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    Defense Department Awards Chip Funding to Fuel Domestic Research

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    The $238 million in grants will set up eight research hubs, as a small slice of the federal money that will go to chip companies and research facilities in the coming months.The Biden administration on Wednesday announced that it was awarding $238 million through the Defense Department to set up eight hubs around the United States for promoting innovation in the semiconductor industry.The funds are one of the earliest releases of the nearly $53 billion in grants and subsidies that Congress and the Biden administration have approved to build up the domestic semiconductor industry, which U.S. officials say has been left vulnerable by decades of offshoring.The Biden administration has a variety of funding programs in the works to encourage chip research institutions and manufacturers to set up operations in the United States. Most of these programs are run through the Commerce Department, and many will begin handing out money this fall.While U.S. companies still design many of the world’s most advanced chips, much of the manufacturing of the technology has been outsourced to foreign locations, including Taiwan, leaving U.S. chip supply vulnerable if, for example, the Chinese government were to invade Taiwan.The awards announced Wednesday will go to research institutes, consortiums and universities located in New York, Arizona, Indiana, Ohio, California, North Carolina and Massachusetts, defense officials said.Each hub will receive $15 million to $40 million to fund the development of new chips for use in electromagnetic warfare, artificial intelligence, 5G and 6G wireless technologies, and quantum computing, among other areas. While the research will be directed at meeting the needs of the Defense Department, it is also expected to be useful for commercial applications.Kathleen Hicks, the deputy defense secretary, said in a news conference Wednesday that the hubs would “tackle many technical challenges relevant to D.O.D.’s missions, to get the most cutting-edge microchips into systems our troops use every day: ships, planes, tanks, long-range munitions, communications gear, sensors and much more.”The funding also aims to accelerate what the industry refers to as the “lab-to-fab transition,” the process of taking new chip technologies and turning them into viable commercial products.David A. Honey, the deputy under secretary of defense for research and engineering, said the hubs would bring more prototype work to the United States.“Now we’ll be able to get it done here,” he said. “And also we’re building out in the areas that are just not available anywhere else.”The Commerce Department is separately setting up a string of research hubs for the semiconductor industry, collectively called the National Semiconductor Technology Center, drawing on $11 billion in funding it received for research and development.Appearing before the House Science, Space and Technology Committee on Tuesday, Gina Raimondo, the commerce secretary, said that her department was on track to formally unveil that technology center this fall.She also said that the department had received about 100 applications from companies hoping to receive grants that will be available to manufacturers.While Ms. Raimondo acknowledged that the grant program faced challenges, like securing enough workers to staff new chip plants, she said that if properly implemented, the program would make the United States “the premier destination in the world” for chip design, research and manufacturing.“That’s the vision that we’re trying to achieve with your support,” Ms. Raimondo told lawmakers.Ms. Raimondo was also questioned about the release in prior weeks of an advanced smartphone by Chinese telecom giant Huawei. The company is under heavy U.S. trade restrictions, administered by the Commerce Department, that theoretically should have prevented such an innovation.Ms. Raimondo said that she was upset by the development, but added that the U.S. government did not have any evidence that Chinese companies could manufacture the more sophisticated chips at scale.Ms. Raimondo said that the United States could take various defensive measures to limit China’s access to advanced technology, but “my strongly held view is that what we do on offense matters so much more.”“The reality is that over the past 30 years, this country has taken its eye off the ball of manufacturing,” she continued. “And when you don’t manufacture you lose out on innovation, and you become dependent on other countries.” More

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    Schumer Wields Political Heft in Bid for New York Chips Funds

