# A Major Problem with Big Government

By: Ian Campbell | Fri, Sep 23, 2011

An article last Wednesday titled 'Billions in Unemployment Benefits Paid In Error' - reading time 3 minutes - reports that in the U.S., in the three year period ended June 30, nearly \$19 billion in state unemployment benefits were paid in error. That is 19,000 million dollars. Prior to discussing this in the context of the referenced article, let me revisit just how much 19,000 million dollars is.

In the past few years people have heard, and read, media talking heads and writers 'throw around' the words 'trillion' and 'billion' so many times they have become commonplace. Much of the 'shock value' either of those words would have brought to a newscast or an written article only, say, 15 - 20 years ago has been lost.

A million dollars is a number that is much easier for most people in a developed country to relate to, although even a million dollars has lost its 1970's (and prior) meaning. To once again put a million, a billion, and a trillion into perspective, if one travelled 1 million miles, they would have circumvented the Earth approximately 40 times. If one travelled 1 billion miles, they would have circumvented the Earth 40,000 times. If one travelled 1 trillion miles, that person would have circumvented the Earth 40 million times.

To relate those calculations to the above noted reported 'paid in error' U.S. state unemployment benefits, 19 billion is a number equivalent to circumventing the Earth 760,000 times. One billion is a colossal number. Don't let anyone convince you otherwise.

There are currently about 330 million men, women and children living in the United States. This one reported 'element of wasted dollars' is equal to approximately \$630 for every one of those men, women and children. This reported 'error' is not a 'rounding error'. Did the referenced article review the 'error' in such a quantified way? No, it simply:

• reported that the so-called error represents more than 10% of jobless benefits paid during that three year period;

• reported the Workforce Development Commissioner of Indiana - the State reported as having the highest error rate - as saying that 'the differences in error rates stem from variations in state programs' (which is, of course, quite different from saying there were no errors);

• quoted that same Commissioner as saying, when questioned about Illinois' apparent 43% 'error rate payments', "To characterize it as waste, fraud and abuse is just manipulative," Mr. Everson said. "There's no way in the world you could cut the 43% of people off"; and,

• reported a U.S. Labor Department comment that simply said "it may be misleading to compare one state's payment accuracy rates with another state's rates... States with stringent or complex provisions tend to have higher improper payment rates than those with simpler, more straightforward provisions".

I think that errors such as the one reported become less acceptable as government budgets get ever tighter. I leave it to you to agree or disagree.

## Author: Ian Campbell

Ian R. Campbell, FCA, FCBV
Economic Straight Talk

Through the Economic Straight Talk Newsletter Ian R. Campbell shares his perspective on the world economy, the financial markets, and natural resources. A recognized business valuation authority, he founded Toronto based Campbell Valuation Partners (1976), Stock Research Portal (2007) a source of resource companies market data and analytic tools, and Economic Straight Talk (2012). The CICBV* annually funds business valuation research in his name**. Contact him at icampbell@srddi.com.
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