Some say that welfare fraud is not a significant problem. While there is a general feeling that welfare fraud is rampant, advocates for welfare programs insist that fraud is only found in 2%-3% of cases researched by the thousands of welfare investigators across the nation. It certainly is possible that more fraud takes place than is being reported. There isn’t any way to really substantiate that feeling, however, without it actually being reported. We know that some fraud exists; but, with such low rates of it being found, it certainly isn’t the biggest challenge that welfare programs face. Is welfare fraud a big enough problem with which we should even concern ourselves?
Let’s run some numbers to find out. According to the 2010 US Census Bureau findings, there are 114.8 Million families in the US. With 34.2% of US families “on welfare” (see related article: An Expansion of the Welfare State), this means that approximately 39.3 Million homes receive monthly welfare benefits. The Federal government expects to spend $451.9 Billion in 2012 on welfare expenditures. This averages out to roughly $11,500 annually per family or $958 per family per month.
If the fraud rate is only 2%-3%, how much money could it really be costing us? Well…these low rates would mean that roughly 785,000 to 1.2 Million families are illegally receiving welfare benefits. At the average rate of $11,500 per year, this is costing the tax payers between $9.0 - $13.5 Billion dollars every year. This is as much or more than the cost of teen pregnancy. (see related article: Homes Built on Sand) While the percentage may be small, the cost is still quite high. It isn’t enough to make up the $1.5 Trillion Federal budget deficit; but, it is still significant.
I think a potentially significant source of outright fraud may exist in what I call the “income expenditure gap”. When we looked at what has been taking place with household incomes and expenditures, we noted a gap between average expenditures and income for homes making $20,000 - $40,000 per year. (see related article: The Unstable American Home)
At the same time, I think that people in general are more frustrated with the abuses of welfare benefits that we witness and about which we hear. These are not necessarily fraud, although some activities are still illegal. We may witness food stamp recipients splurging or making what we feel are unwise shopping decisions at the grocery store. Because many benefits are paid only once per month, which helps keep the administrative costs to the government entities lower, it lends itself to patterns of compulsive spending. Even unemployment benefits, which require waiting periods before benefits begin, place households in situations where money is spent as soon as it is received creating cycles of spending and periods of void.
The periods of void create an increase of potential emotional energy that is released, similar to addictive gambling behavior, when the next benefit payment is received. This is only amplified in effect when actual addictive and substance abuse issues exist – which, as we just saw, is the case in roughly 10% of the US population. (see related article: Homes Built on Sand) We hear of instances where welfare recipients will illegally sell or exchange their benefits for cash in order to purchase drugs or alcohol. This is leading some states to pass drug screening requirements as a condition of qualifying for welfare benefits.
Welfare fraud, though it may not be high in percentage, is still a significant source of welfare expense. The efforts to reduce welfare fraud are a natural reaction to increasing welfare costs. As household disposable income or actual income decrease due to factors in the economy at large, the potential for increased welfare fraud exists. In some cases, the way that programs are administered can encourage fraud and abuse to take place. With politicians and governmental leaders more interested in inciting the public’s passion about welfare than actually taking steps to improve welfare programs, US tax payers and voters are left fighting with each other over what to do about welfare without any substantive data to accurately identify or fully understand the issues.
We must keep our emotions in check though. Certainly fraud and illegal activity is taking advantage of our mercy and goodwill. In our anger and desire to improve the operation of welfare programs, let’s not lose sight of the good that these programs do. Let’s also balance the emotional impact of immoral behaviors with the greater number of people who are legitimately and fairly receiving welfare benefits. We should also keep in mind that even if we were to completely eliminate welfare fraud, without Federal spending reforms in other areas, we must still borrow every dollar we spend on welfare programs. (see related article: What Can We Do About Welfare?)
Welfare was intended to help struggling families while growing the economy. The theory was that the economy would be better positioned to grow as we reduce both the impact and prominence of poverty. When the economy struggles, we all feel the effect and the burden of charity weighs heavily upon us. It is natural to want to reduce fraud and abuse of our goodwill. In our zeal to eliminate the reward for those who illegitimately benefit from welfare programs, let us not lose our compassion for families living in poverty. Though, it would be wise for us to examine whether the impacts of our choices are meeting the expectations of our intentions.
To be continued…Up next: Is Welfare Working?
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Obama's America: Unmaking the American Dream
America as we know it—wealthy, powerful, assertive—is not what Obama wants. He wants a smaller America, a poorer America, an America unable to exert its will, an America happy to be one power among many, an America in decline so that other nations might rise—all in the name of global fairness. To Obama, the hated “one percent” isn’t just wealthy Americas; it is America itself. In Obama’s view, America needs to be taken down a notch.
That is the startling conclusion of bestselling author Dinesh D’Souza in Obama’s America. Building on his previous New York Times bestseller The Roots of Obama’s Rage—which Newt Gingrich called “Stunning…the most profound insight I have read in the last six years”—D’Souza shows how Obama’s goal to downsize America is in plain sight but ignored by everyone.