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Rampant Fraud Plagues Obama Stimulus Programs
11.04.09

NH Congressional Democrats Encourage More of the Same

by Penny Wise
 
All parents hope their children will someday be able to purchase a home. But as young as age four? Fraud in the Obama administration’s First-Time Homebuyer Credit program has gone unchecked, costing U.S. taxpayers hundreds of millions of dollars.
 
The First-Time Homebuyer Credit under the American Recovery and Reinvestment Act of 2009 is an $8,000 tax credit available to taxpayers who have purchased a primary residence. Taxpayers cannot have owned a primary residence during the three years prior to the purchase and they must live in the residence for 36 months to keep the credit. The IRS Inspector General found that “key controls were missing to prevent an individual from erroneously or fraudulently claiming the Credit and receiving an erroneous refund of up to $8,000.”
 
Children four years old have claimed, and the Internal Revenue Service has approved, the $8,000 First-Time Homebuyer Credit. The IRS Inspector General reports that 500 taxpayers under the age of 18, children contractually ineligible to own real estate, have claimed almost $4 million in First-Time Homebuyer Credits.
 
More than 19,300 electronically filed 2008 tax returns claimed the credit at a cost of at least $139 million, even though a primary residence had not been purchased. The IRS assumed that the purchases would be made at some point in the future and paid the credit. Almost 74,000 taxpayers claimed the credit at a cost of at least $500 million, even though there was evidence they had owned a primary residence within the past three years. And more than 3,200 credits were given to resident aliens, who are ineligible to receive the credits, for a total of about $21 million.
 
A sensible person would look at this abuse and let the First-Time Homebuyer Credit expire, even without considering the actual cost of the credit. Economists at the Brookings Institute estimate that the $8,000 credit “equates to a cost to the taxpayer of $43,000 per home,” because the credit is being used by many home-buyers who had already planned to buy a home.
 
Not surprisingly, Democrats in Congress—including New Hampshire Senator Jeanne Shaheen and Representatives Carol Shea-Porter and Paul Hodes—have joined President Obama in looking at flawed stimulus programs in a much different way.
 
Instead of letting the credit expire, House and Senate Democrats have agreed to “expand a popular $8,000 credit for homebuyers, despite a recent government report on extensive mistakes and fraud in the program.” This time the credit “no longer would be limited to first-time buyers; people who have owned a home for at least five years could get a $6,500 credit on a new residence. Income limits for eligibility would be raised, making many more people qualify.” Expanding the credit will cost an additional $11 billion on top of the $10 billion already spent!
 
Don’t think that fraud, waste, error, and abuse stops with the First-Time Homebuyer Credit. While President Obama specifically cautioned members of his administration to spend funds from the Recovery Act responsibly, federal departments, in a rush to spend as much as fast as they can, are ignoring the president’s directive.
 
The Washington Post estimates that “33 federal departments and agencies have awarded more than $1.2 billion in stimulus contracts to at least 30 companies that are ranked by one watchdog group as among the most egregious offenders of state and federal laws. Government records show that as a group, these contractors have sold defective products, manufactured safety tests, submitted false travel claims and padded contracts with fraudulent fees.“ USA Today reports that “The Department of Defense has awarded nearly $30 million in stimulus contracts to six companies while they were under federal criminal investigation on suspicion of fraud.”
 
This is not the end of fraud, waste, error, and abuse with the massive government spending championed by President Obama and the Democrats in Congress. And, unfortunately, it is probably not even the end of the beginning, because with just under $159 billion in federal contracts, grants, and loans already spent under the Recovery Act, there is another $628 billion to go…or waste, depending on how you look at it.

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