One year later, the U.S. government has spent $6 trillion to provide relief from the coronavirus pandemic.

Of that total, $37 billion was spent on Operation Warp Speed’s development of several vaccines. The vaccines are the main benefit that Americans will receive out of $6 trillion of COVID relief spending. That’s because once enough Americans have been vaccinated, the threat of the coronavirus will dissipate. Life can and will go back to normal.

The Operation Warp Speed vaccines, therefore, account for 0.6% of the total cost of COVID pandemic relief, but the lion’s share of the benefits for Americans.

Where Did the Other 99.4% of the Money Go?

By and large, most of the other money goes to cover the cost of mistakes made by state and local politicians. Specifically, because of the lockdown measures they adopted.

The lockdowns they mandated cost millions of people their jobs. The lockdowns they imposed wrecked entire industries. The lockdowns they promised would save lives, but which have yet to show they have, despite having had a year to prove it. The lockdowns require a massive bailout by the federal government to cover the cost of their ongoing damage.

In trying to compensate for those mistakes, the federal bailout has been wasteful. More than $200 billion is suspected to have been lost to unemployment fraud. If you dig deeper, as in California, you find state government bureaucrats enabled that fraud on a massive scale. Multiplied across the nation, unemployment fraud has been five times more costly than the entire cost of the Operation Warp Speed vaccine program.

But there’s more to wasteful spending than just fraud.

The Scale of Spending and Waste

The Foundation for Economic Education’s Brad Polumbo describes the scale of the federal government’s COVID spending and where it is being spent with the least benefit:

The sheer immensity of this spending is hard to grasp. For context, $6 trillion is more than one-fourth of what the US economy produces in an entire year, according to Fox Business. The COVID spending blowout is at least eight times bigger than the (inflation-adjusted) price tag of President Franklin Delano Roosevelt’s “New Deal.”

Moreover, the COVID spending bills have all lost huge sums of money to unrelated carve-outs, politician pet projects, corporate bailouts, fraud, waste, and worse.

In the latest $1.9 trillion package, more than 90 percent of the spending is not directly related to containing COVID-19. Only 1 percent of the money, about $15 to $20 billion, is spent on vaccines. Meanwhile, hundreds of billions go to bailing out poorly managed state governments’ budget holes that predate the pandemic and $86 billion rescues failing pension plans. Meanwhile, billions more go to Obamacare expansion and subsidizing public schools long after the pandemic.

And that’s just scratching the surface.

Polombo estimates the federal government’s $6 trillion in COVID spending could have $18,181 checks for each individual American. How much did you and the rest of the members of your household receive in COVID aid and benefits?

If it’s less than $18,181 per person in your household, you’ve been shafted. Much of the money your household isn’t getting is benefiting the people who did the most damage requiring relief. Shouldn’t we get accountability from them in return for the disproportionate rewards they are now receiving for their lockdowns?

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That’s why the holiday-timed arrival of Senator Rand Paul’s annual Festivus Report is such a pleasure. Its arrival begins with the Senator’s announcement of the traditional Festivus airing of grievances via Twitter.

And takes off from from there! The 2020 edition of the Festivus Report counts some $54.7 billion worth of wasteful government spending.

2020’s Top 10

Here’s my top ten weird government spending line items from this year’s report:

• $1.3 million to study whether crickets, and products made from crickets, are safe for humans to eat.
• $900,000 to give cigarettes to adolescent kids to test their reactions to different levels of nicotine.
• $3.1 million to interview San Franciscan baby boomers about their edible cannabis use.
• $2.0 million to see if sitting in hot tubs three times a week for ten weeks can lower stress.
• $3.5 billion for things and services the Department of Veterans Affairs ordered, often years ago, but never received.
• $1.6 million to X-ray lizard joints as they walk on a treadmill.
• $2.1 million to develop a wearable headset to capture the sound of a person chewing to monitor their eating behavior.
• $10.5 million for test tubes that really turned out to be plastic preforms used for making 2-liter soda bottles.
• $217 million to provide the bureaucrats of the Railroad Retirement Board with specialized, fast track customer service for their own retirement benefits.
• $2.8 million to research how to prepare mealworms for human and livestock consumption.

