Democrats and Republicans want to fund infrastructure using federal unemployment benefits yanked from workers

• President Joe Biden threw his support behind a bipartisan infrastructure package on Thursday.
• But that package doesn't contain funding from tax hikes, as he initially proposed.
• It would be partially paid for by targeting unemployment fraud and unused federal unemployment funds.

President Joe Biden has thrown his support behind a $1 trillion bipartisan infrastructure deal focused on roads and bridges - and part of the spending would be potentially offset by unused relief funds and targeting unemployment insurance fraud.

Repurposed federal UI will account for $25 billion of the deal's pay-fors, a person familiar with details of the plan told Insider. The bulk of the funding from UI will come in the form of "unemployment insurance program integrity," which will provide $80 billion in revenue.

"It's the fraud. It's the fraud from UI," Sen. Jeanne Shaheen (D-N.H.) told Insider when asked about the inclusion of unemployment insurance in the funding. She added: "Apparently, there are several reports that talk about significant fraud in the UI."

Sen. Joe Manchin, a key moderate, said the deal wouldn't detract from enhanced UI. "There's an awful lot of fraud in UI that can be repurposed," Manchin told Insider.

Previously, Sen. Shelley Moore Capito - a major GOP player and negotiator - had floated repurposing unemployment funds from the states ending federal early benefits early to pay for an infrastructure package. That seems to have garnered traction among lawmakers.

Andrew Stettner, a senior fellow and unemployment expert at the left-leaning Century Foundation, cautioned that legislative details still needed to be ironed out. He also said there's a risk people could lose jobless aid they're entitled to if anti-fraud prevention policies are poorly implemented.

"There's been certainly a surge in organized crime activity in the UI system that has led to a lot of fraud," Stettner told Insider. "The thing that we have to be concerned about: Are the mechanisms that are being put in place to try and prevent that fraud? Does it lead to unfairness in the system? Are people being wrongly implicated in fraud? We've had a lot of cases with that."

At least 26 states are prematurely cutting off federal unemployment benefits this summer.

Many of the states opting out are ending all federal benefits, including programs with expanded eligibility. That means thousands of workers will lose - or already have lost - all benefits completely. So far, a dozen states have ended their benefits, cutting off somewhere between 400,000 and 500,000 people.

Now, lawmakers are proposing that those severed benefits be used to fund new infrastructure spending, rather than tax hikes on America's wealthiest and its large corporations.

Overall, about 4 million Americans will see their benefits end ahead of schedule. Federal programs are set to end nationwide in September, but several governors have opted to cut off their benefits in an effort to get workers back into the workforce - although the current labor shortage may also be driven by lack of childcare, or a mismatch between open roles and unemployed workers' qualifications. As Insider's Ayelet Sheffey reported, job searches were actually down in states ending those benefits early.

"This is not because the government - because the world - is suffering from people not returning to their jobs," Keshya Dempsey told Insider of the decision to end benefits prematurely, which will cut her off as well. The 35-year-old Dempsey lives in Florida, where the $300 in extra weekly benefits will end on Saturday."This is political. It has always been political."