.Not having those payments allowed a new set of choices. It helped Ms. Musselwhite and her partner buy a little house on the South Side, and they got to work making improvements like better air conditioning. But that led to its own expenses — and even more debt.“The thing about having a lot of student loans, and working in a job that underpays, and then also being a person who is getting older, is that you want the things that your neighbors have and colleagues have,” said Ms. Musselwhite, 45. “I know financially that’s not always been the best decision.”Now the end of the repayment hiatus is looming. Ms. Musselwhite doesn’t know how much her monthly payments will be, but she’s thinking about where she might need to cut back — and her partner’s student loan payments will start coming due, too.As student debt loads have risen and incomes have stagnated in recent decades, Ms. Musselwhite’s experience of seeing her balance rise instead of sink has become common — 52.1 percent of borrowers were in that situation in 2020, according to an analysis by Ms. Beamer, the higher education researcher, and her co-authors at the Jain Family Institute, largely because interest has accumulated while debtors can afford only minimum payments, or even less.The share of borrowers with balances larger than when they started had been steadily growing until the pandemic and was far higher in census tracts where Black people are a plurality. Then it began to shrink, as those who continued loan payments were able to make progress while interest rates were set at zero.A few other outcomes of this extended breather have become clear.It disproportionately helped families with children, according to economists at the Federal Reserve. A greater share of Black families with children were eligible than white and Hispanic families, although their prepandemic monthly payments were smaller. (That reflects Black families’ lower incomes, not loan balances, which were higher; 53 percent of Black families were also not making payments before the pandemic.)What did borrowers do with the extra space in their budgets? Economists at the University of Chicago found that rather than paying down other debts, those eligible for the pause increased their leverage by 3 percent on average, or $1,200, compared with ineligible borrowers. Extra income can be magnified into greater spending by making minimum payments on lines of credit, which many found attractive, especially earlier in the pandemic when interest rates were low.Put another way, the Consumer Financial Protection Bureau found that half of all borrowers whose student loan payments are scheduled to restart have other debts worth at least 10 percent more than they were before the pandemic.The effect may be most problematic for borrowers who were already delinquent on student loans before the pandemic. That population took on 12.3 percent more credit card debt and 4.6 percent more auto loan debt than distressed borrowers who were not eligible for the pause, according to a paper by finance professors at Yale University and Georgia Tech.In recent months, the paper found, those borrowers have started to become delinquent on their loans at higher rates — raising the concern that the resumption of student loan payments could drive more of them into default.“One of the things we’re prepping for is, once those student loan payments are going to come due, folks are going to have to make a choice between what do I pay and what do I not pay,” said David Flores, the director of client services with GreenPath Financial Wellness, a nonprofit counseling service. “And oftentimes, the credit cards are the ones that don’t get paid.”For now, Mr. Flores urges clients to enroll in income-driven repayment plans if they can. The Biden administration has proposed rules that would make such plans more generous.Further, the administration’s proposal for debt forgiveness, if upheld by the Supreme Court, would cut in half what would otherwise be a 0.2-percentage-point hit to growth in personal spending in 2023, according to researchers at Goldman Sachs.Whether or not debt forgiveness wins in court, the transition back to loan repayment might be rocky. Several large student loan servicers have ended their contracts with the Department of Education and transferred their portfolios to others, and the department is running short on funding for student loan processing.Some experts think the extended hiatus wasn’t necessarily a good thing, especially when it was costing the federal government about $5 billion a month by some estimates.“I think it made sense to do it. The real question is, at what point should it have been turned back on?” said Adam Looney, a professor at the University of Utah who testified before Congress on student loan policy in March.Ideally, the administration should have decided on reforms and ended the payment pause earlier in a coordinated way, Dr. Looney said. Regardless, ending the pause is going to constrain spending for millions of families. For Dan and Beth McConnell of Houston, who have $143,000 left to pay in loans for their two daughters’ undergraduate educations, the implications are stark.The pause in their monthly payments was especially helpful when Mr. McConnell, 61, was laid off as a marine geologist in late 2021. He’s doing some consulting work but doubts he’ll replace his prior income. That could mean dropping long-term care insurance, or digging into retirement accounts, when $1,700 monthly payments start up in the fall.“This is the brick through the window that’s breaking the retirement plans,” Mr. McConnell said. More
Estimates put the amount of leftover money between $50 billion and $70 billion. But even if Republicans could claw it back, it would not make much of a dent in the deficit.WASHINGTON — House Republicans demanding spending cuts in exchange for raising the nation’s debt limit have rallied around a seemingly straightforward proposal: recalling billions of dollars in coronavirus relief funds that Congress approved but have not been spent.Top Republicans regard the idea of rescinding unspent pandemic emergency money — an amount estimated to be between $50 billion and $70 billion — as an easy way to save money while avoiding more politically perilous options like cutting funding for popular federal programs. Their focus on the idea reflects how, after toiling unsuccessfully for months to unite their rank and file around a fiscal blueprint, G.O.P. leaders have become acutely aware that they have few options for doing so that could actually pass the House.On Wednesday, Speaker Kevin McCarthy highlighted the measure when he finally unveiled House Republicans’ proposal to raise the debt limit for one year in exchange for a series of spending cuts and policy changes. The party plans to vote on the legislation next week.