Sometimes a little fraud is perfectly OK. Particularly if it means helping millions of Americans, whose lives have been upended by the pandemic, as quickly as possible.
For anyone who’s ever had to sign up for food stamps or jobless benefits in the U.S., the onerous enrollment procedures and frequent ID verification checks are a well-known, and often, disheartening reality. Ostensibly, the safeguards are meant to ensure only those who need help get it. But according to Georgetown University’s Pamela Herd, they often end up doing more harm than good.
“We need to be just as concerned about those not getting benefits as we are with fraud and abuse statistics,” said Herd, who’s written extensively on the concept of “administrative burden,” which describes the red tape we encounter when we need public assistance.
Of course, no one is advocating defrauding state or federal governments, which have good reason to prevent the widespread abuse of taxpayer dollars. And there’s justifiable outrage when, say, multi-billion dollar entities like Shack Shake or the Los Angeles Lakers get relief money meant for actual small businesses. But Herd’s research suggests that when it comes to social-welfare programs, accepting some fraud is a small, and justifiable, cost if easing requirements helps the greatest number in need.
Take SNAP, which is better known as the food-stamp program, as an example.
Herd points out that nearly 20% of eligible recipients, or about 10 million people, don’t get benefits because of the hurdles required to register, which can include multiple office visits, fingerprinting and, for those with needs for only part of the year, difficulties in proving seasonal income fluctuations.
Compare that with the amount of fraud in the program, which is routinely measured at only 1 to 2%. And most of that is due to people making mistakes on their applications. Herd says it’s a clear sign of imbalance in policy, which goes overboard to prevent fraud at the expense of the program’s goal of providing food assistance to the needy.
The potential for harm is especially acute now, as the devastating economic consequences of Covid-19 leave so many across the country in desperate need of financial support. While the $2 trillion rescue package includes $1,200 emergency payments for most Americans and extended jobless benefits, how quickly the aid finds its way into the hands of the neediest will have consequences for how long and deep the recession gets.
More than 33 million Americans have filed for unemployment benefits during the pandemic, according to figures from the Labor Department.
In Florida, the state’s byzantine “reemployment assistance” system has so limited access to benefits that bread lines are forming in the shadow of President Donald Trump’s Mar-a-Lago resort. Callers to New York’s unemployment claims center have compared trying to get through to someone to competing to be the 100th caller for a radio station giveaway.
House Democrats representing Texas have criticized the state’s handling of unemployment benefits for “making this problem worse” and have urged Governor Greg Abbott to lift its certification requirement that compels individuals to file every other week to continue receiving payments.
“Unemployment insurance is clearly in a state of crisis, these offices didn’t have the capacity to handle this,” Herd said. “But if you reduce verification requirements, you reduce that burden to getting money out and then you can deal with fraud later.”
Rachel Greszler of the Heritage Foundation, a conservative think-tank with ties to the Trump administration, echoes the sentiment -- but one caveat. She says states need to make clear they’re not simply handing out a free pass.
“There’s a need to ease up on checks because it’s a unique situation right now,” she said. “But we need to tell people and businesses that we’re going to check and there will be additional penalties imposed for cases of fraud.”
Citizens Against Government Waste, a fiscal watchdog group, takes a harder line. It says government’s failure to keep tabs on spending in the best of times means there are plenty of reasons to be skeptical about any policy that would lessen the burden of proof on potential beneficiaries.
“To suggest that the coronavirus funding should be handed out without regard to whether the beneficiaries are qualified or bother to fill out forms will only lead to more opportunities to squander tens of billions of dollars,” Tom Schatz, the organization’s president, wrote in an email.
‘Welfare Queen’ Myth
Governments could take a page from the business world and conduct a cost-benefit analysis, but they rarely do, according to Eric Schnurer, president of Public Works, a public policy and management consulting firm. For example, while a retailer accepts some products will be lost, damaged or stolen during transit as a cost of doing business, “it’s not a strict economic calculation” for governments, he said. That’s because political leaders “bring their moral and philosophical beliefs” to bear on policy decisions.
Using fraud to stigmatize poverty, curtail social-spending programs and question who’s deserving of support has a long history in U.S. political discourse. Think Ronald Reagan’s “welfare queen.” Or Bill Clinton’s pledge to “end welfare as we know it.”
“Fraud and abuse have been for decades a mechanism for opposing the expansion and easy access to social-welfare programs,” said Herd. “It’s something politicians can go to as a common tag-line that’s used to add layers of burdens to programs.”
What’s more, evidence suggests policing fraud isn’t even particularly cost effective. In 2016, Georgia spent almost $8 million investigating food-stamp fraud, only to recoup $7.2 million, according to the Atlanta Journal-Constitution. That amount equaled roughly 0.2% of the dollars it distributed in food stamps that year.
On the flip side, fraud detection is big business. Consulting giants like McKinsey & Co., Boston Consulting and Deloitte, among others, all have practices that specialize in detecting and reducing abuse in government programs. They pitch data analytic solutions, using “nudges” from behavioral science to encourage compliance, or, in the case of Boston Consulting, conduct studies on fraud and security vulnerabilities for the Federal Reserve.
The firms didn’t respond to requests for comment.
“We know the tax lobby wants to keep the tax code complex because it keeps it in business. We see the same thing in social welfare,” Herd said, adding that businesses have “rent-seeking incentives” to keep those burdens in place.
Public Works’ Schnurer, who advised Louisiana in its response to Hurricane Katrina, saw firsthand how hard it was for people who lost their homes to obtain any government relief. So it was no small irony to see how easy it was for billion-dollar corporations to get into the Paycheck Protection Program.
“There’s something different about worrying about a few thousand dollars here and there for homeowners, versus millions of dollars going out the door at fairly high rates to businesses that don’t deserve the money,” he said.
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