“Recently,
State Senator Joseph Griffo proposed legislation (S6071) that would require recipients of Food Stamps
(SNAP) to apply for work, strictly limit how they spend benefits and impose
escalating penalties for each failure to comply. It seems entirely unjust to legislate how people on public assistance must
comport themselves if similar strict requirements and penalties are not
legislated for everyone receiving government subsidies.
“New
York State spends $7 billion each year on subsidies meant to spur job
creation and economic development —like ten years of local property tax
exemption to attract industries. Yet too
often subsidy recipients fail to create good local jobs and community
benefits. Meanwhile, legislation (8203A) with reasonable performance and accountability requirements
for industries receiving state subsidies languishes in the state legislature.
“It’s
past time to balance our approach to “welfare fraud” and to pursue the real
welfare cheats – the privileged corporations that extract our tax dollars while
they pay little or nothing; the government contractors who pad bids and garner
huge overrun profits; the insurance and drug companies who over-charge us every
day; and all those industries that receive substantial government hand-outs but
no escalating penalties for non-compliance with rules or community obligations.”
So let’s be clear, and suggest some reasonable thoughts
for understanding this topic.
1) At
best, the government is trying to help invigorate the economy by injecting
capital into businesses and causes it deems worthy. At worst, this means
government is picking winners and losers without adequate input from the
public, and often government makes the wrong choices — especially when the
"winners" are corporations with plenty of money to lobby the
government for said subsidies. This is what many folks refer to as
"corporate welfare," or "crony capitalism.” (MIC.com)
2) MIC.com
tells us that it is important to understand that subsidies “are essentially government-sanctioned
monetary grants given to a person, business or group in
support of an enterprise regarded as being in the public interest."
3) MIC.com
goes further to remind us that “the main thing to know about subsidies is that
they are our tax dollars.” The
dollars handed out are not government subsidies. They are taxpayer
subsidies sanctioned and allocated by government. All recipients of subsidies are receiving and
spending OUR money right from our wallets and purses!
4) Subsidies
come in many forms, such as grants, tax cuts, low-interest loans, aid programs,
vouchers, stipends, exemptions, rebates, special deductions or considerations, allowances,
contracts, appropriations, price supports, reparations, and so on, and so
forth. The subject of government
assistance or government subsidies cannot be limited to what people receive as
“poor relief.” It is much more than
that.
5) Welfare
for the poor and welfare for the rich come from the same basic source: taxes paid to government by citizens,
businesses, and other groups. The taxes
are not limited to one type, and that is something often misunderstood. We are not talking just about income taxes
here. We are talking about an array of
taxes, fees and often about taxes that are never collected because the
principal individual or business has been declared exempt from paying those
taxes.
Again, those corporations
in NYS that get a break on paying no property taxes for 10 years are not held
accountable for how they utilize that ‘subsidy’ because it is not allocated to
them by the Legislature. They don’t receive a check from the State Treasury for
whatever amount they save by not paying property tax. Instead, they benefit from having to pay
nothing in the first place, and by being able to use the ‘money saved’ to
enhance their business enterprises, without having to account for their use of those savings.
Unfortunately, little is
mentioned of the fact that the obligation of industrial property owners to pay
school taxes is eliminated for ten years so the public schools in the
neighborhood are essentially diminished by the exemption of property
taxes, and the exempt industries have no obligation placed upon them to do
something from their own (subsidized) profits to support these schools, or the
adjacent community.
6) Finally,
we have to be very careful about any statistics on waste and fraud because too
often, all incidents of known waste
and abuse are lumped together to get a figure of around $730 million wasted in
Medicare fraud, for instance.. Little mention is made
of the fact that this figure included all the fraud perpetrated by vendors,
providers and insurance companies, as well as a small portion of recipient
fraud. Without this explanation, one
would think that recipient fraud is running amok, and indeed that is what
occurs among voters who never actually research these issues or claims.
Let us put some more touches on our topic, and see if we can discern where the heaviest fraud and the largest waste
is occurring. Is it in government welfare
programs for the poor?
Before we quote any statistics, let us be abundantly
clear here that we are dealing with what politicians and insurance providers
and administrative professionals have wrought:
a system that is almost impossible to analyze in a reasonable,
responsible and effective fashion. What
do I mean by this?
a. The
terms ‘fraud,’ ‘waste’ and ‘abuse’ are not even partially measureable unless
they are defined in a way that is valid and accepted across the nation
b. Statistics
are not valid unless they are all representing the same realities. If one state is collecting statistics aimed at
fraud meaning over-payment but another state defines it as under-reporting of income, we have two different categories that
cannot be combined
c. Outcomes
are not usable if the statistics collected in the first place are not collected
in the exact same ways, and entered into a data base that is common to the
entire nation in all places where “welfare” stats are kept. THAT IS NOT THE CASE, AND NEVER HAS BEEN. So here are some of the problems:
i.
