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Food Stamp Fraud a Political Issue

December 23, 2013
Plain English Version

The federal government spends billions and billions of dollars on food stamps and Medicaid. These programs are meant to help low-income people.

It spends billions more on programs to help business people and farmers.

Many are seeking to reform the tax code and subsidy programs that enrich people. And many are trying to reduce food stamp benefits that nourish people.

And there are some, like a congressman from Tennessee. He is also a farmer who received millions in federal farm subsidies.  He wants to cut the food stamp program.

The problem is fraud. All government benefit programs are subject to dishonest applicants and users. The worst abuses occur in the Medicaid and Medicare programs. These are programs in which recipients get services, not money.

Food stamp patrons use Electronic Benefit Transfer cards (EBTs). Critics assert that there is a black market. Users trade their food stamp benefits for all kinds of things, such as gas and liquor, and for cash. The charges go against their accounts. The merchant does not have to do anything.

Merchants make money by discounting the value of their goods and keeping the difference for themselves. For example, a merchant will charge a customer $100 for “food” and then give the customer $70 in cash. The merchant is credited with $100 by the government. This results in a profit of $30 for the merchant. And a loss of $30 in food buying power for the customer. But the customer has cash.

Food stamps are big business. There are 47 million beneficiaries and the program costs $80 billion annually.

The number of people in the program has skyrocketed since the Great Recession of 2008.

How should the government spend taxpayer dollars? Republicans say the loss of food stamps (or unemployment benefits) will make people train for and search for work. Democrats say the labor market is too weak to provide jobs for less skilled workers. They believe that the food stamp program and the unemployment insurance program are part of a necessary, essential safety net.

Nobody is in favor of fraud.

Source: The New York Times                                                                                              December 18, 2013

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