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    The Senate majority leader helped deliver billions of dollars in federal funding for semiconductors. Now he’s pushing for his state to reap benefits.In a darkened hotel ballroom in San Jose, Calif., last November, the most powerful players in the semiconductor industry received a familiar sales pitch.Senator Chuck Schumer, the majority leader, appeared by video message to urge the industry titans at the Semiconductor Industry Association’s annual awards dinner to work together to strengthen American manufacturing of a critical technology — and to invest more in his home state of New York.“I ask that more of the industry consider investing in the Empire State, and if you do, you’ll find no greater champion in your corner than me, the Senate majority leader,” Mr. Schumer said, to cheers and laughs of recognition from a crowd accustomed to the senator’s solicitations.Amid growing fears about China’s dominance of technology and America’s loss of competitiveness, Mr. Schumer last year helped rally Congress to push through the biggest industrial policy programs the United States has seen a generation. The Biden administration is now preparing to invest tens of billions of dollars in the U.S. semiconductor industry in an effort to boost chip manufacturing across the country and lessen U.S. reliance on foreign factories.If Mr. Schumer gets his way, a substantial part of that funding will flow to New York.In his encounters with chip executives, Commerce Secretary Gina Raimondo and President Biden himself, Mr. Schumer has openly and aggressively drawn on his political capital as majority leader to try to channel investment to his home state. During the months where Congress was debating whether to approve that funding, industry executives who set foot in Mr. Schumer’s office or spoke to him on the flip phone he carries in his breast pocket were asked when, not if, they would invest in New York.Mr. Schumer, a longtime China critic, primarily views the investments as critical to reducing America’s reliance on Beijing for a technology that powers everything from cars and dishwashers to missiles and fighter jets. Most chip production has moved to Asia in recent decades, leaving the U.S. economy highly vulnerable to shortages, as became apparent during the pandemic.But he also saw the opportunity to fulfill a more personal goal: securing investment that could revive the factory towns of his home state, which had been hollowed out through decades of competition with China. The move would also augment his local political support, attract donations from chip companies to fill Democratic coffers and cement his legacy as a proponent of upstate New York.“I cared about upstate and I cared about competition with China,” Mr. Schumer said in an interview in Albany in June. “When I drafted the legislation, I did things with New York companies in mind.”Senate majority leaders and other legislators have long used their clout to drive federal funds back home. But Mr. Schumer is capitalizing on his position at an opportune moment, as the United States prepares to invest nearly $53 billion in the sector, including $11 billion for chip research and $39 billion in manufacturing grants.Still, some critics have cautioned that economic and strategic factors, not political influence, must determine the investment decisions that could shape the U.S. economy for decades to come.A silicone wafer at the GlobalFoundries facility.Cindy Schultz for The New York TimesIf the proposed investments are realized, New York could become one of the country’s busiest hubs for chip production. Chip makers like GlobalFoundries, IBM, Onsemi and Wolfspeed are applying for funds to build or expand facilities there. Micron Technology, a memory chip maker, is proposing to invest up to $100 billion near Syracuse over the next two decades to build what would be the largest high-tech chips facility proposed in the United States, employing up to 9,000 people.Mr. Schumer is also pushing for New York to play a leading role in semiconductor research, as the headquarters of a new federal chip research organization.Competition for federal funding is expected to be fierce. By late June, the Commerce Department — which will dole out the funds — had received nearly 400 statements of interest from companies that intended to apply for money.“I suspect there will be many disappointed companies who feel that they should have a certain amount of money,” Ms. Raimondo said in February.New York has already faced some setbacks. Taiwan Semiconductor Manufacturing Company, Samsung and Intel, makers of the most cutting-edge types of logic chips, passed over the state in recent years in favor of Arizona, Texas and Ohio, where they are now building large facilities that could absorb a significant portion of government funding.Chip industry executives say practical factors, like the cost of electricity, land and capital, the availability of workers and the proximity of their suppliers, weigh heaviest in their decisions about where to invest.But the pressure from Mr. Schumer — and from other influential lawmakers, university presidents and company executives who helped secure the funding — raises questions about the role powerful political figures will play in the next chapter of American industrial policy.“I think there is and ought to be a lot of skepticism about political players having a major say in decision making over where these funds are spent,” said Chris Miller, an associate professor at Tufts University and the author of “Chip War: The Fight for the World’s Most Critical Technology.”“If you want effective industrial policy, you have to keep it as far away as possible from pork barrel politics,” he said.The Commerce Department has been hiring experts in finance and semiconductors to review company applications, and it has set up a selection committee to chose the board for the new research center, called the National Semiconductor Technology Center. The department appears to be trying to avoid any undue influence or favoritism.“Our awards will be entirely dependent upon the strength of applications and which projects will advance U.S. economic and national security interests,” the Commerce Department said in a statement.Mr. Schumer insists that New York will win federal dollars on its own merits, but he is also explicit about the benefit his position brings. In June, as he walked the sunlit halls of the Albany NanoTech Complex, a long-running chip research and educational facility, Mr. Schumer said he “did not close out a single discussion” with a semiconductor company without encouraging them to invest in New York.GlobalFoundries is among the chip makers that stand to benefit from the CHIPS act.Cindy Schultz for The New York TimesNew York has five main advantages, he told executives: Skilled workers, stemming from New York’s history of manufacturing. Cheap and plentiful water. Cheap hydropower. Shovel-ready sites for companies to build on.