{"id":32109,"date":"2012-09-24T05:31:25","date_gmt":"2012-09-24T09:31:25","guid":{"rendered":"http:\/\/valorguardians.com\/blog\/?p=32109"},"modified":"2012-09-24T08:56:27","modified_gmt":"2012-09-24T12:56:27","slug":"federal-fiscal-follies-part-iv-free-groceries-are-a-snap","status":"publish","type":"post","link":"https:\/\/valorguardians.com\/blog\/?p=32109","title":{"rendered":"Federal Fiscal Follies, Part IV – Today, Free Groceries are a SNAP"},"content":{"rendered":"

I\u2019ve written recently about how Social Security is now poised to become the largest single expense of the Federal government<\/a> next year, spending more than DoD.\u00a0 I’ve also written about how Social Security is\u00a0 apparently being abused to provide de facto welfare<\/a> for many.\u00a0 Well, now let\u2019s look at another problematic Federal program.\u00a0 Specifically, we\u2019ll look at the Supplemental Nutritional Assistance Program, or SNAP \u2013 formerly known as \u201cfood stamps\u201d.\u00a0 Below, I\u2019ll refer to it by the older name as that\u2019s how it’s still more commonly known.<\/p>\n

In theory, food stamps seem like a good idea.\u00a0 The idea is simple: \u00a0help the truly needy feed themselves by giving them public assistance that they can only use to buy food.\u00a0 This lets them and use what little money they have on other essentials.<\/p>\n

That’s the theory, anyway.\u00a0 In practice, things have turned out a bit differently.<\/p>\n

The food stamp program is rife with fraud. \u00a0 Costs have risen hugely over the last decade plus, in both good times and bad, with no reductions in sight for at least another two years<\/a> \u2013 if then.\u00a0 And the program very obviously supports far more than those who are truly needy.<\/p>\n

You might want to grab a barf bag before you read any further.<\/p>\n

<\/p>\n

Food Stamp Fraud – Business as Usual<\/strong><\/p>\n

Fraud in the food stamp program is legendary, so I won\u2019t discuss it in great detail.\u00a0 Let\u2019s just say that many vendors and individuals find . . . interesting ways to defraud Uncle Sam when it comes to food stamps.<\/p>\n

It\u2019s well-documented that food stamps benefits are often sold<\/a> or traded<\/a> \u2013 never mind the fact that doing so is against Federal law.\u00a0 Dirty vendors<\/a> ring up phantom purchases and give back part of the sale in cash, pocketing the difference.\u00a0 They also ring up false sales and allow the customer to take non-qualifying items instead \u2013 like beer.\u00a0 Some even blatantly allow the purchase of non-qualifying<\/a> items with food stamp benefits.\u00a0 And there\u2019s little in the way of penalties for getting caught \u2013 in some cases, repeatedly \u2013 besides being \u201cpermanently\u201d barred from the program.\u00a0 While theoretically criminal charges can be filed, they\u2019re apparently pretty rare.<\/p>\n

Unscrupulous vendors know how to use aliases, of course.\u00a0 That\u2019s where at least some of the \u201crepeatedly\u201d comes from.\u00a0 Same guy or gal, different name, same scam.\u00a0 Rinse and repeat.<\/p>\n

Why risk it?\u00a0 In a word:\u00a0 money<\/em>.\u00a0 You can be looking at an extra $50,000 a month in income if you work it right \u2013 and most of that would be profit.\u00a0 Say 50% is the dirty vendor\u2019s profit from the scam. That\u2019s an extra $300,000 a year for an unscrupulous store owner.\u00a0 Yeah, they\u2019d probably have to pay taxes on some of that \u2013 but I think they could probably manage to live on the after-tax part.\u00a0 Plus whatever after-tax profit the business made legitimately, of course.<\/p>\n