For 2021, I think we should all be concerned by the federal government’s increased interest in getting Americans to eat more insects.

Senator Paul’s own Top 10 list for 2020 can be found within the report.

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If it were, the total amount of taxpayer money lost to fraudulent unemployment claims in the state would total less than $1 billion. That’s a big number, but it is a small percentage of the $110 billion in pandemic unemployment benefits the state has paid out, one that seems below the threshold that would drive serious reforms to fix the state’s unemployment benefits system.

But now, the known scale of the fraud has ballooned. Bank of America is the financial institution that issues the debit cards providing unemployment benefits to individuals approved to receive them by California’s Employment Development Division (EDD). It estimates that over $2 billion in fraudulent claims have been filed, using 640,000 of its debit card accounts. The Los Angeles Times‘ Patrick McGreevey describes the findings of BofA’s investigation:

Bank of America estimated Monday that fraud in California’s unemployment benefits system could total $2 billion, and said it has identified 640,000 accounts with suspicious activity that should be investigated to determine whether they are bogus and should be shut down.

The bank, which has contracted with the state Employment Development Department to issue debit cards containing unemployment benefits, issued the warning in a letter to state legislators. It represents the highest estimate of fraud yet in a system that has paid $110 billion since the COVID-19 pandemic triggered a wave of joblessness in California beginning in March.

A bank official said red flags have been issued on claims filed in the names of infants, children and centenarians, as well as people living in states not contiguous to California.

“It is outrageous,” said Jon Coupal, president of the Howard Jarvis Taxpayers Assn. “We understand that there was an effort to push as much money into the economy as possible but there has got to be some controls. Here it is like they have opened up a bag of cash in the middle of a tornado and hoped that it ends up someplace where it is supposed to be.”

The massive extent of the fraud points to a complete breakdown of reasonable controls to prevent such crimes at the EDD. Specifically, it points to the failure of the management at the agency’s Labor and Workforce Development Agency, which operates California’s Pandemic Unemployment Assistance (PUA) program.

The scale of the problem appears to have derailed the immediate future career prospects of Julie Su, the appointed secretary of California’s Labor and Workforce Development Agency. She had been under consideration to become the U.S. Secretary of Labor, but that possibility now appears dead. Writing at Morning Consult, Tom Manzo weighs in on the (PUA) fraud disaster:

California’s Julie Su could be up for a big promotion. As Joe Biden assembles his cabinet in advance of January, she’s reportedly on a list of candidates to be labor secretary. But a look at Su’s recent track record should call her qualifications into question.

Under Su’s leadership, the state’s Labor and Workforce Development Agency—which handles the pandemic unemployment system—has experienced “the most significant fraud on taxpayer funds in California history.” Following months of delayed or unpaid unemployment insurance benefits, it’s come to light that the agency paid out almost $1 billion in fraudulent benefits to California prison inmates.

Unfortunately, this disaster looks like it was a long time coming. Su acknowledged that there were issues with the state’s unemployment insurance system back in April. She even took ownership of the problems: “I need to own the things that we are not doing right. We need to fix those things, we need to make sure that we are accurate, that we are timely and that we are providing services.” But it seems not enough was done to right the ship.

That piece was written on December 7, days before the official estimates of California’s pandemic unemployment fraud doubled to become a multi-billion example of government waste.

Now the question is, how long will it be before heads roll at California’s EDD? The magnitude of the breakdown of effective oversight and management demands a clean break with how things have been done there for years. It will take a full top-to-bottom housecleaning to right the troubled agency’s years-in-the-making problems of fraud and waste.