“And fifth, they had the majority leader,” he said.In a yellow-lit clean room behind Mr. Schumer, workers in white protective suits were tending to hundreds of millions of dollars of advanced machinery. On tracks overhead, mechanized metal pails whizzed by carrying silicon wafers, each roughly the size of a record, to and from the machines, where they would be imprinted with layers of intricate circuitry.Mr. Schumer paused to peer over his reading glasses at a smooth, white box the size of a mobile home: an extreme ultraviolet lithography machine, made by the Dutch firm ASML, arguably the most advanced piece of machinery ever developed.Albany NanoTech is the only public research facility in the United States with such a machine. The facility is applying for federal funding to build a new clean room in an adjacent parking lot, and it hopes to become home to part of the government’s new research center.“This is the perfect place,” Mr. Schumer said. “When we wrote the CHIPS and Science bill to set up a National Semiconductor Technology Center, I had Albany in mind. And I’m pushing to get it.”Mr. Schumer said he had personally made that case to a parade of administration officials he brought through the state. That included Mr. Biden, who was pitched on New York’s potential as the two men rode in a motorcade to hear Micron’s investment announcement last October.By his telling, Mr. Schumer’s efforts on behalf of upstate New York are a personal mission, stemming in part from an early challenge from a political opponent who told voters they would never see Mr. Schumer, a Brooklyn native, west of the Hudson River. As Mr. Schumer watched companies like General Motors, General Electric and Carrier shutter their New York facilities, he said, he vowed to do something to stop the flow of young people out of the state.Mr. Schumer had also been one of Congress’ earliest China hawks, particularly on the issue of Chinese currency manipulation. During a workout in 2019 in the Senate gym, Mr. Schumer began forming a plan with Senator Todd Young, Republican of Indiana, to bolster the U.S. economy by dedicating over $100 billion to technology research.It took two years — and an aggressive, coordinated lobbying effort between government and industry — to amass the support and momentum to turn that bill into law. Mr. Schumer and other key Republican and Democratic lawmakers enlisted company executives, university presidents and state officials to talk publicly about the importance of the funding, and put pressure on reluctant members of Congress.Mr. Schumer also worked closely with Ms. Raimondo to push the bill forward. He called her frequently as obstacles arose, including during Sunday Mass and her daughter’s 18th birthday party, she said in an interview in July 2022.As the bill progressed, the prospect of funding for new U.S. factories touched off an elaborate game of courtship among legislators, state officials and companies.The number of chip lobbyists in Washington multiplied. Companies like GlobalFoundries and Intel, which stood to benefit enormously from the legislation, hosted or attended fund-raisers and virtual events for Mr. Schumer in the months before the CHIPS Act was passed. From the beginning of 2021 through June 2023, political action committees linked with Mr. Schumer received more than $350,000 in donations from executives at chip companies and their suppliers, including a $5,000 donation from Intel’s chief executive, Pat Gelsinger, data from the Federal Election Commission shows.Mr. Schumer, right, viewed a model of a Micron facility with President Biden in Syracuse, N.Y. Micron has projected that the facility will employ up to 9,000 people.Kenny Holston for The New York TimesNew York played host to a series of chip companies considering potential investments, particularly for the plot that Micron now plans to build on. TSMC looked at the site in 2019 before it chose Arizona, and Intel considered the same location but ultimately chose Ohio.Micron was ready to write off New York because the state did not have a big enough site, Ryan McMahon, the local county executive, said. To win the final bid, the county spent tens of millions of dollars acquiring land, including buying out a street of homeowners, and running gas and electricity to the site, he said.“If Schumer didn’t introduce us, it’s one of those things, you wonder if it ever would have happened,” Mr. McMahon, a Republican, said.Mr. Schumer, along with other proponents, secured an investment tax credit in the chips legislation that Micron saw as key to making the economics of the project work. And at the urging of Gov. Kathy Hochul, New York state lawmakers passed their own chips subsidy bill to complement the federal one, approving up to $500 million a year in tax abatements to chip manufacturers.Micron has said it plans to start construction next year and complete the first $20 billion phrase of the factory by 2030. New York State has promised to give Micron $5.5 billion in tax credits over the life of the project if the company meets certain employment targets.As the biggest maker of memory chips with headquarters in the United States, Micron is seen as a likely candidate for a federal grant. But other developments have thrown the project into question: Micron has recently become the subject of a crackdown in China that could cost the company an eighth of its global revenues, potentially undercutting its ability to make ambitious investments.The deal has also been met with skepticism from local government watchdogs, who fear that Micron will become the latest firm to be offered taxpayer subsidies but fail to deliver the promised economic impact.“It might be good geostrategic policy for the United States,” said John Kaehny, executive director of Reinvent Albany, a watchdog focused on the New York government. “But for New York, it’s an incredibly low return on the investment of subsidy dollars.”For both Mr. Schumer and Governor Hochul, the Micron investment became a centerpiece of their electoral strategy last fall. With Republicans on their way to the best statewide showing in two decades, both Democrats packaged clips of themselves with Micron’s chief executive into TV ads that blanketed parts of the state otherwise wary of Democrats’ economic agenda.“Transformational for upstate New York, transformational for America,” Mr. Schumer said in one.Nicholas Fandos More