“The American people are tired of politicians who use Covid as an excuse for more extreme inflationary spending,” Mr. McCarthy said in a speech on the House floor. “If the money was authorized to fight the pandemic, what was not spent during the pandemic should not be spent after the pandemic is over.”But going after the leftover money scattered across the patchwork of government programs used to dole out the relief funding — dozens of different accounts — is easier said than done.And even if House Republicans can find a way to identify and get their hands on the comparatively small sums of leftover money, it would do little to shrink the nation’s $1.4 trillion deficit. Additionally, the federal budget analysts who calculate the deficit have already accounted for the fact that some of the money Congress allocated for pandemic relief programs will likely never be spent.House Republicans have identified the move as just one way to rein in federal spending, which they say must be done in exchange for their votes to raise the debt ceiling, which is expected to be breached as early as June.But the challenges around what has widely been considered one of the simplest options underscore how difficult it will be for the party to meet the lofty goals Republican leaders laid out at the beginning of the year. They have already abandoned their aspiration of balancing the federal budget in 10 years and have been unable to reach consensus on freezing spending levels and other cuts that would shave down the deficit without touching Medicare or Social Security.Jeenah Moon for The New York TimesOver the span of two years and six laws, Congress approved about $4.6 trillion in federal spending to help the nation respond to and recover from the coronavirus pandemic. While most of that money has already been spent, either by federal agencies or state or local governments, tens of billions of dollars have yet to be earmarked for specific use.An internal document circulated by House Republican leaders laying out a draft of their fiscal demands in exchange for raising the debt limit until May 2024 estimated that there is $50 to $70 billion in leftover federal coronavirus relief funds scattered across federal agencies and programs. The Government Accountability Office reported in February that there was about $90 billion remaining.That money is spread across dozens of programs, and many agencies are still doling out money, including the Health and Human Services Department, the Department of Veterans Affairs and the Transportation Department.The bulk of it is intended for grants to health care providers, medical care for veterans, pension benefits and aid for public transit agencies that saw ridership levels plummet during the pandemic. Although Biden administration officials expect much of the remaining funds to be spent eventually, officials believe some programs with leftover money are largely over, including one designed to help aircraft manufacturers pay for compensation costs during the pandemic, which had about $2.3 billion left as of January.The funds could be unspent for various reasons. Transit agencies could already be using some to fund operations, but may not have submitted reimbursement requests to the federal government because they have more than a year left to spend the money. Funds for public health have been set aside for research, vaccine distribution and refilling stockpiles of personal protective equipment. A program that provides assistance to financially troubled pension plans is accepting applications through 2026 because of its extensive review process.Economists and policy researchers said rescinding the unspent funding would help trim the deficit — but only by a relatively small amount.Even if lawmakers were able to rescind, for example, $70 billion in relief funds, it likely would not result in a $70 billion reduction of the deficit, according to economic researchers. That is because researchers at Congress’s nonpartisan Congressional Budget Office who project the deficit have already assumed that not all pandemic relief funds would be spent and factored that into their calculations.Douglas Holtz-Eakin, the president of the conservative American Action Forum and a former C.B.O. director, said it would “make good sense” to rescind unspent relief funds if there were a substantial amount left and they were not needed, but the total savings would be relatively scant. He argued that it would be more effective for lawmakers to instead focus on slowing the growth of benefit programs such as Social Security or Medicare.“If you’re genuinely worried about the fiscal future and the unsustainable nature of the federal budget, good, but this won’t solve any of those problems,” Mr. Holtz-Eakin said. “This is a one-time reduction in spending that looks backward, not forward, and the real issues are in front of us.”Marc Goldwein, the senior vice president at the Committee for a Responsible Federal Budget, a nonpartisan fiscal watchdog group, said the federal government should pursue some of the relief money that is not being used and try to recoup funds by investigating cases of potential fraud, though it would be a “little too late” now.“We shouldn’t have a bunch of money sitting out there that’s not being used if it’s not needed, but we just shouldn’t expect much budget savings from it,” Mr. Goldwein said.The White House has pushed back on the proposal and signaled that it would not support a move to rescind a significant amount of the funds.Gene Sperling, a senior White House adviser, said that about 98 percent of the funding in the $1.9 trillion American Rescue Plan has already been spent or is “on the train to go out to people and places as it was specifically intended to by the law.”Rescinding the unspent funds, he said, would “lead to significant pain for veterans, retirees [and] small businesses.”“This is a one-time reduction in spending that looks backward, not forward, and the real issues are in front of us,” said Dr. Douglas Holtz-Eakin, the president of the conservative American Action Forum and a former C.B.O. director.Stefani Reynolds for The New York TimesCongressional negotiators have previously attempted to offset the costs of other bills by rescinding unspent Covid money provided to state and local governments, including last year, when Democrats tried to cover the cost of a $15 billion pandemic relief bill in part by rescinding funding earmarked for state and local relief funds.But a revolt from Midwestern House Democrats — whose states would have been disproportionately affected by the clawbacks and whose governors yowled at the idea of being stripped of money they had already planned to use — ultimately led party leaders to drop the measure altogether.The episode served as a warning to state and local leaders, and ahead of the debt limit fight, some prominent mayors began publicly warning their peers to spend down the federal funds available to them quickly.Lawmakers last year also sought to offset the costs of the stand-alone pandemic aid bill by raiding the $2.3 billion in unspent money from the Transportation Department’s program to help aircraft manufacturers cover the costs of their employees’ wages during the pandemic. The idea was ultimately scuttled after the revolt around rescinding state and local funds. More
