Thursday, March 3, 2016
Within the last week, a local newspaper published my Letter-to-the-Editor on a topic that needs additional exploration. It addresses un-informed, un-balanced and un-relenting attitudes toward “government welfare” or “public assistance.” Way too many people seem incapable of realizing that “public assistance” is not limited to those in poverty, or to minorities or those who experience special needs or a disability. Far from it. Public Assistance is a much broader term that covers many different kinds of assistance that government – in all its forms and at all levels – metes out to individual citizens and to corporate entities as well. But before we get too far ahead of this subject, take a look at what I wrote in response to a conservative Republican State Senator who publicly announced legislation he is sponsoring to restrict both the eligibility for, and the use of, SNAP benefits.
“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 governments 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!”