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    How to Catch Pandemic Fraud? Prosecutors Try Novel Methods.

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    Federal prosecutors are scrambling to recoup billions of dollars in pandemic aid from people who falsely obtained funds from government programs that were intended to keep the economy afloat during the Covid shutdowns.In some districts, prosecutors are screening those suspected of a violent crime for potential involvement in pandemic fraud schemes. Other investigators are putting together “strike force teams” to unravel the most sophisticated enterprises or leaning on local officials to steer them toward potential fraudsters in their areas.The moves come as the federal government looks for novel ways to root out what officials say was an enormous number of fraudulent claims that were submitted and approved during the pandemic. Many of the programs that were set up to dole out relief money required minimal proof from those seeking funds and approved applications quickly in order to pump money into the economy.While the exact amount that was stolen is unknown, the Small Business Administration’s inspector general estimated that more than $200 billion — or at least 17 percent of the roughly $1.2 trillion in pandemic loans the agency doled out — was disbursed to “potentially fraudulent actors.” Nearly $30 billion has been seized or returned to the agency, according to the office.Thousands of investigations are still underway. The Labor Department’s inspector general has about 160,000 open investigations focused on unemployment-insurance fraud from the pandemic.But rooting out those who defrauded pandemic-relief programs has proved difficult, given the sheer amount of fraud. So far, the federal government has charged more than 2,230 defendants with schemes and offenses related to pandemic fraud, according to the Justice Department. More than 550 convictions have been made related to fraud involving funds from the Paycheck Protection Program and the Economic Injury Disaster Loan program, according to the S.B.A.’s office of inspector general.Michael Galdo, the acting director of Covid-19 fraud enforcement at the Justice Department, said there was a “wide variety of different approaches across U.S. attorney’s offices,” which have a large amount of freedom to determine the most effective way to catch fraudsters.Power in Local ConnectionsIn the Northern District of Mississippi, officials at the U.S. attorney’s office are traveling to individual counties and asking local officials to review lists of people who received pandemic loans. That approach can help prosecutors catch recipients they might not otherwise find, since local officials typically know, for example, whether someone owned a business, overstated the number of employees on an application or listed an address that was actually an empty lot.Clay Joyner, the U.S. attorney for the district, said the approach had helped uncover more cases than the district had the resources to criminally prosecute, so the office is pursuing civil cases in many investigations that involve smaller loans.“Thousands of the loans are for those lower-tier amounts,” Mr. Joyner said. “If you were trying to pursue all of these cases criminally, it would almost be impossible.”The office’s civil division has reached over 200 judgments, more than any other district in the country. Officials have recovered over $2.2 million so far, although they expect to recover more than $23 million through their civil judgments so far.Mr. Joyner said the office had also pursued civil cases because the financial consequences could be severe. Under a federal law commonly used for civil fraud cases, individuals could be required to pay three times the amount of a stolen loan, in addition to penalties and fees. Although the money usually has been spent already, most fraudsters agree to return the full amount through a repayment plan, Mr. Joyner said.Officials said they did not initially plan to pursue more civil cases, but they realized they could take advantage of the district’s small-town, rural nature after an attorney in the office recognized the names of loan recipients and suspected that many did not own businesses because he had grown up in the same area.Scrutiny of Other SuspectsOfficials at the U.S. attorney’s office in Maryland have started screening all new suspects of violent crime and illegal possession of firearms for pandemic fraud. Erek L. Barron, the U.S. attorney for the district, said the method had allowed officials to pursue investigations they normally would not have the capacity to take on.“We can’t take each and every case, so we have to be very thoughtful about the dollar amounts and the individuals that we investigate and prosecute,” he said.Since officials instituted the process in 2021, more than 60 percent of screened cases have turned up reasonable suspicion of pandemic-related fraud, Mr. Barron said, adding that the overlap had “presented an opportunity to go after two priorities in one.”“Those who are involved in violence, it’s not a stretch to imagine that they’re also willing participants in other wrongdoing,” he said.One recent case involved Jerry Phillips of Capitol Heights, Md., who was sentenced to seven years in federal prison after admitting to obtaining more than $1 million in relief funds using fake and stolen identities. After he was arrested and officials searched his residence, they recovered four “ghost guns,” including one he had illegally modified into a machine gun. Mr. Phillips had purchased the guns online, in part with an alias and address he used for fraud schemes, according to court documents.Special Teams for FraudThe Justice Department has also established “strike force teams” in several U.S. attorney’s offices. Phillip A. Talbert, the U.S. attorney for the Eastern District of California, said its joint strike force with the Central District of California used a data-driven approach to identify large fraud schemes. Analysts from the F.B.I. and at least five other federal agencies work with the offices, searching databases for patterns of suspicious activity.“If you just looked at one application or a couple applications, it may not be apparent that’s just a little piece of the fraud scheme,” Mr. Talbert said.The office’s earlier fraud cases originated mostly from referrals by banks and state and federal agencies. One case involved Andrea M. Gervais of Roseville, Calif., who was sentenced to 36 months of probation after pleading guilty to theft of government money in a scheme involving more than 90 fraudulent unemployment claims. The case began after investigators discovered someone had filed a claim using the identity of a sitting U.S. senator, which was processed for payment. The official was Senator Dianne Feinstein of California, according to a person familiar with the investigation. Senator Feinstein’s office confirmed that a person had used the senator’s name to file fraudulent unemployment claims, but it declined to provide additional comment.Mr. Talbert said the strike force would help the office investigate cases that are harder to detect, such as those involving international fraud rings.Dan Fruchter, an assistant U.S. attorney in the Eastern District of Washington, said officials initially focused on cases that were less complicated to prove, such as those involving fake businesses, but he also expected the office to prosecute more complex cases in the coming years. Investigations can take longer if people with legitimate businesses overstated facts in their applications or made improper purchases, for instance.Since forming its own strike force last year to strengthen coordination with federal law enforcement, the office has charged 19 defendants and recovered about $4 million.A Broad SweepIn addition to U.S. attorney’s offices, hundreds of people across more than 40 offices of inspectors general are working on pandemic fraud investigations, as are agents from the F.B.I., the Secret Service, the Postal Inspection Service, Homeland Security Investigations and Internal Revenue Service Criminal Investigation.Brian Miller, the country’s special inspector general for pandemic recovery, said he expected to uncover new leads over the next few years as more borrowers defaulted on pandemic loans, a “red flag” for potential fraud. He said default rates on interest payments for some programs had already been alarmingly high, and he urged Congress to fund the office past 2025, when many final payments are due.Michael Horowitz, the Justice Department’s inspector general and chairman of the Pandemic Response Accountability Committee, which is composed of 20 agency inspectors general, said investigators had prioritized mostly multimillion-dollar fraud cases, but he anticipated prosecutors would pursue more lower-dollar cases in the coming years.“They’re still big numbers,” Mr. Horowitz said. “In any other time, they would be viewed as bigger frauds.” More

