Fraction of Covid-19 Rental Assistance Reaches Tenants and Landlords (follow up to a post on June 11)

Just $1.5 billion of $47 billion is distributed through May 31 as local governments struggle to set up distribution programs

By Andrew Ackerman of The WSJ.

This is a follow up to the post Life is full of tradeoffs, the case of federal renters assistance. One thing I said there was "Getting this aid to people is slow since it takes time to verify who is in need (to prevent fraud). So you can have more assistance or less fraud. We might not be able to get both." 

This actually relates to Type I and Type II errors, which I explain after excerpts from this latest WSJ article:

"A large U.S. tenant-protection program has distributed a fraction of the $47 billion appropriated by Congress to cover rent and utility arrearages for millions of renters harmed by the coronavirus, the Treasury Department reported on Friday.

Just $1.5 billion of that money found its way into the hands of landlords and tenants through May 31 as local governments struggle to set up distribution programs, the Treasury Department said in the report. The aid began flowing to states and localities early this year through the Treasury.

Local governments across the U.S. have struggled with how to distribute the money, with most if not all setting up programs entirely from scratch. Some have complained that their staffs are being deluged by aid requests, while numerous renters are being disqualified for failing to complete their applications correctly"

"Numerous states and localities didn’t open their rental-assistance programs until May or even early June, the Treasury Department said. Many also reported little or no household assistance funds disbursed through May 31.

About 160,000 households were served in May, over 60% more than the previous month, the Treasury Department said.

“State and local governments must do more to accelerate aid to struggling renters and expand programs to meet the scale of assistance needed,” the department said."

In giving assistance, the government can give it to many people quickly, which would mean not checking for fraud very closely. Then some people get it who don't deserve it. That sounds like a Type I error. You put a policy into place too soon and some bad things happen.

Or, the government could check all applications for aid very closely. Then far less fraud would occur, but some deserving people would have to wait a long time, perhaps too long. This sounds like a Type II error (the article mentions that aid might not get to renters and landlords before the eviction moratorium ends). You take too long to put a policy into effect because you want to play it safe and you delay good things from happening.

I use the book The Economics of Public Issues in my micro classes. Chapter 1 is called "Death by Bureaucrat." It discusses how the Food and Drug Administration can make either a Type I error or a Type II error.

Type I error: The FDA approves a drug before enough testing is done and when people take it, there are harmful side effects.

Type II error: The FDA tests a drug longer than necessary to stay on the safe side. But people might suffer because the drug is not yet available. 80,000 people died waiting for Septra to be approved.

The FDA would usually rather make a Type II error because the public can blame the FDA if a Type I error occurs. But in this case, they wanted to get masks to people quickly. Not enough testing was done. So it looks like a Type I error.