California’s unemployment insurance program lost approximately $32 billion to fraud during COVID-19. Sacramento assigned two state employees to investigate. Chris Rufo, senior fellow at the Manhattan Institute, says that wasn’t negligence. It was a rational response to the incentive structure, because the fraud pays the people in charge.
Key Facts
• ~$32 billion was stolen from California’s EDD unemployment program during COVID-19, documented by the California State Auditor and the U.S. Department of Labor Office of Inspector General.
• Two state employees were assigned to oversee fraud statewide while EDD paid out billions in claims each week.
• Gavin Newsom has been California’s governor since January 2019, the period Rufo identifies as when the state became, in his words, “a big fat target.”
• Tennessee rapper “Nuke Bizzle” was arrested only after releasing a music video demonstrating his fraud methods in detail; federal prosecutors cited the video as evidence in court.
• Rufo identifies a money chain: fraudulent IHSS caregiver enrollments inflate union membership rolls, generating dues that flow to California Democratic campaigns.
• Enforcement is broken at every stage: most fraudsters aren’t caught, caught ones typically aren’t charged, and those convicted rarely serve meaningful time.
The Rest of the Story
How the Machine Works
California’s In-Home Supportive Services program automatically enrolls home care workers in public sector unions. When fraud inflates IHSS caregiver headcounts, union dues increase. Those dues fund California Democrats, the same politicians who control EDD oversight.
Rufo frames it as a direct pipeline: “taxpayers, fraud schemes, unions, politicians.” Every link in that chain has a financial interest in the pipe staying open.
The Immunity Chain
Most EDD fraud goes unprosecuted. California’s criminal justice system, under the same political management as EDD, provides the final protection. Fraudsters who are caught aren’t charged. Those charged aren’t convicted. Those convicted don’t serve time.
The result is a system that carries almost no risk for fraudsters. That’s not a failure of capacity. It’s a predictable outcome of who controls the enforcement mechanism.
The Nuke Bizzle Problem
The sharpest illustration of California’s enforcement failure is “Nuke Bizzle,” a Tennessee rapper caught defrauding EDD only after he released a music video walking through his exact method. California’s two fraud investigators didn’t identify him. He handed federal prosecutors the evidence himself.
That’s the enforcement standard Newsom’s administration produced for a program paying out billions per week.
Commentary
Madison wrote in Federalist No. 51 that “ambition must be made to counteract ambition,” that government requires competing interests watching each other. In California, one party controls the benefit distribution, the fraud investigation, the prosecution, and the campaign accounts that receive downstream dollars. The counterweight Madison described doesn’t exist.
Federalist No. 57 argues that elected officials remain bound to their constituents through ambition, duty, and interest. In California, those incentives run backward. Newsom’s political base profits from the fraud machine. His interest is served by its continuation, not its correction.
Hamilton wrote in Federalist No. 70 that a unified executive provides clear accountability. One governor. One EDD. Two investigators. The accountability is clear. What’s missing is a competing force willing to enforce it.
The Bottom Line
California taxpayers aren’t funding a welfare program that occasionally fails. They’re funding a system that converts their money into political power for the people who run it. As Rufo puts it: when the people with the levers of power benefit from the system, the system does not change.
Source: New York Post, May 20, 2026