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    What’s in the CHIPS Act, Aimed at Childcare Expansion and National Security

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    A sprawling new program for the semiconductor industry is foremost about national security, but it will try to advance other priorities as well.The Biden administration unveiled rules Tuesday for its “Chips for America” program to build up semiconductor research and manufacturing in the United States, beginning a new rush toward federal funding in the sector.The Commerce Department has $50 billion to hand out in the form of direct funding, federal loans and loan guarantees. It is one of the largest federal investments in a single industry in decades and highlights deepening concern in Washington about America’s dependence on foreign chips.Given the huge cost of building highly advanced semiconductor facilities, the funding could go fast, and competition for the money has been intense.Here’s a look at the CHIPS and Science Act, what it aims to do and how it will work.Funding chip production and researchThe largest portion of the money— $39 billion — will go to fund the construction of new and expanded manufacturing facilities. Another $11 billion will be distributed later this year to support research into new chip technologies.The bulk of the manufacturing money is likely to go to a few companies that produce the world’s most advanced semiconductors — including Taiwan Semiconductor Manufacturing Company, Samsung Electronics, Micron Technology and, perhaps in the future, Intel — to help them build U.S. facilities.Some will go to makers of older chips that are still essential for cars, appliances and weapons, as well as suppliers of raw materials for the industry and companies that package the chips into their final products.While some critics have questioned the wisdom of giving grants to a profitable industry, semiconductor executives argue that they have little incentive to invest in the United States, given the higher costs of workers and running a factory.The Global Race for Computer ChipsU.S. Industrial Policy: In return for vast subsidies, the Biden administration is asking chip manufacturers to make promises about their workers and finances, including providing affordable child care.Arizona Factory: Internal doubts are mounting at Taiwan Semiconductor Manufacturing Company, the world’s biggest maker of advanced chips, over its investment in a new factory in Phoenix.CHIPS Act: Semiconductor companies, which united to get the sprawling $280 billion bill approved last year, have set off a lobbying frenzy as they argue for more cash than their competitors.A Ramp-Up in Spending: Amid a tech cold war with China, U.S. companies have pledged nearly $200 billion for chip manufacturing projects since early 2020. But the investments have limits.The administration does not plan to fund entire projects: Biden administration officials say they plan to offer grants of between 5 to 15 percent of a company’s capital expenditures for a project, with funding not expected to exceed 35 percent of the cost. Companies can also apply for a tax credit reimbursing them for 25 percent of project construction.Limiting foreign dependenceGina Raimondo, the secretary of commerce, describes the program as foremost a national security initiative.While the United States is still a leader in designing chips, most manufacturing has been sent offshore. Today, more than 90 percent of the most technologically advanced chips, which are critical for the U.S. military and the economy, are produced in Taiwan. That has prompted concerns about the supply’s vulnerability, given China’s aggression toward Taiwan and the potential for a military invasion of the island.At the same time, China has increased its market share in less advanced chips that are still critical for cars, electronics and other products. The United States manufactures 12 percent of chips, though none of the world’s most advanced.Chip shortages during the pandemic forced factories to halt work and brought home in a tangible way how vulnerable the supply chain is to disruption. Workers at Ford Motor factories in Michigan and Indiana worked a full week just three times last year because of a chips shortage, Ms. Raimondo said in a speech at Georgetown University last week. That helped create a car shortage and raise the price of cars, stoking inflation.The Commerce Department says the program will also provide the Department of Defense and the national security community with a domestic source of the world’s most advanced chips.An Intel factory under construction in Arizona. The Biden administration unveiled the rules for its program to build up U.S. semiconductor research and manufacturing.Philip Cheung for The New York TimesBuilding chip hubsAccording to Ms. Raimondo, the goal is to build at least two U.S. manufacturing clusters to produce the most advanced types of logic chips, as well as facilities for other kinds of chips, and complex supply networks to support them.Commerce officials have declined to speculate where these facilities might be, saying they must review applications. But chip makers have already announced billions of dollars in plans for new investments around the United States.TSMC, which produces most of the world’s leading-edge chips, has been busy expanding in Arizona, while No. 2 Samsung is growing in Texas. Micron, which makes advanced memory chips, has announced big expansion plans in New York. And Intel, a U.S. technology giant that is investing heavily to try to capture a technological edge, has broken ground on a “megasite” in Ohio.Ms. Raimondo has said the vision is to restore the United States to a position of leadership in semiconductor technology, to the point where every major global chip company wants to have both research and manufacturing facilities in the United States.Still, there is skepticism about how much the program can do. One 2020 study, for example, found that a $50 billion investment in the industry would increase U.S. market share only to 14 percent.Protecting taxpayer fundsThe stakes are high for the Biden administration to prove this foray into industrial policy can work. Critics have argued that the federal government may not be the best judge of winners and losers. If the administration gets it wrong, it could face intense criticism.The Commerce Department said it would look closely at companies that applied for funding, to try to ensure that they were not being given more taxpayer dollars than they needed.In a decision that may irk some companies, the department said projects receiving grants would be required to share a portion of any unanticipated profits with the federal government, to ensure that companies gave accurate financial projections and didn’t exaggerate costs to get bigger awards.The Commerce Department also said it would dole out funding over time as companies hit project milestones, and give preference to those that pledged to refrain from stock buybacks, which tend to enrich shareholders and corporate executives by increasing a company’s share price.Companies are also barred from making new, high-tech investments in China or other “countries of concern” for at least a decade, to try to ensure that taxpayer money does not go to fund new operations in China.But analysts said it remained to be seen how difficult it would be to enforce these provisions. Company finances can be opaque, and when a company saves a dollar in the United States, it may then choose to invest it elsewhere.Helping workers by attaching big stringsThe program also includes some ambitious and unusual requirements aimed at benefiting the people who will staff semiconductor facilities.For one, the department will require companies seeking awards of $150 million or more to guarantee affordable, high-quality child care for plant construction workers and operators. This could include building company child care centers near construction sites or new plants, paying local child care providers to add capacity at an affordable cost or directly subsidizing workers’ care costs. Ms. Raimondo has said child care will draw more people into the work force, when many businesses are struggling in a tight labor market.Applicants are also required to detail their engagement with labor unions, schools and work force education programs, with preference given to projects that benefit communities and workers.Other provisions will encourage companies, universities and other parties to offer more training for workers, both in advanced sciences and in skills like welding. The department said it would give preference to projects for which state and local governments were providing incentives with “spillover” benefits for communities, like work force training, education investment or infrastructure construction.This is part of the Biden administration’s “worker-centered” approach to economic policy, which seeks to use the might of the federal government to benefit workers. But some critics say it could put the program’s goal of building the most advanced semiconductor factories at risk, if it adds excessive costs to new projects. More

