Experts Warn Bipartisan Infrastructure Deal Could Slash Unemployment Benefits

The bipartisan infrastructure deal that President Joe Biden touted in front of the White House on Thursday contains a proposed funding mechanism that experts fear could unjustly strip unemployment benefits from jobless workers under the guise of combating fraud.

A White House fact sheet on the new agreement lists "unemployment insurance program integrity" as one of the $579 billion plan's pay-fors, alongside other funding sources that critics say amount to an infrastructure privatization scheme. The bipartisan group of senators that struck the deal with Biden reportedly believes $80 billion in revenue can be derived from a crackdown on unemployment fraud.

"It's the fraud. It's the fraud from UI," Sen. Jeanne Shaheen (D-N.H.), a member of the bipartisan group, said in an interview with Business Insider. "Apparently, there are several reports that talk about significant fraud in the UI."

Shaheen may have been referring to a recent Axios story suggesting that "unemployment fraud during the pandemic could easily reach $400 billion." But analysts panned that reporting as "unbelievably shoddy" and likely a major overestimate, noting that the only source Axios cites for the figure is the CEO of an anti-fraud company.

In a series of tweets on Thursday, Andrew Stettner of the Century Foundation cautioned that past attempts to root out supposed unemployment fraud "have led to terrible fiascoes and wrongful accusations."

Stettner pointed to a 2017 investigation in Michigan showing that the state's Unemployment Insurance Agency falsely accused tens of thousands of people of committing fraud--a 70% error rate--and hit them with draconian penalties, including wage garnishment and seizure of income tax refunds.

Experts say the major issue is that people frequently make honest errors as they attempt to navigate byzantine application processes, resulting in unjustified claims of conscious fraud and abuse. In Indiana and other states across the U.S., those who made mistakes on their applications are being forced to pay back benefits plus a hefty fine.

"Remember, the only way to save money is to stop fraud or recoup benefits, and without protections a lot of workers who made mistakes or were confused by ever changing rules could be forced to pay back thousands of dollars," Stettner warned. "Congress needs to focus on fixing the UI system not obsessing about fraud."

With no legislative text written, it's unclear how the bipartisan group's proposed UI "integrity" program will operate. But Nathan Tankus, research director of the Modern Money Network, said the proposal effectively amounts to "cutting unemployment insurance for infrastructure."

The bipartisan infrastructure framework--which doesn't include any taxes on wealthy individuals or large corporations--comes as 25 Republican-led states and Louisiana are prematurely cutting off pandemic-related federal unemployment benefits, including a $300 weekly boost aimed at helping jobless workers weather the economic crisis.

The Biden administration has thus far refused to intervene, despite being required under federal law to continue providing certain emergency benefits regardless of states' actions.

Now, in addition to the proposed UI "integrity" effort, senators and the White House are aiming to use the unspent unemployment benefits to help fund infrastructure projects.