Food insecurity is rising again as relief provided by President Biden’s $1.9 trillion stimulus package wanes.PORTLAND, Ore. — For the better part of last year, the pandemic eased its grip on Oregon’s economy. Awash in federal assistance, including direct checks to individuals and parents, many of the state’s most vulnerable found it easier to afford food, housing and other daily staples.Most of that aid, which was designed to be a temporary bridge, has run out at a particularly bad moment. Oregon, like states across the nation, has seen its economy improve, but prices for everything from eggs to gas to rent have spiked. Demand is growing at food banks like William Temple House in Northwest Portland, where the line for necessities like bread, vegetables and toilet paper stretched two dozen people deep on a recent day.“I’m very worried, like I was in the first month of the pandemic, that we will run out of food,” said Susannah Morgan, who runs the Oregon Food Bank, which helps supply William Temple House and 1,400 other meal assistance sites.In March 2021, President Biden signed into law a $1.9 trillion aid package aimed at helping people stay afloat when the economy was still reeling from the coronavirus. In addition to direct checks, the package included rental assistance and other measures meant to prevent evictions. It ensured free school lunches and offered expanded food assistance through several programs.Those programs helped the U.S. economy recover far more quickly than many economists had expected, but they have run their course as prices soar at the fastest pace in 40 years. The Federal Reserve, in an attempt to tame inflation, is rapidly raising borrowing costs, slowing the economy’s growth and stoking fears of a recession. While the labor market remains remarkably strong, the Fed’s interest rate increases risk slamming the brakes on the economy and pushing millions of people out of work, which would hurt lower-wage workers and risk adding to evictions and food insecurity.Several factors have driven prices higher in the last year, including a shift in spending toward goods like couches and cars and away from services. Supply chain snarls, a buying frenzy in the housing market and an oil price spike surrounding the Russian invasion of Ukraine have also contributed. While gas prices have fallen in recent months, rent continues to rise, and food and other staples remain elevated.Another factor fueling inflation, at least in small part, is the stimulus spending that helped speed the economy’s recovery and keep people out of poverty. More money in people’s bank accounts translated into more consumer spending.While the extent to which the rescue package fed inflation remains a matter of disagreement, almost no one, in Washington or on the front lines of helping vulnerable people across the country, expects another round of federal aid even if the economy tips into a recession. Lawmakers have grown increasingly concerned that more stimulus could exacerbate rising prices.In the meantime, the progress that the Biden administration hailed in fighting poverty last year has faded. The national child poverty rate and the food hardship rate for families with children, which dipped in 2021, have both rebounded to their highest levels since December 2020, according to researchers at Columbia University’s Center on Poverty and Social Policy. Two in five Americans surveyed by the Census Bureau at the end of July said they had difficulty paying a usual household expense in the previous week, the highest rate in two years of the survey.What is happening at the William Temple House is emblematic of the economic situation. Demand for food is swelling again, and officials here blame rising prices and lost federal aid. The people seeking help come from a wide variety of backgrounds: parents, retirees struggling to stretch Social Security benefits, immigrants who speak Mandarin, college graduates with jobs.Inflation F.A.Q.Card 1 of 5Inflation F.A.Q.What is inflation? More
Investigators say there was so much fraud in federal covid-relief programs that — even after two years of work and hundreds of prosecutions — they’re still just getting started.In the midst of the pandemic the government gave unemployment benefits to the incarcerated, the imaginary and the dead. It sent money to “farms” that turned out to be front yards. It paid people who were on the government’s “Do Not Pay List.” It gave loans to 342 people who said their name was “N/A.”As the virus shuttered businesses and forced people out of work, the federal government sent a flood of relief money into programs aimed at helping the newly unemployed and boosting the economy. That included $3.1 trillion that former President Donald J. Trump approved in 2020, followed by a $1.9 trillion package signed into law in 2021 by President Biden.But those dollars came with few strings and minimal oversight. The result: one of the largest frauds in American history, with billions of dollars stolen by thousands of people, including at least one amateur who boasted of his criminal activity on YouTube.Now, prosecutors are trying to catch up.There are currently 500 people working on pandemic-fraud cases across the offices of 21 inspectors general, plus investigators from the F.B.I., the Secret Service, the Postal Inspection Service and the Internal Revenue Service.The federal government has already charged 1,500 people with defrauding pandemic-aid programs, and more than 450 people have been convicted so far. But those figures are dwarfed by the mountain of tips and leads that investigators still have to chase.Agents in the Labor Department’s inspector general’s office have 39,000 investigations going. About 50 agents in a Small Business Administration office are sorting through two million potentially fraudulent loan applications.Officials already concede that the sheer number of cases means that some small-dollar thefts may never be prosecuted. Earlier this month, President Biden signed bills extending the statute of limitations for some pandemic-related fraud to 10 years from five, a move aimed at giving the government more time to pursue cases. “My message to those cheats out there is this: You can’t hide. We’re going to find you,” Mr. Biden said during the signing at the White House.Investigators say they hope the extra time will allow them to ensure that those who defrauded the government are ultimately punished, restoring a deterrent that had vanished in a flood of lies and money.President Biden signed bills extending the statute of limitations for some pandemic-related fraud to 10 years.Pete Marovich for The New York Times“There are years and years and years of work ahead of us,” said Kevin Chambers, the Department of Justice’s chief pandemic prosecutor. “I’m confident that we’ll be using every last day of those 10 years.”The federal government provided about $5 trillion in relief money in three separate legislative packages — an enormous sum that is credited with reducing poverty and saving the country from a prolonged, painful recession.But investigators say that Congress, in its haste to get money out the door quickly, designed all three packages with the same flaw: relying on the honor system.For example, an expanded unemployment benefit gave workers an extra $600 per week in federal jobless funds on top of what they received from their state. The program was funded by the federal government but administered by states, which often had loose rules around qualifying. Applicants did not need to provide proof they had lost income because of Covid-19; they simply had to swear it was true.A similar we’ll-take-your-word-for-it approach was used in two loan programs run by the Small Business Administration.Millions of Americans sought unemployment benefits during the height of the pandemic.Hiroko Masuike/The New York TimesThey were the Paycheck Protection