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    Pandemic Aid Cut U.S. Poverty to New Low in 2021, Census Bureau Reports

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    A measure that accounts for all federal subsidies also showed a reduction of almost half in the number of children below the poverty level.A second year of emergency pandemic aid from the federal government drove poverty to the lowest level on record in 2021 and cut the number of poor children by nearly half, the Census Bureau reported on Tuesday.The poverty rate fell to 7.8 percent, down from 9.2 percent the previous year, according to the Supplemental Poverty Measure, a yardstick that includes wages, taxes and the fullest account of government aid. In addition, the share of children in poverty sank to another record low of 5.2 percent, down 4.5 percentage points from 2020, a sharp acceleration of a long-term trend. In large part, those changes reflect the trillions of stimulus dollars approved by Congress, culminating in the Democrats’ American Rescue Plan of March 2021, especially the expanded child tax credit, which temporarily provided an income guarantee to families with children.Real median household income reached $70,800, not significantly different from 2020, as increases in full-time employment were offset by rising inflation and decreases in unemployment insurance, which had been supplemented above normal levels through the summer of 2021. The “official” poverty rate, generally considered outdated because it omits hundreds of billions spent on programs like tax credits and housing assistance, also did not change significantly from the previous year.How Poverty Has DecreasedThe official poverty rate was 11.6 percent last year, but the supplemental rate — which accounts for the impact of government programs — fell to 7.8 percent.

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    Share of the population living in poverty
    The supplemental rate adjusts for geographic differences. It also includes wage income, taxes and the fullest account of government aid.Sources: Census Bureau; Columbia UniversityKarl RussellThis data covers a year that was profoundly influenced by a set of emergency programs that have largely expired. Since then, many families have again found themselves under financial strain.Progressives see the reduction in poverty — even if temporary — as evidence that the federal government has the power to give people a better standard of living and that it should continue to do so in the future.“Man, I’m just grinning ear to ear,” said Luke Shaefer, who runs a center on poverty at the University of Michigan and sees the expanded child tax credit as a blueprint for a permanent program. “Americans wonder if the government can shape successful policies that address poverty. This offers incontrovertible evidence that it can.”Inflation F.A.Q.Card 1 of 5What is inflation? More

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    What Will Happen to Black Workers’ Gains if There’s a Recession?

