Post by Tpatt100 on Oct 9, 2017 11:33:04 GMT -5
It doesn’t work for the middle, upper middle and the wealthy either. Why treat lower income people like they have lower intelligence or are less responsible? They are already plenty of hungry people, why not maximize their benefit dollars so they can continue to be hungry but we maximize our tax dollars.
Food Stamp Fraud, Or Why We Should Abolish Food Stamps
Food Stamp Fraud, Or Why We Should Abolish Food Stamps
The aim and purpose of a welfare system is to provide the maximum benefit to the recipients at the least cost to ourselves. This seems like a fairly logical thing to be aiming for too. However, there's good evidence that the current US welfare system simply doesn't do this. So, the argument then becomes how can we improve that welfare system in order to increase the benefits to the recipients or, perhaps, to reduce the costs to ourselves as taxpayers. To which the most obvious answer is to abolish the system of giving people benefits in kind, things like SNAP, or food stamps, Section 8 housing vouchers, Medicaid, and simply give them money instead.
My example comes from this little story:
The way the scam worked was recipients would come into the store and pretend to purchase food. The willing cashier then swipes the Electronic Benefit Transfer (EBT) card and reaches into the cash register and produces the cash, taking his or her cut.
This was just one store. One imagines the arrests were the exception. According to the U.S. Department of Agriculture, which administers the program, “In FY 2012, over 100 analysts and investigators reviewed over 15,000 stores and conducted nearly 4,500 undercover investigations. Close to 1,400 stores were permanently disqualified for trafficking [converting benefits into cash] and nearly 700 stores were sanctioned for other violations such as the sale of ineligible items.”
Now the writer over there is frothing in indignation at the idea that someone would so cheat the system. But we should go further than this and ask why they're doing so and what we can do about it.
The first and most obvious point is that if people are willing to trade food stamps for cash at a discount then they obviously value the lesser amount of cash more highly than they do the greater amount of food stamps. This is inherent in revealed preferences and our observations of what they're actually doing. They would only be making this trade if they valued that smaller amount of cash more highly than that greater amount of food stamps.
This isn't confined to food stamps either: Census has, when discussing the measurement of poverty and the alleviation of it through welfare made the admission that many of the things we provide, other than cash, are valued by the poor at less than the cash we spend to provide them with it. And this is obviously an inefficient outcome. Just to invent some numbers, for every $100 we spend on providing welfare the poor actually get $80 of welfare out of it. That would be true if the food stamps/cash trade was being done at 10/8 of course, but those numbers are only as a logical example.
This means that there's a net loss of welfare in the whole system. We're spending more than the value of what is being received. And that's really not what we want in a system at all.
So, what could we do to remedy this? The most obvious solution is to simply abolish giving people things and give them money instead. Then they can go and buy what they want, not what we think they should have. And they do value that ability, as we can see from the fact that they will trade the food stamps at a discount and as Census admits.
So, the first and most obvious part of our solution is that we should abolish food stamps. We then have a choice. We could say that we're spending the right amount on welfare right now. So, we just give the poor the same amount of cash instead of in food stamps. Or, we could say that we're alleviating the right amount of poverty right now. Meaning that we should give those poor the amount of cash they value the food stamps at and save us some cash in the paying for it. This leaves them just as well off and us better off.
Or, of course, we can do a deal that benefits everyone (as "Pareto improvement" in the jargon) and give the poor a bit more cash than they value the stamps at and a little less than the face value of the stamps. This saves us money in paying for it and makes them better off in the way that they value things.
Then we can go off and look at the other things we provide in kind, housing, medical care and so on, and see whether the poor value them at less than face value. If they do, then give them the cash instead.
I agree, it does sound slightly odd, but it is still true all the same. The very fact that people will trade food stamps for cash, at a discount, is the very thing that shows us that food stamps are an inefficient method of alleviating poverty. We can alleviate the same poverty at lower cost, or alleviate more at the same, simply by abolishing the entire food stamp program and simply handing out cash instead.
My example comes from this little story:
The way the scam worked was recipients would come into the store and pretend to purchase food. The willing cashier then swipes the Electronic Benefit Transfer (EBT) card and reaches into the cash register and produces the cash, taking his or her cut.
This was just one store. One imagines the arrests were the exception. According to the U.S. Department of Agriculture, which administers the program, “In FY 2012, over 100 analysts and investigators reviewed over 15,000 stores and conducted nearly 4,500 undercover investigations. Close to 1,400 stores were permanently disqualified for trafficking [converting benefits into cash] and nearly 700 stores were sanctioned for other violations such as the sale of ineligible items.”
Now the writer over there is frothing in indignation at the idea that someone would so cheat the system. But we should go further than this and ask why they're doing so and what we can do about it.
The first and most obvious point is that if people are willing to trade food stamps for cash at a discount then they obviously value the lesser amount of cash more highly than they do the greater amount of food stamps. This is inherent in revealed preferences and our observations of what they're actually doing. They would only be making this trade if they valued that smaller amount of cash more highly than that greater amount of food stamps.
This isn't confined to food stamps either: Census has, when discussing the measurement of poverty and the alleviation of it through welfare made the admission that many of the things we provide, other than cash, are valued by the poor at less than the cash we spend to provide them with it. And this is obviously an inefficient outcome. Just to invent some numbers, for every $100 we spend on providing welfare the poor actually get $80 of welfare out of it. That would be true if the food stamps/cash trade was being done at 10/8 of course, but those numbers are only as a logical example.
This means that there's a net loss of welfare in the whole system. We're spending more than the value of what is being received. And that's really not what we want in a system at all.
So, what could we do to remedy this? The most obvious solution is to simply abolish giving people things and give them money instead. Then they can go and buy what they want, not what we think they should have. And they do value that ability, as we can see from the fact that they will trade the food stamps at a discount and as Census admits.
So, the first and most obvious part of our solution is that we should abolish food stamps. We then have a choice. We could say that we're spending the right amount on welfare right now. So, we just give the poor the same amount of cash instead of in food stamps. Or, we could say that we're alleviating the right amount of poverty right now. Meaning that we should give those poor the amount of cash they value the food stamps at and save us some cash in the paying for it. This leaves them just as well off and us better off.
Or, of course, we can do a deal that benefits everyone (as "Pareto improvement" in the jargon) and give the poor a bit more cash than they value the stamps at and a little less than the face value of the stamps. This saves us money in paying for it and makes them better off in the way that they value things.
Then we can go off and look at the other things we provide in kind, housing, medical care and so on, and see whether the poor value them at less than face value. If they do, then give them the cash instead.
I agree, it does sound slightly odd, but it is still true all the same. The very fact that people will trade food stamps for cash, at a discount, is the very thing that shows us that food stamps are an inefficient method of alleviating poverty. We can alleviate the same poverty at lower cost, or alleviate more at the same, simply by abolishing the entire food stamp program and simply handing out cash instead.