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Let’s test your skills. I’ve listed eight simple descriptions of things or groups that may or may not have been funded in recent years by U.S. taxpayers. Which of these items do you think are real, and which do you think are fake?

1. Cricket Lessons in Punjab, India
2. Comic Book Superheroes To Fight Extremism
3. High School Counselors in China
4. Hookers for Jesus
5. Peace Drums for Arab and Jewish Youth
6. Personalized Mobile Cooking App for K-8 STEM Education
7. Sex Education for Commercial Sex Workers in Ethiopia
8. Story Time at the Laundromat

I’ve written a lot about federal spending waste, and I’m pretty sure I’m not duplicating anything I might have covered before. I won’t guarantee that, however, because there are so many more examples.

If you’re game, in the comments section below submit your list of which things you think are real and which one you think can’t possibly be true. I’ll provide the answers to the challenge in the comments on Friday, October 30, 2020. Just in time to potentially scare you before Halloween!

This game is only for fun, and there are no prizes to win. If you think about it, if any one of these items is real, all of us have lost.

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You don’t have to take my word for it. The proof is in a picture from the statement itself. Meet the COVID-19 Leviathan of Federal Spending and Borrowing:

Before the pandemic struck, the U.S. government was on track to run its first trillion dollar deficit since 2012. COVID-19 nearly tripled that expected shortfall, impacting both spending and revenues. As you can see in the chart below, the enlarged shortfall is mainly because of spending.

The U.S. government’s spending was over $1.76 trillion higher than what was projected in February 2020. By contrast, its tax collections dipped almost $0.29 trillion lower than expected for the 2020 fiscal year. The total additional budget deficit because of COVID-19 in 2020 is $2.05 trillion, of which, increased spending accounts for 86 percent.

The swamp creatures of Washington, D.C., would like nothing better than to permanently ratchet up all that spending. Even if most of it goes to waste, they gain because they get more power. If they do, ordinary Americans can reasonably expect their taxes to go up, a lot. And they can expect to pay higher prices, because a lot of those tax hikes will be built into the cost of everything they buy.

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That may not be a bad thing.

Democrats, who control the House of Representatives, originally planned to spend $3 trillion more to replenish the relief pot and to fund a wishlist of new spending. They have recently lowered their new spending ask to somewhere between $2.0 and $2.4 trillion.

Republicans, who control the Senate and the White House, have proposed spending $1.3 trillion more. Their proposal prioritizes meeting the immediate relief needs of Americans who have become economically displaced because of the pandemic.

The main difference between the two proposals largely comes down to the House Democrats’ proposal to fund a bailout of state and local governments. Unfortunately, many of these governments have long been in fiscal trouble having nothing to do with the pandemic’s impact. Regardless, they would be rewarded with huge sums of cash under the guise of coronavirus relief.

What’s wrong with that?

The bailout proposal fails to force the worst-managed state and local governments to adopt sound fiscal policies. Without requiring serious reforms in return for funds, spendthrift state and local politicians have little incentive to face up to their deeper problems.

The only outcome guaranteed by the House bill’s approach to state and local government bailouts is that those who receive them will someday return for bigger bailouts. When they do, they will be looking to burden ordinary American taxpayers with the ever-growing cost of their fiscal failures. Again.

Writing at RealClearPolitics, OpenTheBooks’ Thomas W. Smith and Adam Andrzejewski have some thoughts on the proposed spending and bailouts:

Half a billion here. Half a billion there. The federal debt continues to explode. It has quadrupled in the last 20 years. Today, has surpassed $26.6 trillion and is rising rapidly. The deficit this year is unknown. It will be somewhere around $4 trillion, the equivalent of a wartime deficit. The entire federal debt in 1992—after 216 years, two world wars, depressions, countless natural disasters—was $4 trillion.

The Pelosi state bailout bill clearly screams, “So what? It’s not my money.” By the time our country’s debt becomes so corrosive to your livelihood, to your life, that it can’t be ignored—as it will—Pelosi and the big spenders in both major political parties will be long out of office.