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    Black unemployment fell quickly after the initial pandemic downturn. But as the Federal Reserve fights inflation, those gains could be eroded.Black Americans have been hired much more rapidly in the wake of the pandemic shutdowns than after previous recessions. But as the Federal Reserve tries to soften the labor market in a bid to tame inflation, economists worry that Black workers will bear the brunt of a slowdown — and that without federal aid to cushion the blow, the impact could be severe.Some 3.5 million Black workers lost or left their jobs in March and April 2020. In weeks, the unemployment rate for Black workers soared to 16.8 percent, the same as the peak after the 2008 financial crisis, while the rate for white workers topped out at 14.1 percent.Since then, the U.S. economy has experienced one of its fastest rebounds ever, one that has extended to workers of all races. The Black unemployment rate was 6 percent last month, just above the record low of late 2019. And in government data collected since the 1990s, wages for Black workers are rising at their fastest pace ever.Now policymakers at the Fed and in the White House face the challenge of fighting inflation without inducing a recession that would erode or reverse those workplace gains.Decades of research has found that workers from racial and ethnic minorities — along with those with other barriers to employment, such as disabilities, criminal records or low levels of education — are among the first laid off during a downturn and the last hired during a recovery.William Darity Jr., a Duke University professor who has studied racial gaps in employment, says the problem is that the only reliable tool the Fed uses to fight inflation — increasing interest rates — works in part by causing unemployment. Higher borrowing costs make consumers less likely to spend and employers less likely to invest, reducing pressure on prices. But that also reduces demand for workers, pushing joblessness up and wages down.“I don’t know that there’s any existing policy option that’s plausible that would not result in hurting some significant portion of the population,” Mr. Darity said. “Whether it’s inflation or it’s rising unemployment, there’s a disproportionate impact on Black workers.”In a paper published last month, Lawrence H. Summers, a former Treasury secretary and top economic adviser to Presidents Bill Clinton and Barack Obama, asserted with his co-authors that the Fed would need to allow the overall unemployment rate to rise to 5 percent or above — it is now 3.5 percent — to bring inflation under control. Since Black unemployment is typically about double that of white workers, that suggests that the rate for Black workers would approach or reach double digits.In an interview, Mr. Summers said that outcome would be regrettable and, to some extent, unavoidable.“But the alternative,” Mr. Summers argued — “simply pretending” the U.S. labor market can remain this hot — “is setting the stage for the mistakes we made in the 1970s, and ultimately for a far larger recession, to contain inflation.”The State of Jobs in the United StatesEmployment gains in July, which far surpassed expectations, show that the labor market is not slowing despite efforts by the Federal Reserve to cool the economy.July Jobs Report: U.S. employers added 528,000 jobs in the seventh month of the year. The unemployment rate was 3.5 percent, down from 3.6 percent in June.Slow Wage Growth: Pay has been rising rapidly for workers at the top and the bottom. But things haven’t been so positive for all professions — especially for pharmacists.Care Worker Shortages: A lack of child care and elder care options is forcing some women to limit their hours or has sidelined them altogether, hurting their career prospects.Downsides of a Hot Market: Students are forgoing degrees in favor of the attractive positions offered by employers desperate to hire. That could come back to haunt them.“These arguments have nothing to do with how much you care about unemployment, or how much you care about the unemployment of disadvantaged groups,” he continued. “They only have to do with technical judgment.”Many progressive economists have been sharply critical of that view, arguing that Black workers should not be the collateral damage in a war on inflation. William Spriggs, an economist at Howard University, cautioned against overstating the Fed’s ability to bring inflation under control — especially when inflation is being driven in part by global forces — and underestimating the potential damage from driving interest rates much higher.Black workers will suffer first under a Fed-induced recession, Mr. Spriggs said. When that happens, he added, job losses across the board tend to follow. “And so you pay attention, because that’s the canary in the coal mine,” he said.In a June 2020 essay in The Washington Post and an accompanying research paper, Jared Bernstein — now a top economic adviser to President Biden — laid out the increasingly popular argument that in light of this, the Fed “should consider targeting not the overall unemployment rate, but the Black rate.”Fed policy, he added, implicitly treats 4 percent unemployment as a long-term goal, but “because Black unemployment is two times the overall rate, targeting 4 percent for the overall economy means targeting 8 percent for blacks.”The Fed didn’t take Mr. Bernstein’s advice. But in the years leading up to the pandemic, Fed policymakers increasingly talked about the benefits of a strong labor market for racial and ethnic minorities, and cited it as a factor in their policy decisions.After Mr. Biden took office, he and his economic advisers pushed for a large government spending bill — which became the $1.9 trillion American Recovery Plan — in part on the grounds that it would avoid the painful slog that job seekers, particularly nonwhite workers, faced after the 2007-9 recession and would instead deliver a supercharged recovery.Federal pandemic relief provided a cushion for Ms. Jordan, at her home near Atlanta with her husband and children. Rita Harper for The New York Times“It’s been faster, more robust for African Americans than any other post-recessionary periods since at least the 1970s,” Cecilia Rouse, the chair of Mr. Biden’s Council of Economic Advisers, said in an interview. Black workers are receiving faster wage gains than other racial and ethnic groups, and have taken advantage of the strong job market to move into higher-paying industries and occupations, according to an analysis of government data by White House economists shared with The New York Times.Menyuan Jordan is among them. Ms. Jordan, who has a master’s degree in social work and was making a living training child care providers in February 2020, saw her livelihood upended when Covid-19 struck.