Then there are the truly blatant individual frauds.\u00a0 Like who?\u00a0 Why, like Ms. Brenda Charlestain<\/a>, the paralegal-turned-stripper who was pulling down $85k a year in tips, spending nearly $9,200 on \u201csurgical enhancements\u201d, plus a bundle on a custom bright pink paint job for her 2008 Dodge Charger (monthly car payment:\u00a0 $326) and paying $1,100 monthly in rent – while getting food stamps for herself and her five children because she was \u201chomeless and out of work\u201d.<\/p>\n

Of course, in Ms. Charlestain\u2019s case, the gravy train did eventually stop.\u00a0 She\u2019s recently been sentenced to 18 months in the pen for fraud.\u00a0 No word on whether the IRS has a case pending against her for tax evasion.<\/p>\n

Percentage wise, fraud may only be a small fraction the total cost of the program \u2013 the USDA estimates 1%<\/a>, and while I think that\u2019s probably a bit low I\u2019d also guess the true fraud rate is no more than 2 or 3%.\u00a0 But when you\u2019re talking about nearly $75+ billion annually, 1-3% is still serious money.<\/p>\n

Uncontrolled Program Growth<\/strong><\/p>\n

The food stamp program has exploded in size since it\u2019s first major expansion in the 1970s.\u00a0 In the 1970s \u2013 most of which was a pretty damn tough time economically – \u00a0approximately 1 American in 50 was receiving food stamps.\u00a0 Today, it\u2019s close to 1 in 7<\/a>.\u00a0 Yes, the economy is in the bad shape today.\u00a0 But the economy was in the toilet in the mid- and late-1970s, too.\u00a0 So it\u2019s quite reasonable to ask:\u00a0 what gives?<\/p>\n

Further, the program has doubled in cost and nearly doubled in size since 2008 alone (data for this and the next several paragraphs is from this excellent source<\/a>, which in turn uses data from USDA).\u00a0 Yes, part of that expansion is due to the economy.\u00a0 But as I\u2019ll demonstrate below, the economy is only a part of the reason for that expansion.\u00a0 Other factors appear to have been even more important in adding literally millions to the food stamp rolls that simply shouldn\u2019t be there.<\/p>\n

However, the long-term trend over time is clear:\u00a0 since 1975, the program has been cyclic and generally out-of-phase with the economy.\u00a0 But it never drops to previous lows in subsequent good economic times, and it always seems to reach greater highs in subsequent \u201cbad times\u201d.\u00a0 And sometimes you even see steady growth in relatively good economic times.\u00a0 Very clearly, something else is driving the growth of the program along with economic need.<\/p>\n

———<\/p>\n

Few people realize just how much the food stamp program has expanded in the last 11 years, or how explosive that growth has been.\u00a0 And that expansion is not confined to periods of bad economic times. \u00a0\u00a0In 2001 \u2013 which coincides with regulatory changes expanding eligibility that I\u2019ll discuss later \u2013 the food stamp program provided benefits to roughly 17.5 million and cost about $18 billion.\u00a0 By 2007 \u2013 remember, this was all during a period of relatively low unemployment and reasonably good-but-not-great economic times – it had expanded to about 26.5 million recipients and cost $33 billion \u00a0 By the next year, 2008, it hit 28 million recipients and cost $38 billion.<\/p>\n

Then things really took off. In the next 4 years – e.g., by late FY 2012 – the food stamp program added nearly 20<\/del> 19 million persons and nearly doubled in cost.\u00a0 And, as I\u2019ve indicated previously:\u00a0 only part of that expansion is due to today’s bad economy.<\/p>\n

Today, roughly 48 million in America receive food stamps<\/em> (46.7 million in the US proper, plus another 1.3 million in Puerto Rico \u2013 or about 34% of Puerto Rico\u2019s population<\/em>).\u00a0 The cost to the Federal government for the program this year is approximately $75.7 billion ($71.8 billion in benefits distributed, plus another $3.9 billion in administrative costs; other estimates I’ve seen are slightly higher).\u00a0 And that\u2019s only the Federal cost for the program.\u00a0 It doesn\u2019t include the billions spend in aggregate by states administering their part of the program.<\/p>\n