Plan, in which the government guaranteed loans made by private lenders, and the Economic Injury Disaster Loan program, in which the government itself gave out loans and smaller advance grants that didn’t have to be repaid. In both, the government trusted businesses to self-certify that they met key requirements.Both the Labor Department and the Small Business Administration said they tried to screen those claims — and that they did reject billions of dollars’ worth of applications that didn’t make sense. But that wasn’t enough.In some cases, the programs missed schemes that were comically easy to spot: In one instance, 29 states paid unemployment benefits to the same person. In another, a Postal Service employee got $82,900 loan for a business called “U.S. Postal Services.” Another individual got 10 loans for 10 nonexistent bathroom-renovation businesses, using the email address of a burrito shop.In the Paycheck Protection Plan, private banks were supposed to help with the screening, since in theory they were dealing with customers they already knew. But that left out many small businesses, and the government allowed online lenders to enter the program. This year, University of Texas researchers found that some of those “fintech” lenders appeared less diligent about catching fraud.As the virus shuttered businesses and forced people out of work, Congress and federal agencies sent relief money into programs aimed at supporting the jobless and helping the economy stay afloat.Brittainy Newman/The New York TimesIn another case, a mother and daughter in Westchester County, N.Y., stand accused of turning fraud into a franchise — helping other people cook up fake businesses in order to get loans from the Economic Injury Disaster program.Andrea Ayers advised one client to tell the government she ran a baking business from home, although she was not a baker, prosecutors said.“You bake,” Ms. Ayers texted to the client, adding four laugh-crying emojis, according to charging documents.“Lol,” the client wrote back.The scheme was designed, prosecutors said, to take advantage of the Small Business Administration’s advance grant program, which provided applicants up to $10,000 up front while the agency decided whether to award an a larger loan. Even if the loan was rejected, in many cases the applicant could still keep the grant.Prosecutors said that Ms. Ayers’s daughter, Alicia Ayers, texted another client that the small size of the grants meant they were unlikely to be punished: “10k is not enough for jail time lol.”The government charged both Ayerses with wire fraud. They have pleaded not guilty. Their lawyers did not respond to requests for comment.In some corners of the internet, schemes to defraud were discussed in chat rooms and YouTube videos, where scammers offered to help for a cut of the proceeds. Some used the money on necessities, like mortgage bills or car payments. But many seemed to act out of opportunism and greed, splurging on a yacht, a mansion, a $38,000 Rolex or a $57,000 Pokemon trading card.Vinath Oudomsine bought a $57,000 Pokemon card after receiving a pandemic loan from the Small Business Administration for a nonexistent business.U.S. Attorney’s Office for the Southern District of GeorgiaVinath Oudomsine bought the Pokemon card in January 2021, after receiving a loan from the Small Business Administration for a nonexistent business. He pleaded guilty to defrauding the loan program in October 2021, leaving the U.S. government responsible for selling the card.Pandemic fraud became such an open secret that it ceased to be much of a secret at all. In September 2020, a California rapper named Fontrell Antonio Baines, who performs as Nuke Bizzle, posted a music video on YouTube, bragging in detail about how he’d gotten rich by submitting false unemployment claims. His song was called “EDD,” after California’s Employment Development Department, which paid the benefits.“I just seen 30 cards land in one day. Got straight on the phone and activate,” Mr. Baines rapped in the song, flashing cash and envelopes with preloaded debit cards from the state.“Unemployment so sweet,” Mr. Baines said.All three of those programs are now over. There is no official estimate for the amount of money that was stolen from them — or from pandemic-relief programs in general. The Justice Department has charged people with about $1 billion in fraud so far, and is investigating other cases involving $6 billion more, investigators said.But other reports have suggested the real number could be much higher. One official said the total of “improper” unemployment payments could be more than $163 billion, as first reported by The Washington Post. In the Economic Injury Disaster Loan program, a watchdog found that $58 billion had been paid to companies that shared the same addresses, phone numbers, bank accounts or other data as other applicants — a sign of potential fraud.“It’s clear there’s tens of billions in fraud,” said Michael Horowitz, the chairman of the Pandemic Response Accountability Committee, which includes 21 agency inspectors general working on fraud cases. “Would it surprise me if it exceeded $100 billion? No.”The effort to catch fraudsters began as soon as the money started flowing, and the first person was charged with benefit fraud in May 2020. But investigators were quickly deluged with tips at a scale they’d never dealt with before. The Small Business Administration’s fraud hotline — which had previously received 800 calls a year — got 148,000 in the first year of the pandemic. The Small Business Administration sent its inspector general two million loan applications to check for potential identity theft. At the Department of Labor, the inspector general’s office has 39,000 cases of suspected unemployment fraud, a 1,000 percent increase from prepandemic levels.But prosecutors face a key disadvantage: While fraud takes minutes, investigations take months and prosecutions take even longer.Mr. Baines, who detailed his jobless benefit scheme on YouTube, was arrested in September 2020, when Las Vegas police found other people’s unemployment-benefit cards in his car. Mr. Baines pleaded guilty to mail fraud last month. His attorneys declined to comment.Fontrell Antonio Baines, a rapper who performs as Nuke Bizzle, posted a video in which he bragged about getting rich by submitting false unemployment claims.Nuke Bizzle, via YouTubeHannibal Ware, the Small Business Administration inspector general, said his office has tried to focus on cases involving large thefts, career criminals or ringleaders who organized a fraud operation.