“The money was based off face-to-face professional development that went to zero almost immediately overnight,” she said. “I couldn’t afford the rent.”But pandemic relief packages from the federal government helped cushion the blow of lost earnings. And by last winter, Ms. Jordan had landed a job as a mental health clinician near her home in Atlanta — one that offered training and paid roughly $13,000 more than her prepandemic role, which she estimates brought in $42,000 annually.Administration officials say they are optimistic that Black workers can continue to see higher wages and improving job opportunities even if the labor market cools. But Goldman Sachs analysts, echoing a common view, recently concluded that average wage gains for workers would need to fall much further to be consistent with the Fed’s inflation goals.Fed policymakers are still somewhat hopeful that they can bring down inflation without causing a recession or undoing the gains of the past two years, in part because of a hope that the labor market can slow down mainly through reductions in job openings rather than layoffs.Jerome H. Powell, the Fed chair, has made the case that only by bringing inflation under control can the central bank create a sustainably strong labor market that will benefit all workers.“We all want to get back to the kind of labor market we had before the pandemic,” Mr. Powell said in a news conference last month. “That’s not going to happen without restoring price stability.”Some voices in finance are calling for smaller and fewer rate increases, worried that the Fed is underestimating the ultimate impact of its actions to date. David Kelly, the chief global strategist for J.P. Morgan Asset Management, believes that inflation is set to fall considerably anyway — and that the central bank should exhibit greater patience, as remnants of pandemic government stimulus begin to vanish and household savings further dwindle.“The economy is basically treading water right now,” Mr. Kelly said, adding that officials “don’t need to put us into a recession just to show how tough they are on inflation.”Michelle Holder, a labor economist at John Jay College of Criminal Justice, similarly warned against the “statistical fatalism” that halting labor gains is the only way forward. Still, she said, she’s fully aware that under current policy, trade-offs between inflation and job creation are likely to endure, disproportionately hurting Black workers. Interest rate increases, she said, are the Fed’s primary tool — its hammer — and “a hammer sees everything as a nail.”Reflecting on a dinner she recently attended in Washington with “really high-level, all-white progressive economists,” Ms. Holder, who is Black, said there was a “resigned attitude” among many of her peers, who want positive near-term outcomes for people of color overall but remain “wedded to the use of mainstream tools” and ask, “What else can we do?”Mr. Darity, the Duke professor, argued that one solution would be policies that helped insulate workers from an economic downturn, like having the federal government guarantee a job to anyone who wants one. Some economists support less ambitious policies, such as expanded benefits to help people who lose jobs in a recession. But there is little prospect that Congress would adopt either approach, or come to the rescue again with large relief checks — especially given criticism from many Republicans, and some high-profile Democrats, that excessive aid in the pandemic contributed to inflation today.“The tragedy will be that our administration won’t be able to help the families or individuals that need it if another recession happens,” Ms. Holder said.Morgani Brown, 24, lives and works in Charlotte, N.C., and has experienced the modest yet meaningful improvements in job quality that many Black workers have since the initial pandemic recession. She left an aircraft cleaning job with Jetstream Ground Services at Charlotte Douglas International Airport last year because the $10-an-hour pay was underwhelming. But six months ago, the work had become more attractive.Morgani Brown returned to an employer she had left in Charlotte, N.C., when the hourly pay rose. Damola Akintunde for The New York Times“I’d seen that they were paying more, at $14,” she said, “so I went and applied for Jetstream again.” She remains frustrated with some work conditions, but said the situation had “ended up being better.”With rents rising, she saves money rooming with her boyfriend and another friend, both of whom work at an Amazon fulfillment center. Ms. Brown, who has a baby on the way, is aware that the e-commerce giant has recently cut back its work force. (An Amazon official noted on a recent earnings call that the company had “quickly transitioned from being understaffed to being overstaffed.”)Ms. Brown said she and her roommates hoped that their jobs could weather any downturn. But she has begun hearing more rumblings about people she knows being fired or laid off.“I’m not sure exactly why,” she said. More

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    Economic Aid, Once Plentiful, Falls Off at a Painful Moment

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    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

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    Prosecutors Struggle to Catch Up to a Tidal Wave of Pandemic Fraud

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    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