According to Wikipedia, some 19 states do
not even collect such statistics.
ii.
There is no common software available in
the other states that do collect stats, making it is almost impossible to
produce accurate statistical reports on individual fraud waste and abuse in the
welfare system
iii.
Individual stories, vignettes, or anecdotes
seem to represent the best we can do in our current environment. Groups like the Heritage Foundation have no
better statistics than anyone else. They
are relying on individual stories to make a case for government assistance
abuse built on hearsay evidence, extending that to large numbers by inference, personal
opinion, group profiling and manipulation of the facts.
iv.
So, do not believe what you read about individual
welfare fraud, waste and abuse as though it represents a broad spectrum of recipients. It’s
fabricated and manipulated to look like nation-wide statistics, but comprehensive stats
don’t exist to any great extent What exists are bare-bones
statistics mostly related to local conditions, along with anecdotes about individuals that tell us little or
nothing about welfare recipients as a group.
I tried doing a search on a government statistics website
associated with the Department of Commerce.
I asked: "how much money is fraudulently used by all recipients of
welfare annually?" I got NO results from
that agency within the DoC named the “Statistic Brain.’
So I tried a similar search at HHS where one would
expect to find a hefty load of data. I concentrated on food stamps (SNAP) and
found some interesting stats, but none concerned with fraud or waste.
·
How many total recipients – 41 million
·
total cost – $69.8 billion
·
% of US population on food stamps –
14%
·
Whites and Blacks are about even in the %
of each group who are on food stamps - 38.8%
and 39.8% respectively.
·
But ask about fraud and abuse, you get
zilch – nada – nothing!
So, what can we do?
Well, as I have done, we have to look around to see if any reliable data
exist and use such data, being quite open about its limited relevance. Where
might we find relevant data collected by people who deal in investigation and
statistics as a way of life, so to speak?
Well, one would have to be the FBI.
Here are some of the things they have found about ‘welfare fraud.’
·
In 2014, a joint federal and state search
and arrest warrant operation investigated retailers in Hamtramck, Warren, and
Detroit who were illegally trafficking in food stamps. The charges allege that
store owners and employees allowed SNAP and WIC benefit recipients to use their
Electronic Benefit Transfer (EBT) cards to exchange their SNAP or WIC benefits
for cash. In return, the stores added a surcharge to the recipients’ withdrawal
of SNAP and WIC benefits, sometimes in an amount equal to that of the amount of
cash benefit received by the recipient. These transactions totaled an estimated
$12.5 million during the investigation.
Marlon Miller, Special Agent in
Charge of U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security
Investigations (HSI) Detroit said: “When unscrupulous business owners take
advantage of these benefits for their own profit, the taxpayer is cheated and
the individuals who really need the help also suffer.”
·
The latest edition of The FBI Story,
an annual collection of news and feature articles from the FBI public website (FBI.gov)
chronicles the most successful 2014 investigations and operations. These include
the disruption of botnet operators responsible for the theft of more than $100
million worldwide; nearly $9 billion in penalties levied against one of the
largest financial institutions in the world for exploiting the American
financial system; and a nationwide child exploitation sweep that recovered 168
victims of trafficking.
·
This 2014 edition of FBI report has several examples of
corporate fraud and criminal activity, but not one article talks about fraud
and abuse perpetrated by welfare recipients.
Perhaps it is because it is not significant enough to mention? Oh, they found $60 million in Medicare/Medicaid fraudulent billing by 26 unscrupulous Michigan pharmacy owners, but
individual recipients of benefits were not involved. There was a similar report of increasing
student-aid fraud, but this too centered around criminals who were stealing
student slots and the federal aid that goes with them.
·
In releasing their crime statistics for
2013, the agency doesn’t even mention welfare fraud, but does say that 1.6
million arrests for property crimes and larceny constituted the second largest
grouping of crimes
·
Larceny thefts accounted for the largest
percentage of property crimes reported to law enforcement—69.6 percent. (The
average value of property taken during larceny-thefts was $1,259.) But there is no attempt to indicate that
welfare fraud by individual recipients is a big part of this category.