“Only about 50 working field agents, right? So how do I take one of my agents off of a $20 million case to work a $10,000 case?” said Mr. Ware, who is known as Mike. “Because they will tell me, ‘Mike, the work is the same.’”That has allowed many individuals who took advantage of government programs to go unpunished. Despite ample evidence of people fraudulently obtaining $10,000 advance grants, Mr. Ware’s office has not sought charges for cases involving only a single grant, falsely obtained. It would cost more than $10,000 just to investigate each one.In all, that program awarded 3.9 million loans totaling about $389 billion, on top of $27 billion in grants that did not have to be repaid, according to the Small Business Administration. Many of the allegations of fraud in the grants program date to the first weeks of the pandemic, when the government gave out 5.8 million advance grants worth $19.7 billion in just over 100 days. In that program, fraud was easy to pull off, according to a government watchdog, which cited numerous loans given to businesses that were ineligible for funding.Mr. Ware said that he recently limited his agents to working 10 cases at a time, telling them, “You’re killing yourself. I have to protect you from you.”In some cases, lawyers for those charged with committing pandemic fraud have sought to argue that their clients should be judged less harshly for stealing because the government made it so easy.The government “was handing out money with no checks and a lot of people took advantage of that,” Ashwin J. Ram, an attorney for convicted fraudster Richard Ayvazyan, told The New York Times in November.“It’s a honey trap,” he added. “Richard Ayvazyan fell into that trap.” Mr. Ayvazyan was sentenced to 17 years in prison for participating in a ring that sought $20 million in fraudulent loans.Richard Ayvazyan was convicted in a scheme to steal $20 million in Covid-19 relief funds.Gary Coronado/Los Angeles Times, via Getty ImagesIn the case of Mr. Oudomsine, the Pokemon card purchaser, his lawyers argued in March that a judge should be lenient in deciding his sentence because the fraud had taken hardly any time at all.“It is an event without significant planning, of limited duration,” said lawyer Brian Jarrard, who was Mr. Oudomsine’s attorney at the time.That didn’t work.U.S. District Judge Dudley H. Bowen Jr. sentenced Mr. Oudomsine to three years in prison, more than prosecutors had asked for, to “demonstrate to the world that this is the consequence” of fraud, according to a transcript of the sentencing.Now, Mr. Oudomsine is appealing, with a new lawyer and a new argument. Deterrence, the new lawyer argues, is moot here because the pandemic-relief programs are over.“There’s no way to deter someone from doing it, when there’s no way they can do it any longer,” said David Rafus, Mr. Oudomsine’s new lawyer.Biden administration officials say they’re trying to prepare for the next disaster, seeking to build a system that would quickly check applications for signs of identity theft.“Criminal syndicates are going to look for weak links at moments of crisis to attack us,” said Gene Sperling, the White House coordinator for pandemic aid. He said the White House now aims to build an ongoing system that would detect identity theft quickly in applications for aid: “The right time to start building a stronger system to prevent identity theft is now, not in the middle of the next serious crisis.”In the meantime, the arrests go on.Last week, prosecutors charged a correctional officer at a federal prison in Atlanta with defrauding the Paycheck Protection Program, saying she had received two loans totaling $38,200 in 2020 and 2021. The officer, Harrescia Hopkins, has pleaded not guilty. Her attorney did not respond to a request for comment.“You can’t have a system where crime pays,” said Mr. Horowitz, of the federal Pandemic Response Accountability Committee. “It undercuts the entire system of justice. It undercuts people’s faith in these programs, in their government. You can’t have that.”Seamus Hughes contributed reporting. More
WASHINGTON — Democratic lawmakers on Wednesday released a report alleging that top Trump administration officials had awarded a $700 million pandemic relief loan to a struggling trucking company in 2020 over the objections of career officials at the Defense Department.The report, released by the Democratic staff of the House Select Subcommittee on the Coronavirus Crisis, describes the role of corporate lobbyists during the early months of the pandemic in helping to secure government funds as trillions of dollars of relief money were being pumped into the economy. It also suggests that senior officials such as Steven Mnuchin, the former Treasury secretary, and Mark T. Esper, the former defense secretary, intervened to ensure that the trucking company, Yellow Corporation, received special treatment despite concerns about its eligibility to receive relief funds.“Today’s select subcommittee staff report reveals yet another example of the Trump administration disregarding their obligation to be responsible stewards of taxpayer dollars,” Representative James E. Clyburn of South Carolina, the Democratic chairman of the subcommittee, said in a statement. “Political appointees risked hundreds of millions of dollars in public funds against the recommendations of career D.O.D. officials and in clear disregard of provisions of the CARES Act intended to protect national security and American taxpayers.”The $2.2 trillion pandemic relief package that Congress passed in 2020 included a $17 billion pot of money set up by Congress and controlled by the Treasury Department to assist companies that were considered critical to national security. In July 2020, the Treasury Department announced it was giving a $700 million loan to the trucking company YRC Worldwide, which has since changed its name to Yellow.Lobbyists for Yellow had been in close touch with White House officials throughout the loan process and had discussed how the company employs Teamsters as its drivers, according to the report.Mark Meadows, the White House chief of staff, was a “key actor” coordinating with Yellow’s lobbyists, according to correspondences that the committee obtained. The report also noted that the White House’s political operation was “almost giddy” in its effort to assist with the application.The loan raised immediate questions from watchdog groups because of the company’s close ties to the Trump administration and because it had faced years of financial and legal turmoil. The firm had lost more than $100 million in 2019 and was being sued by the Justice Department over claims that it had defrauded the federal government for a seven-year period. It recently agreed to pay $6.85 million to resolve allegations “that they knowingly presented false claims to the U.S. Department of Defense by systematically overcharging for freight carrier services and making false statements to hide their misconduct.”To qualify for a national security loan, a company needed certification by the Defense Department.According to the report, defense officials had recommended against certification because of the accusations that the company had overcharged the government. They also noted that the work that the company had been doing for the federal government — which included shipping meal kits, protective equipment and other supplies to military bases — could be replaced by other trucking firms.But the day after a defense official notified a Treasury official that the company would not be certified, one of Mr. Mnuchin’s aides set up a telephone call between him and Mr. Esper.The report indicated that Mr. Esper was not initially familiar with the status of Yellow’s certification. Before the call, aides prepared a summary of the analysis and recommendations of the department’s career officials that concluded that the certification should be rejected. Before those reached Mr. Esper, Ellen M. Lord, the department’s under secretary for acquisition and sustainment who was appointed by Mr. Trump, intervened and requested a new set of