In other words, federal, state and local government officials need more incentives to fix their fiscal problems.

Here is a thought. What if they could never escape the consequences of their actions in office unless they did?

Here is a modest proposal. Require state and local governments to put their public employee pension funds’ assets up as collateral in return for a federal bailout. Now, politicians and bureaucrats would no longer be able to leave their problems for others without risking the garnishment of their generous retirement packages in the future. Everlasting accountability will have arrived for them at last.

Sometimes, gridlock in Washington, D.C., is good. If today’s gridlock leads to strong fiscal reforms among state and local governments that puts them onto a sustainable fiscal path, it is worth it. If that goal is achieved by burdening politicians and bureaucrats without burdening American taxpayers, all the better.

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According to a Fresno Bee report, the Delta Conveyance Project is “an attempt to shore up the reliability of critically needed water deliveries to the south state while improving the fragile ecosystem of the Sacramento-San Joaquin Delta.” The tunnel project will “intercept the Sacramento River just south of the city, divert a portion of the water into an underground tunnel and pipe it directly to the pumps.” As the report notes, “some environmental groups agreed to consider the new plan, but the downsized project still faces considerable opposition.”

If taxpayers wonder about surging costs, they might look back at the original project.

The Unexpected Complexity of the California WaterFix Project Has Resulted in Significant Cost Increases, a report from California’s State Auditor published in 2017, pegged the planning costs alone at $280 million. The audit found that the state Department of Water Resources “did not follow state law when it replaced the program manager for the conservation and conveyance program.” The DWR selected the Hallmark Group “without advertising a request for qualifications,” and “the cost of DWR’s current contract with Hallmark has tripled from $4.1 million to $13.8 million.”

Consider also the new span of the San Francisco–Oakland Bay Bridge, which came in $5 billion over cost, ten years late, and riddled with safety issues. With original estimates at $1.3 billion, a final figure in the range of $30 billion for the Delta Conveyance Project is not out of the question. Taxpayers will be hard pressed to find a government project of this magnitude that came in under cost and on time. Meanwhile, the current pandemic has also failed to lock down spending on California’s vaunted high-speed rail project.

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Gov. Brown wanted two tunnels, but Newsom scaled it down to one. In January, Newsom issued a notice of preparation for the project, the first step in environmental review. As of June, the state Department of Water Resources “continues to advance the Delta Conveyance Project” and requested authorization for activities in the waters of the United States. The DWR website provides no cost estimates, and as KCRA reported in January, “state officials don’t know how much it will cost.” Taxpayers can find estimates in past tunnel activity. 

Gov. Brown’s two-tunnel plan would have cost in the region of $16 billion. The Public Policy Institute of California’s Water Policy Center wanted a single tunnel as a “grand compromise” but failed to nail down the total cost. A report from California’s State Auditor, The Unexpected Complexity of the California WaterFix Project Has Resulted in Significant Cost Increases, pegged the planning costs alone at $280 million as of June, 2017. The audit found that the state Department of Water Resources, “did not follow state law when it replaced the program manager for the conservation and conveyance program.” The DWR selected the Hallmark Group “without advertising a request for qualifications,” and “the cost of DWR’s current contract with Hallmark has tripled from $4.1 million to $13.8 million.”

The digging had not even started when the project hit corruption. More is doubtless in store, and total costs remains elusive. As a general rule, with government everything always costs more and takes longer. The new span of the Bay Bridge, for example, came in $5 billion over cost and ten years late. With the tunnel, costs are not the only issue.

“We anticipated that there might be an effort to employ a list of efficiency, conservation, and other measures to reduce dependence on a tunnel before moving forward on such a massive and environmentally harmful project,” Sierra Club California Director Kathryn Phillips told KCRA in January. “Now we’ll have to focus a lot of time and energy on battling the tunnel again.”

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