Most people don’t see government failure.

They feel it.

It’s higher taxes.
It’s services that don’t improve.
It’s watching billions get spent while problems somehow get worse.

And then once in a while, the numbers slip out — and you realize the problem isn’t just inefficiency.

It’s fraud on a scale that would be a national scandal anywhere else.

On Breaking Battlegrounds, Orange County GOP Chairman and former Newport Beach Mayor Will O’Neill pulled back the curtain on a reality Californians know all too well: when massive federal programs collide with weak oversight, the result isn’t relief.

It’s a feeding frenzy.

When the Money Flooded In

During the COVID shutdowns, unemployment systems across the country were overwhelmed. Benefits expanded quickly. Rules loosened. Speed mattered more than verification.

That created opportunity.

In California, that opportunity turned into an explosion of fraud. According to O’Neill, the state saw more than $31 billion in fraudulent unemployment claims during 2021 and 2022 alone.

That’s not a typo. Billion. With a “B.”

While other states scrambled to stabilize their systems, California’s program hemorrhaged money at historic levels.

And when the unemployment trust fund ran dry?

The state borrowed roughly $20 billion from the federal government to stay afloat.

It still hasn’t paid it back.

The Hidden Tax Most People Don’t Know About

That unpaid loan doesn’t just sit on a ledger somewhere.

It hits employers.

Because California hasn’t repaid the federal government, businesses in the state face higher federal unemployment taxes. In effect, O’Neill argues, the state’s failure to clean up its own system becomes a quiet tax increase — one driven not by policy debate, but by mismanagement.

It’s a loop Californians know too well:

Crisis → spending → poor oversight → losses → higher costs.

And It Didn’t Stop There

Unemployment fraud was only the beginning.

O’Neill points to other massive programs where oversight struggles to keep pace with spending:

  • Medi-Cal (California’s Medicaid system), where fraud concerns have long trailed expansion.

  • Homelessness funding, where billions have flowed through government agencies and nonprofit partners with limited transparency and uneven results.

One recent case he cited underscores the public frustration: an arrest tied to alleged misuse of tens of millions of dollars in homelessness funds, while the individual in question reportedly lived in a multimillion-dollar home.

For taxpayers, the optics are devastating.

The more money spent, the worse the outcomes often appear — and the harder it becomes to trace where the dollars actually went.

Why This Keeps Happening

The Minnesota scandal that sparked the broader discussion is one example. But O’Neill’s argument is that the structure of large federal programs makes this risk national.

When:

  • money moves fast,

  • eligibility expands quickly,

  • verification lags, and

  • oversight is fragmented,

fraud isn’t an outlier. It’s predictable.

The real dividing line, he suggests, is leadership — whether officials treat fraud as a political inconvenience or an operational emergency.

The Frustration Boiling Over

For everyday residents, this isn’t abstract.

They’re paying more.
They’re seeing less.
And they’re told the answer is always more funding.

Meanwhile, headlines keep revealing new cases of waste, abuse, or outright theft.

That gap — between what taxpayers sacrifice and what government delivers — is where trust breaks down.

The Lesson Washington Doesn’t Like to Admit

Throwing money at a problem doesn’t solve it.

Systems matter. Oversight matters. Enforcement matters.

And when leadership doesn’t demand accountability, large programs don’t just get inefficient.

They get exploited.

As O’Neill’s comments make clear, the debate isn’t just about spending levels. It’s about whether the people in charge are willing to treat taxpayer dollars like they matter — or like they’re endless.

Because when billions disappear, the cost doesn’t.

Taxpayers always pick up the bill.

Transcript

Sam Stone: Welcome back to Breaking Battlegrounds with your Chuck Warren. I’m Sam Stone. Folks, make sure you are on going to breaking battlegrounds dot vote. Sign up for our substacks. Sign up for our podcast feed because you don’t want to miss all the great extra content you get each week. We’re continuing on now with Chairman Will O’Neill. He is the chairman of the Republican Party of Orange County, formerly the mayor of the Newport Beach City and served on the council there as well. Chairman O’Neill.

One of the issues, obviously, that’s come to light and has sort of been, and I think it was deliberately buried by the anti-ice protest is this massive fraud throughout Minnesota that’s popped up. But the truth is these are federal programs. I wrote a piece right when this broke that said this is every state. This is in every state because these federal programs can be exploited in the same way, very similarly, almost everywhere. What is going on in California? Is that the case there?

Will O’Neill: Oh my gosh, where do I begin? So if you go back into 2021 and 22 California actually basically cut it. I have to imagine Gavin Newsom is looking out at Walt’s and just saying, hey, hold my beer, man. Because you had back in 2021 and 22 unemployment fraud in California that exceeded 31 billion, 30, 31 billion dollars went to fraud in California just on one program.

And people have sort of forgotten that. And the amazing thing is during that whole cycle, everybody, a lot of states, they actually ran out of money in their unemployment because so many people were off work during the COVID shutdowns. So California took out about a $20 billion loan from the United States government. They still haven’t paid it back. They’re literally the only state that hasn’t paid it back. And the crazy thing is by not paying it back, employers actually have their unemployment tax go up on the federal government.

So Gavin Newsom consistently has increased taxes by not paying off his own loan. It’s nuts. But then when we’re also talking about fraud, you’re talking about, to your point, Medicare fraud. In California, it’s called Medi-Cal. And there’s a significant amount of fraud there. But one of the biggest problems we have right now is actually homelessness fraud. And I mean like the NGOs, the charities, they’re taking in money.

Just recently, in the last two weeks, a guy was arrested at a $7 million home after allegedly taking $23 million worth of homelessness funding that was sent and overseen by Karen Bass’s department in the city of Los Angeles. This is all taxpayer dollars. And so you end up with a lot of people incredibly frustrated with the lack of transparency and knowing that when they work hard, their tax dollars are going to a government that is not efficient, and not overseeing anything and making sure and stopping the fraud.

So we know for sure that when we are paying our taxes here in California it is absolutely going to fraud somewhere in the system and it is infuriating.

Listen to the full episode of Breaking Battlegrounds anywhere you stream your podcasts!