talking points that argued that the company should receive the financial support “to both support force readiness and national economic security.” Ms. Lord could not immediately be reached for comment.After the call with Mr. Mnuchin, Mr. Esper certified that the company was critical to national security, and a week later the approval of the loan was announced.Mr. Mnuchin then sent an email to Mr. Meadows that included news reports praising the loan. He highlighted positive comments from James P. Hoffa, the longtime president of the Teamsters union, who according to documents in the report made a direct plea to President Donald J. Trump about the loan.Mr. Esper and Mr. Mnuchin declined to comment. A former Treasury official familiar with the process said the loan saved 25,000 union jobs during an economic crisis and prevented disruption to the national supply chain that the Defense Department, businesses and consumers had depended on. The former official said that because of the terms of the loan, taxpayers were profiting from the agreement.A spokesman for Mr. Esper said that the company met the criteria to be eligible for the loan and emphasized that the report made clear that senior staff at the Defense Department recommended that he certify it. The Treasury Department made the final decision to issue the loan, the spokesman added.The Trump InvestigationsCard 1 of 6Numerous inquiries. More
The United States spent more on its policy response than other advanced economies. Now economists are revisiting how that worked.The United States spent more aggressively to protect its economy from the pandemic than many global peers, a strategy that has helped to foment more rapid inflation — but also a faster economic rebound and brisk job gains.Now, though, America is grappling with what many economists see as an unsustainable worker shortage that threatens to keep inflation high and may necessitate a firm response by the Federal Reserve. Yet U.S. employment has not recovered as fully as in Europe and some other advanced economies. That reality is prodding some economists to ask: Was America’s spending spree worth it?As the Fed raises interest rates and economists increasingly warn that it may take at least a mild recession to bring inflation to heel, risks are mounting that America’s ambitious spending will end up with a checkered legacy. Rapid growth and a strong labor market rebound have been big wins, and economists across the ideological spectrum agree that some amount of spending was necessary to avoid a repeat of the painfully slow recovery that followed the previous recession. But the benefits of that faster recovery could be diminished as rising prices eat away at paychecks — and even more so if high inflation prods central bank policymakers set policy in a way that pushes up unemployment down the road.“I’m worried that we traded a temporary growth gain for permanently higher inflation,” said Jason Furman, an economist at Harvard University and a former economic official in the Obama administration. His concern, he said, is that “inflation could stay higher, or the Fed could control it by lowering output in the future.”The Biden administration has repeatedly argued that, to the extent the United States is seeing more inflation, the policy response to the pandemic also created a stronger economy.“We got a lot more growth, we got less child poverty, we got better household balance sheets, we have the strongest labor market by some metrics I’ve ever seen,” Jared Bernstein, an economic adviser to President Biden, said in an interview. “Were all of those accomplishments accompanied by heat on the price side? Yes, but some degree of that heat showed up in every advanced economy, and we wouldn’t trade that back for the historic recovery we helped to generate.”Inflation has picked up around the world, but price increases have been quicker in America than in many other wealthy nations.Consumer prices were up 9.8 percent in March from a year earlier, according to a measure of inflation that strips out owner-occupied housing to make it comparable across countries. That was faster than in Germany, where prices rose 7.6 percent in the same period; the United Kingdom, where they rose 7 percent; and other European countries. Other measures similarly show U.S. inflation outpacing that of its global peers.The Rise of InflationInflation has risen worldwide in the past year, but the increase has been fastest in the United States.
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Note: Euro area and U.K. data are Harmonised Index of Consumer Prices. U.S. data is the Consumer Price Index excluding owners’ equivalent rent.Sources: U.S. Bureau of Labor Statistics, O.E.C.D., EurostatBy The New York TimesThe comparatively large jump in prices in America owes at least partly to the nation’s ambitious spending. Research from the Federal Reserve Bank of San Francisco attributed about half of the nation’s 2021 annual price increase to the government’s spending response. The researchers estimated the number, which is imprecise, by measuring America’s inflation outcome compared with what happened in countries that spent less.“The size of the package was very large compared to any other country,” said Òscar Jordà, a co-author on the study.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: Times readers sent us their questions about rising prices. Top experts and economists weighed in.Interest Rates: As it seeks to curb inflation, the Federal Reserve announced that it was raising interest rates for the first time since 2018.How Americans Feel: We asked 2,200 people where they’ve noticed inflation. Many mentioned basic necessities, like food and gas.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.The Trump and then Biden administrations spent about $5 trillion on pandemic relief in 2020 and 2021 — far more as a share of the nation’s economy than what other advanced economies spent, based on a database compiled by the International Monetary Fund. Much of that money went directly to households in the form of stimulus checks, expanded unemployment insurance and tax credits for parents.Payments to households helped to fuel rapid consumer demand and quick economic growth — progress that has continued into 2022. A global economic outlook released by the International Monetary Fund last week showed that America’s economy is expected to expand by 3.7 percent this year, faster than the roughly 2 percent trend that prevailed before the pandemic and the 3.3 percent average expected across advanced economies this year.That comes on the heels of even more rapid 2021 growth. And as the U.S. economy has expanded so quickly, unemployment has plummeted. After spiking to 14.7 percent in early 2020, joblessness is now roughly back to the 50-year lows that prevailed prior the pandemic.That’s a victory that politicians have celebrated. “Our economy roared back faster than most predicted,” Mr. Biden said in his State of the Union address last month. A major report from the White House on April 14 noted that the United States has experienced a faster recovery than other advanced economies, as measured by gross domestic product, consumer spending and other indicators.The Rebound in SpendingConsumer spending has recovered more quickly in the United States, even after accounting for faster inflation.
