Economy

California is the Poster Child for Unemployment Dysfunction

Written by Juan Sebastian Fragozo

Under Gov. Newsom, California has had major problems with its unemployment system. The safety net system was already stretched thin, and now with the ongoing pandemic, the State simply ran out of money and had to borrow from the Federal government in order to keep the benefits going. The problem goes deeper, apart from the debt incurred by the State, there are also fake unemployment claims. 

An “Invisible tax” is what Stanford economist Mark Duggan says in reference to fraud unemployment claims. Social Security is run by the federal government and deducted directly from the worker’s paychecks, but each state oversees its own unemployment system, funded by employer taxes. The system is not running appropriately, and people taking advantage of the system during these troubling times is a big problem.

California has paid out millions in false unemployment claims, even sending money to crime syndicates overseas and prison inmates in multiple states.

So far, lawmakers from both parties are proposing limited reforms, but none of the proposals address the underlying tax system at the agency controlled by the governor. 

“This could end up being the single worst financial scandal in the history of California government. But the irony is it’s so big and so sprawling, it’s difficult for voters to understand,” said Dan Schnur, a professor at the University of Southern California and UC Berkeley and a Republican Campaign Veteran. 

 

Photo via ABC 7