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Unemployment/Stimulus check

Why Stimulus For The Dead Might Not Have Been So Bad

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The way my mind works stimulus checks going to dead people had me first thinking about zombie movies. My second thought was about a fellow I knew who said his estate plan would be to bounce his last check. He would have had to come back. But with the Wall Street Journal, the Washington Post and the New York Times

NYT
taking it seriously, I thought it would be good to take a look at the GAO report that is causing all the fuss.

Bayoneting The Wounded

For context it is indicated that the report is on an audit.

We conducted this performance audit from March 2020 to June 2020 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

So who is doing the work?

Auditors wishing to work for the GAO are required to hold an undergraduate or graduate degree. This must include 24 semester hours or the equivalent of accounting classwork.

One of the jokes about auditors is that they are the people who come in after the battle is over to bayonet the wounded. I generally deplore the use of military metaphors by accounting professionals, who will rarely experience anything in their job that could be characterized as hardship, but I kind of like that one. It is a good metaphor for how the coverage is headlined like Richard Rubin’s “IRS Paid $1.4 Billion in Stimulus Payments to Dead People, GAO Report Says

More Nuanced

The GAO report actually paints a more nuanced picture. The initial legal interpretation was that dead people were supposed to be getting the payments. The first three payment batches were done under that assumption that dead people were not excluded.

According to IRS officials, an IRS working group charged with administering the payments first raised questions with Treasury officials about payments to decedents in late March as Congress was drafting legislation. IRS counsel subsequently determined that IRS did not have the legal authority to deny payments to those who filed a return for 2019, even if they were deceased at the time of payment. IRS counsel further advised that the agency should exercise discretion provided for in the CARES Act to apply the same set of processing rules to recipients who had filed a 2018 return but not yet a 2019 return. IRS officials said on the basis of this determination they did not exclude decedents in their programming requirements.”

That first three batches accounted for 72% of the payments.

There is more in the report on how Treasury should have access to the same Social Security Death records that IRS has. Now I am all for privacy, but I am pretty sure death records are almost universally public (The details of death certificates are sealed in some states as I learned in my JD Salinger coverage.) Integrating those sorts of records to make for proper tax and financial administration should be fine.

The Army You Have

A friend of mine who also deplores war metaphors to describe things that are not, you know, war has made an exception for the overall response to the Covid-19 crisis.

Chris Boetig has worked for the Army one way or the other – uniform, contractor, DOD civilian- for his entire adulthood.

Chris is a veteran of the first Gulf War. His final job in uniform after a tour on the faculty at the Command and General Staff School was XVIII Airborne Corps Aviation plans officer.

Chris sees the Covid-19 response as akin the problems military planners ponder in response to major mobilization crises. One of the constraints, reflected in a remark attributed to Donald Rumsfeld, is that they go to war with the Army that they have. Chris wrote me:

Interesting as on facebook my old boss is going ballistic about the NYTs article which apparently is an expose on the checks sent to dead folks.

Looking at the recommendations, GAO has a good recommendation but based on the % error does not appear to be all worked up about it.

Remember what I said about efficiency versus effectiveness especially with a brand new program. What was better in early April?  Getting money quickly into the hands of people and accept errors (effective) or do it absolutely correctly and have the people wait till May?  People of honor can be valid on both sides of the fence but you cannot have it both ways.

The IRS

Overall I think the IRS did a pretty good job particularly given that they went into this “war” with Vietnam War era software as you can see in this article by Tom Temin in Federal News Network earlier this year. Not to mention a huge headcount reduction in the aftermath of the interminable “scandal”.

GAO seems to be concerned about them chasing the erroneous stimulus payments, but given that many of them went to widows and orphans, I think that should be a low priority.

Bottom line is that when Congress wanted money shoveled out quickly IRS thought fast and made mistakes which in retrospect was absolutely the right thing to do.

Paycheck Protection

The report also highlights the fact the fact that the half trillion shoveled out by the Treasury and SBA to protect paychecks did not have much in the way of systems to prevent fraud. Shocking. Next thing you know we will find that there was gambling at Rick’s.

Other Views

Kelly Erb on Taxgirl.com covered the practical issues that we the living might face when we get checks for the dead back on May 6.

I was somewhat pleased to find that I am not, as sometimes happens, alone in my view. On Slate, Jordan Weissman has Who Cares if the IRS Sent Stimulus Checks to Dead People?

The real headline here should really be that the government did its job pretty well. When Congress passed the CARES Act, many were worried about how quickly the government could actually get money out the door. But within two weeks, the IRS had managed to deliver 80 million payments electronically. Its speed is part of the reason that poorer households were able to start spending normally again by May despite an unemployment rate rivaling the Great Depression’s….

It’s not a mystery why some journalists prioritize their coverage this way. “Dead guy gets money” is the kind of basic, nonpartisan shoe-leather story that a lot of beat reporters are conditioned to write. It’s scoopy, and in some cases, it is indeed important for public accountability purposes. But without proper context, it creates an appearance of deep bureaucratic incompetence where none exists and makes politicians less likely to back the kind of fast, decisive rescue actions that the economy needs to survive right now.”



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