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Change in per capita household spending since fourth quarter of 2019
Notes: Quarterly data, adjusted for inflationSource: O.E.C.D.By The New York TimesBut increasingly, at least when it comes to the job market, America’s achievement looks less unique.Unemployment in the United States jumped much higher at the outset of the pandemic in part because America’s policies did less to discourage layoffs than those in Europe. While many European governments paid companies to keep workers on their payrolls, the U.S. focused more on providing money directly to those who lost their jobs.Joblessness fell fast in the United States, too, but that was also true elsewhere. Many European countries, Canada and Australia are now back to or below their prepandemic unemployment rates, data reported by the Organization for Economic Co-operation and Development showed.And when it comes to the share of people who are actually working, the United States is lagging some of its global peers. The nation’s employment rate is hovering around 71.4 percent, still down slightly from nearly 71.8 percent before the pandemic began.By comparison, the eurozone countries, Canada and Australia have a higher employment rates than before the pandemic, and Japan’s employment rate has fully recovered.The Rebound in JobsEmployment rates fell further in the U.S. than in many peer countries, and have not yet returned to their prepandemic level.
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Change in employment rate since fourth quarter of 2019
Note: Quarterly data, ages 15 to 64Source: O.E.C.D.By The New York TimesEurope’s more complete employment recovery may partly reflect its different regulations and different approach to supporting workers during the pandemic, said Nick Bennenbroek, international economist at Wells Fargo. European aid programs effectively paid companies to keep people on the payroll even when they couldn’t go to work, while the United States supported workers directly through the unemployment insurance system.That relatively subtle difference had a major consequence: Because fewer Europeans were separated from employers, many flowed right back into their old jobs as the economy reopened. Meanwhile, pandemic layoffs touched off an era of soul-searching and job shuffling in the United States.“You didn’t have as much motivation to reconsider your assessment of your work-life situation,” Mr. Bennenbroek said. “What we initially saw in the U.S. was much more disruptive.”Inflation F.A.Q.Card 1 of 6What is inflation? More
Last June, a meeting of the Dutchess County Legislature in New York’s Hudson Valley quickly turned heated over how to spend some of the county’s $57 million in federal pandemic relief aid.For more than two hours, residents and Democratic lawmakers implored the Republican majority to address longstanding problems that the pandemic had exacerbated. They cited opioid abuse, poverty and food insecurity. Some pointed to decrepit sewer systems and inadequate high-speed internet. Democrats offered up amendments directing funds to addiction recovery and mental health services.In the end, the Legislature rebuffed their appeals. It voted 15 to 10 to devote $12.5 million to renovate a minor-league baseball stadium that’s home to the Hudson Valley Renegades, a Yankees affiliate.“Who created this plan? Some legislators?” asked Carole Pickering, a resident of Hyde Park. “These funds were intended to rescue our citizens to the extent possible, not to upgrade a baseball field.”“I think we should be a little bit ashamed,” Brennan Kearney, a Democrat in the Legislature, told her fellow lawmakers.Cities and counties across the United States have found themselves in the surprisingly uncomfortable position of deciding how best to spend a windfall of federal relief funds intended to help keep them afloat amid deadly waves of Covid-19 infections.The pandemic, which is showing signs of waning as it enters its third year, prompted the largest infusion of federal money into the U.S. economy since the New Deal. President Biden and former President Donald J. Trump got Congress to approve roughly $5 trillion to help support families, shop owners, unemployed workers, schools and businesses.Where $5 Trillion in Pandemic Stimulus Money WentIt is the largest government relief effort in recorded history, and two years after Covid-19 crisis began, money is still flowing to communities. Here’s where it went and how it was spent.A large portion of the aid went to state, local and tribal governments, many of which had projected revenue losses of as much as 20 percent at the pandemic’s onset. The largest chunk came from Mr. Biden’s $1.9 trillion recovery bill, the American Rescue Plan, which earmarked $350 billion. That money is just beginning to flow to communities, which have until 2026 to spend it.“We’ve sent you a whole hell of a lot of money,” Mr. Biden said during a meeting with the nation’s governors in January.In many cases, the money has become an unusually public and contentious marker of what matters most to a place — and who gets to make those decisions. The debates are sometimes partisan, but not always divided by ideology. They pit colleagues against each other, neighbors against neighbors, people who want infrastructure improvements against those who want to help people experiencing homelessness.“It’s both breathtaking in its magnitude but it still requires some hard and strategic choices,” said Brad Whitehead, who is a nonresident senior fellow at Brookings Metro, a metropolitan policy project, and advises cities on how to use their funds. “One of the difficulties for elected leaders is everyone has a claim and a thought for how these dollars should be used.”Poughkeepsie, N.Y., part of Dutchess County. At a meeting last summer, county residents implored leaders to use pandemic aid to address longstanding problems.Amir Hamja for The New York TimesA person who is homeless in Poughkeepsie. Homelessness and poverty were among the issues that residents said deserved funding.Amir Hamja for The New York TimesLocal governments were given broad discretion over how to use the money. In addition to addressing immediate health needs, they were allowed to make up for pandemic-related revenue losses from empty transit systems, tourist attractions and other areas that suffered financially.That money is often equivalent to a third or nearly half of a city’s annual budget. St. Louis, for instance, will receive $498 million, more than 40 percent of its 2021 budget of $1.1 billion. Cleveland, with a city budget of $1.8 billion, will get $511 million.But the relief comes with strings: Governments are prohibited from using the funds to subsidize tax cuts or to make up for pension shortfalls. And because the aid is essentially a one-time installment, it wouldn’t necessarily help cover salaries for new teachers or other recurring costs.Several states have sued the Biden administration over the tax cut restriction, claiming it violates state sovereignty. Some governments have refused to take the money over concerns that it would give the federal government power to control local decision-making.In Saginaw, Mich., the mayor formed a 15-person advisory group to recommend ways to spend the city’s $52 million allotment. Harrisburg, Pa., which received $49 million, has held public events seeking input from residents. Massillon, Ohio, identified the biggest source of public complaints — flooding and sanitation issues — and proposed using its $16 million share to address those areas.