So essentially, important agencies having to do with government
programs and crime stats have little or nothing to report regarding individual
recipient welfare crimes or cheating in the area of welfare benefits. In fact, this one quote from lovetoknow.com
sort of sums up the situation. After
quoting fraud stats from several states (http://save.lovetoknow.com/Welfare_Fraud_Statistics),
this writer concludes:
“Numerical
data about welfare abuse is difficult to find. Not only are exact statistics
hard to calculate, but information included in these calculations may not fit the
traditional definition of fraud. According to a recent article in The Atlantic, much of what is categorized as fraud is due
to employee error. Hard data about welfare fraud, therefore, should be
considered in light of all of its contents, including the report's definition
of fraud.”
Another Blogger agrees that stats on recipient fraud
are very hard to find and also agrees that recipient fraud and waste seems
quite low from what evidence we do have. Styling himself and his Blog as the “Get Out of
Debt Guy” (https://getoutofdebt.org), a
recent post claimed several items of interest:
1. There
are many urban myths about the levels of benefit fraud -- levels of benefits
fraud they have either witnessed or heard about. However, in general “facts about welfare
fraud are hard to come by, but those that can be found do not support
widespread benefit fraud.” (he quotes a
source for every such conclusion).
2. Congressional
testimony from 2002 stated the level of unemployment insurance fraud was 1.9
percent of all unemployment insurance benefits.
3. The
Los Angeles County Department of Public Social Services reports they handle
about 1.5 million cases involving benefits. The county reports that currently
the level of found fraud or misrepresentation occurs on 5,000 to 8,000 cases.
Based on current levels of aid, that represents about half of one percent (.05%) of
all cases.
4. According
to 2011 data, the fraud rate for SNAP (Supplemental Nutrition Assistance Program
-- food stamps), is minimal as well. According
to the Center on Budget and Policy Priorities the levels of SNAP over and
underpayments is declining. To put the
statistics in context, an overpayment is defined as “they either went to
ineligible households or went to eligible households but in excessive amounts,
and more than 98 percent of SNAP benefits were issued to eligible households.” In
2011, for example, the combined error rate was 3.80 percent. But the net loss
to the federal government from errors was only 2.18 percent.
5. A
conclusion is quoted from the CBPP that sums it up nicely:
“Relatively
few SNAP errors represent dishonesty or fraud by recipients (emphasis mine). The overwhelming majority result
from honest mistakes by recipients, eligibility workers, data entry clerks, or
computer programmers. In recent years, states have reported that almost 60
percent of the dollar value of overpayments and more than 90 percent of the
dollar value of underpayments were their fault, rather than recipients’ fault.
Much of the rest of overpayments resulted from innocent errors by households
facing a program with complex rules.”
6. As
to Medicaid Fraud: according to recent numbers there are more than 58 million
people that receive coverage through Medicaid. According to 2011 statistics
there were a total of 10,685 fraud investigations and 824 convictions from
1,011 indictments. Even if we just use the
total investigations started, the reported level of Medicaid fraud comes out to
0.018 percent.
7. “The
disturbing part of all the claims of benefit and welfare fraud is that there
appears to be little support to back-up the urban tales. Logically some amount of waste, fraud, or
abuse must exist. But evidence of massive fraud can’t be found.”
This Blogger concludes by quoting another source:
“The
myth of the Cadillac-driving welfare queen” who defrauds the system lingers
even though there’s no proof of it, said Erin O’Brien, a poverty expert at the
University of Massachusetts, Boston.
In
fact, welfare fraud among Philadelphia’s 95,456 recipients is “minute,”
according to Peter Berson, assistant chief of the government fraud unit in the
Philadelphia District Attorney’s Office.
“The 200 to 400 cases of welfare fraud in the city each year – down 50
percent since 2002 because of better enforcement and fewer recipients – are not
non-working women having babies to game the government, but working women
receiving welfare and working at other jobs without reporting the income,”
Berson said.
Having made the points that individual welfare fraud
does not appear to be categorized as a major problem, that over-payments are
declining, and that most welfare recipients are the working poor, not “freeloaders.”
let’s look next time at where the real fraud and abuse may well be—most of it
hidden from view.
By the way, it was Donald Trump who provided a clue to
what remains hidden to most. In a
campaign speech, he publicly let us have a peek into insider manipulations when
he made it clear that he used the governmental tax system to enhance his company’s
standing whenever he could. He also said
that everyone else does it, and that they would be fools not to, since it is
all perfectly legal!
Thanks for the
clue, Donald. We’ll take a closer look
next time at substantial fraud and abuse of federal subsidies in contrast to what
turns out to be the over-blown ‘penney-ante’ amounts of welfare fraud by
individual recipients. As ‘they’ say: “You
ain’t seen nothin’ yet!”
