The White House has reportedly chosen to withdraw $400 million in funding that was set aside for states to upgrade their unemployment insurance systems.
What Happened: Congress originally designated these funds as part of the $1.9 trillion coronavirus relief package passed in 2021. The goal was to upgrade state unemployment systems, which had been overwhelmed during the pandemic, leading to significant fraud and delays in payments to beneficiaries, reported Axios.
Last week, the Labor Department informed Congress that the grants are being discontinued. The Department’s report revealed that about 28% of the funds allocated to states—amounting to $219 million—were dedicated to promoting equity. Axios mentioned that “equity” in this case refers to efforts aimed at making the unemployment insurance system more accessible and easier to navigate, rather than necessarily in the context of DEI.
“When I left in December, states had spent about $100 million of the $219 million specifically for equity but only $2 million of the $204 million for IT,” mentioned Andrew Stettner, who led the modernization efforts during the Biden administration.
Stettner stated that 18 states are presently working on updates to their systems. He warned that pulling this aid now could be disastrous for states just starting these projects.
The Labor Department defended the decision by telling Axios that the grants were “squandered” on “bureaucratic and wasteful projects that focused on equitable access rather than advancing access for all Americans in need.”
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Why It Matters: This decision by the Trump administration is a part of its goal to cut fraud and wasteful spending. Elon Musk, who stepped down on Wednesday, was spearheading these initiatives under the Department of Government Efficiency (DOGE).
During his time, DOGE claimed to save $160 billion by eliminating wasteful government spending. However, a recent analysis by the nonpartisan nonprofit agency, Partnership for Public Service (PSP), revealed that DOGE’s actions could cost taxpayers up to $135 billion this fiscal year.
The analysis included costs related to paid leave for federal employees, rehiring of wrongly dismissed workers, and lost productivity. The figure does not account for the costs of defending multiple lawsuits against DOGE’s actions or the estimated loss in tax collections resulting from IRS staff reductions.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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