By now, many of you will have received a payment from the government of up to $1,200 as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act passed by Congress in late March.
While it is tempting to phrase it as “free money from the government,” it should be pointed out that the government doesn’t have its own money. What it has is control over your money.
A better way to look at it is to picture the government taking out a credit card in your name with a $2 trillion line of credit. You just received a cash advance of $1,200; now where is the rest going? I am sure that you would like the government to spend that money wisely, seeing as it is you who must pay it back.
Legislative oversight is one tool to keep track of where that money goes. It usually consists of either a committee in the legislature that is given the job of tracking the money they have allowed the government to spend, and/or a person hired to track spending within a specific area or agency. These people are often given the title of “inspector general” and work for the president or governor.
For the CARES Act, $2.4 trillion is a lot of money to keep track of and there are a lot of moving parts to the act. This immense amount of money is a magnet for fraud or abuse. The last huge federal bailout was the Troubled Asset Relief Program (TARP), signed into law in 2008, and spending $416 billion to support failing banks and other lenders. The special inspector general for TARP over time identified dozens of cases of fraud and recovered hundreds of millions of taxpayer dollars, proving the value of oversight. The CARES Act is giving out five times as much money, much of it handed out quickly due to the severe nature of the crisis.
To protect that money, Congress wrote into the act three ways to watch over your money.
The first is a collection of 20 inspectors general from nine government agencies who will oversee the whole program. They will provide transparency to the relief paid out, as well as investigate possible fraud. The second is a special inspector general from the Treasury Department in charge of $500 billion in loans to large businesses. Finally, a five-person Congressional Oversight Commission, appointed by Democrat Nancy Pelosi and Republican Mitch McConnell, will have the ability to hold hearings to check in on how the money is being spent, but will not have power to force people to come to those meetings.
And there are already signs that taxpayer money is in jeopardy. For example, the oil company Diamond Offshore Drilling is just one example of dozens of drilling companies requesting hundreds of millions of dollars in relief funding. For Diamond Drilling, this included $9.7 million for bonuses to their top nine executives. Other large companies have taken advantage of the Paycheck Protection Program (PPP) that was designed to help small-business owners survive the stay-at-home orders by giving them money to keep their employees on the payroll. Public outcry over the decision to give funds to large corporations caused wealthy major businesses such as Ruth’s Chris Steak House and the L.A. Lakers to return millions of taxpayer dollars.
But there are signs that even smaller business owners are committing fraud. Georgia has accused Maurice Fayne, who owns a trucking company, of using PPP loans on personal gifts instead of giving the money to his employees. These gifts included a Rolex watch, diamond jewelry and a Rolls Royce, and added up to more than $1.5 million in taxpayer money. His lawyer blamed the program itself, saying, “There has been considerable confusion among small-business owners about PPP guidelines – particularly around the question of whether and how business owners are permitted to pay themselves a salary or take an owner’s draw. I hope these issues to be better fleshed out in the weeks and months to come.” At 880 pages long, the CARES Act is sure to be full of loopholes that people like Fayne are hoping to exploit.
As the rest of the CARES funds are passed out, it will become more necessary than ever to make sure that your money is well spent. There are a lot of individuals and companies demanding relief, and there will be some hard choices made. It is the purpose of oversight to protect as much of your money as possible. After all, it belongs to you.
(Aaron Blais teaches Honors Government at Exeter High School.)