Regardless of scope, food stamp fraud should be addressed

There is an impressive gap between the view of food stamp fraud and the public’s perception of what is going on. The feds see its significance as exaggerated; the public perception sees fraud as a more pervasive problem.

It is not absolutely clear at this point which view is correct, but history is on the side of the public.

Officially, the food stamp program is known as the Supplemental Nutrition Assistance Program, or SNAP. In the real world, though, it seems that most people, even government officials, still refer to the program as “food stamps,” even though the actual stamps were replaced years ago by a debit card—like identifier.

That’s about the only thing about the food stamp program that’s simple. It is too large and involves too many people and government operations for that. The universe can probably be described with fewer words than the food stamp program.

Based on the latest available official data, the food stamp program provides assistance to 47,727,052 people in a total of 23,116,441 households. That is a lot of people, a lot of homes, a lot of families.

The average monthly benefit is $132.86, and if you do the arithmetic, that works out to an annual total for the program of about $76 billion, which is fairly close to the amount allocated in the federal budget. The remainder goes to the other nutrition programs — school breakfasts and lunch, for example — focused on children and cases of adults in need of assistance.

There are three fundamentally different ways to look at this program: as an economic entity; as a system; and as an economic indicator.

As an economic entity, the food stamp program is essentially a very large set of transfer payments in which money is taken by the federal government from one group of individuals and given to another group of individuals. The executive branch of the federal government acts as the intermediary, using its taxing powers to take the money and the statutory and regulatory powers given to it by Congress to determine which individuals will receive it.

A straightforward system like that would be far too simple to satisfy the federal government, though, so a twist was added. Not trusting the recipients to keep their priorities straight, instead of money they were given stamps that they could use to purchase food.

As a system, the food stamp program is administered by the fifty individual states, and management responsibility is shared by the federal and state governments. This was a good idea, but does present recurrent problems in management and consistency. And since it is the responsibility of the individual states to detect and prevent fraud, there is still a lot of work to do in that area.

A report issued by the Government Accountability Office this month assessed the fraud issue within the food stamp program. They looked at how the fraud prevention and detection programs worked in 11 states, representing about a third of all the households receiving benefits under the program.

The basic conclusion of the report was that the systems used by the states to detect fraud weren’t really up to the job. In the area of replacement cards, for example, the GAO investigators found possible or likely fraud to be far more likely than had been detected and reported by the states.

They found that one reason for this is that the states have remained overwhelmed by the flood of food stamp applicants and recipients since 2009 and the Great Recession. Another reason is that the information systems and algorithms used in fraud detection are inadequate to the task.

Although it was not the intent of the report, it does go a long way to explaining the fraud perception gap. The federal government has to trust its information systems, and they, because of their structure and inadequacies, indicate that fraud is at a consistently low level. The public sees what is really going on.

As an indicator or reflector of how well our economy and our society are doing, the food stamp program sends a mixed message. The surge of food stamp users in the wake of the recession tells us that it is an excellent indicator of the economy’s health. The continued growth and persistence of food stamp use tells us how distant our economic policy makers are from what has been really happening in our country.

It is both admirable and in our best interests to ensure adequate nutrition for all of our citizens. Fraud in the food stamp program, though, is a toxic element that poisons our social cohesion and our national purpose. We need to take fraud seriously and eradicate it.

James McCusker is a Bothell economist, educator and consultant. He also writes a monthly column for The Herald Business Journal.

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