So, in 11 years the program has gone from $18 billion a year to nearly $76 billion, and from 17.5 million recipients to nearly 47 million.\u00a0 What happened?<\/p>\n

Non-Economic Reasons for the Expansion<\/strong><\/p>\n

Yes, the economy played a large part in the rise in participation and cost between 2001 and today.\u00a0 But it\u2019s hardly the sole reason.\u00a0 Qualification for food stamps has been intentionally streamlined – with predictable results.\u00a0 Eligibility was restored to many who’d lost eligibility in 1996.\u00a0 The “means test” for food stamp eligibility is a freaking joke; it has more holes than Swiss cheese.\u00a0 And by policy, we’ve created a few special categories that get ridiculously special treatment.<\/p>\n

———<\/p>\n

The 1996 Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) – e.g., the 1996 welfare reforms – provided states additional flexibility in managing welfare programs, and imposed many changes on previous Federal welfare programs and requirements.\u00a0 However, one of these changes allowed states substantially greater flexibility in determining food stamp eligibility.\u00a0 In particular, states were accorded great latitude in declaring working poor categorically eligible<\/em> (e.g., essentially automatically eligible)\u00a0 for food stamps if they met certain criteria.\u00a0 When one is categorically eligible, complete proof that one meets normal eligibility requirements is not required.<\/p>\n

Ostensibly intended to help the \u201cworking poor\u201d, the actual effect has been to allow states to expand food stamp eligibility broadly \u2013 some would say, without any rational constraints.\u00a0 One common modification to food stamp criteria often adopted by states is termed “broad based” categorical eligibility.\u00a0 Regarding states using \u201cbroad based\u201d categorical eligibility requirements, the Congressional Research Service reports<\/a>:<\/p>\n

Typically, households are made categorically eligible through receiving or being authorized to receive a minimal TANF- or MOE-funded benefit or service, such as being given a brochure or being referred to a social services \u201c800\u201d telephone number. \u00a0(p. 6)<\/em><\/p><\/blockquote>\n

Currently 43 states \u2013 more than 8 of 10 – \u00a0have adopted \u201cbroad\u201d categorical eligibility requirements for food stamps.\u00a0 Why?\u00a0 Again:\u00a0 money<\/em>.\u00a0 More residents getting food stamps means more Federal money spent in the state \u2013 which in turn means more taxes paid to that state.<\/p>\n

———<\/p>\n

A second factor contributing to the 2001-2007 rise in food stamp recipients during a period of relatively good economic times is the fact that eligibility for many non-citizens to receive food stamps was restored beginning in the late 1990s.\u00a0 The 1996 PRWORA essentially prohibited non-citizens from receiving food stamps.\u00a0 (Previously many if not most legal US residents were eligible for food stamps; illegal aliens were and still are not.) \u00a0 However, over the next several years, various acts and policy decisions reversed this ban.\u00a0 Now legal non-citizen residents are eligible for food stamps too \u2013 albeit in most cases after a 5-year waiting period.<\/p>\n

This is probably only a relatively minor factor \u2013 estimates put the percentage of non-citizens receiving food stamps at around 4% <\/a>of the total. One can also argue that legal immigrants, after a reasonable waiting period, should be allowed to receive nutritional assistance too.\u00a0 But the fact remains that 4% of 46 million is nearly 1.85 million individuals.\u00a0 And virtually all of those were added to the food stamps rolls since 2001.<\/p>\n

———<\/p>\n

A third factor is the fact that, frankly, the so-called \u201cmeans test\u201d associated with food stamps is exactly that \u2013 a \u201cso called\u201d means test.\u00a0 It is virtually worthless, and doesn\u2019t come anywhere near measuring actual family income (and thus actual economic need).\u00a0 There are so many exclusions to what is considered \u201cincome\u201d when it comes to eligibility for food stamps that it\u2019s ridiculous.<\/p>\n

As an example, let\u2019s look at California.\u00a0 Here are just a few of the types of income \u2013 in kind, or in cash \u2013 that are excluded<\/a> in California when determining if a household has a low enough income to qualify for food stamps.<\/p>\n