“We listened to the people, and we’re trying to make improvements for them,” said Kathy Catazaro-Perry, Massillon’s mayor. “Our city is old. We have a lot of areas that did not have storm drains, and so for us, this is going to be huge because we’re going to be able to rectify some of those older neighborhoods.”But many have found their communities mired in clashes over who has the power to spend the money.Poughkeepsie residents picked up free meals at the Family Partnership Center in February. The food was distributed through the Lunch Box, a program that provides hot meals in Dutchess County five days a week.Amir Hamja for The New York TimesIn New York’s Onondaga County, which includes Syracuse, legislators from both parties have been trying to claw back spending authority from the county executive, Ryan McMahon, a Republican.When the first half of the county’s $89 million stimulus share arrived last spring, Mr. McMahon placed it into an account that he controlled and began committing funds to projects, including a $1 million restaurant voucher program, $5 million in incentives for filmmakers to produce in the area and $25 million for a multisport complex featuring 10 synthetic turf fields.Lawmakers, who questioned why they were not being asked to vote on the spending, were told by the county attorney’s office that they had ceded that authority in December 2020 when they approved an emergency resolution that gave the county executive authority “to address budget issues specifically related to Covid-19 global pandemic.”Legislators argued that they had never intended for that control to extend beyond the immediate pandemic response.James Rowley, who was elected chair of the Onondaga County Legislature in January, hired a lawyer and spent $11,000 preparing a lawsuit to challenge Mr. McMahon.“We have the power of the purse,” Mr. Rowley, a Republican, said in an interview. “I didn’t want to set a precedent that gave the county executive power to spend county money.”Mr. McMahon did not respond to a request for comment. On Feb. 22, he sent a letter to the Legislature proposing that it regain control of the stimulus funds that had not yet been allocated.“I recognize your concern,” he wrote, noting that “our cooperative actions should comport with county charter principles of separation of powers.” An abandoned property in Poughkeepsie. One county legislator called the investment in the baseball stadium “a betrayal of our community.”Boarded-up buildings in Poughkeepsie. Local governments were given broad discretion in how the pandemic aid could be spent.The rush of money from the federal government is in part an attempt to avoid the mistakes of the last recession, when state and local governments cut spending and fired workers, prolonging America’s economic recovery. But analysts say it will take years to fully assess whether all the spending this time was successful. Critics argue that the overall $5 trillion effort has added to a ballooning federal deficit and helped propel rapid inflation. And many states report increasing revenue, and even surpluses, as the economy strengthens.The money has led to ideological fights over the role of the federal government.In January, dozens of residents crowded into a City Council meeting in Coeur d’Alene, Idaho, where they demanded that the mayor and other officials turn down the city’s $8.6 million share of stimulus funds, saying it was a ruse by Washington to take control of the town.Residents booed and called the Council members “fascists.” Several referred to the money as a Trojan horse, lamenting that taking it would allow the federal government to impose restrictions on Idaho, including establishing vaccine checkpoints. Amid cries of “Recall!” one woman shouted repeatedly that “you have given up our sovereignty.”“Nobody wants this money,” Mark Salazar, a resident, said to applause. “I don’t want to be under the chains of the federal government. Nobody does.”The council eventually voted 5 to 1 to accept the funds, saying they would go toward expanding a police station and other areas.Dutchess County residents were similarly agitated, if less rowdy, at their June 14 meeting about the stadium. Guidance on using the funds issued by the Treasury Department specifically cited stadiums as “generally not reasonably proportional to addressing the negative economic impacts of the pandemic.”So why, those in attendance asked, was this happening?Marc Molinaro, the county executive, defended the spending, saying Dutchess County had identified $33 million in lost revenue as a result of the pandemic and that, according to the Biden administration’s guidance, stimulus funds could indeed go toward investing in things like the stadium.“It’s basically any structure, facility, thing you own as a government, you can invest these dollars in with broad latitude,” Mr. Molinaro said.In a recent interview, Mr. Molinaro said that because the funds were one-time money, the county needed to be careful not to create expenses that could not be paid for once the federal funds ran out.He added that investing in the stadium would produce an ongoing revenue stream for Dutchess County — money that he said would allow the government to pay for the types of programs that Democrats wanted.The investment, he said, “allows us to create 25 years of revenue that we can invest in the expansion of mental health services, homelessness and substance abuse.”That explanation has not mollified everyone.“I was just devastated that we spent the money that way,” Ms. Kearney, the Democratic legislator, said in an interview. “It was such a betrayal of our community. So grossly inappropriate and grossly tone deaf to the needs of the people in Dutchess who have suffered.” More
