California defaults on an $18.6 million federal debt. The citizens will pay for it
According to experts, California's recent decision not to pay back about $20 billion it borrowed from the federal government to cover unemployment benefits during the pandemic will fall on the shoulders of employers.
“ The state was expected to repay loans with COVID funds received from the government in 2021,” said Marc Joffe, a policy analyst at the Cato Institute, a public policy think tank based in Washington, DC, in a statement to the public. 'Epoch Times.
In the state's 2023-2024 budget proposal, $750 million was set aside to start paying off the loans, but Governor Gavin Newsom scrapped the provision in early January, leaving the state's businesses responsible for the loans , as mandated by federal rules – so that the federal unemployment contribution rate of 0.6% will increase by 0.3% annually starting in 2023 until the loan is repaid. An increase
“ California is not exactly an employer-friendly state ,” Joffe said. “ This thing will not make the difference between an open or closed company, but it is just another burden that adds to the many burdens that the State imposes on employers “.
In total, 22 states have borrowed money from the federal government for unemployment insurance. All but four states (California, Colorado, Connecticut and New York) have paid off their debts: California owes the most, with $18.6 billion as of May 2, followed by New York with $8 billion dollars, Connecticut with $187 million and Colorado with $77 million, according to US Treasury data.
Initially, the state used its reserves to pay for benefits, but after depleting its coffers it borrowed to cover expenses, analysts said.
Compounding the situation were unprecedented levels of fraud occurring across the state due to limited oversight and outdated computer systems, according to Lee Ohanian, an economics professor at the University of California-Los Angeles.
Analyst firm LexisNexis estimated the total cost of the frauds that occurred in California at $32.6 billion.
Investigations later found that the illicit unemployment benefit payments were made to convicted felons, with one address receiving 60 separate fraudulent payments.
Fraud has historically been a persistent problem with the program, and in 2013 a $2 million federal grant sought to address the problem with new computer systems.
The update managed to stop the fraud cases, but further improvements stalled with the grant's end in 2016, reportedly due to the agency's reluctance to shoulder the annual third-party service charge.
“They were wise and foolish,” Ohanian told The Epoch Times.
With an annual investment of $2 million, the program would have cost $14 million since it was discontinued.
"Unfortunately, it's a trifecta of bad decisions," Ohanian said. “The Department of Labor Development made the very bad decision not to renew the lease on the fraud detection software, the state government took out a loan and chose not to service the debt, which is outrageous, and now businesses are paying more taxes for the state government's incredibly careless decisions and mistakes.”
News that the state is seeking a pardon from the federal government has been met with resistance from policy pundits, including Ohanian.
“We have made many bad decisions and we expect the rest of the country to pay the price,” he said. “This also raises questions about the future: If the state is about to default on $20 billion in federal loans, how safe are California municipal bonds?”
So Americans also defraud, not just Italians…
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The article California defaults on $18.6 million in federal debt. The citizens will pay it comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/la-california-fa-default-su-un-debito-federale-da-186-milioni-lo-pagheranno-i-cittadini/ on Mon, 08 May 2023 08:00:13 +0000.