The Biden-GOP debt deal did not cut spending for the Supplemental Nutrition Assistance Program (SNAP), but it did adjust work requirements. However, cuts are necessary because SNAP expenditures have skyrocketed from $63 billion in 2019 to an estimated $145 billion in 2023. Congress will have an opportunity to reform the program later this year when it is reauthorized as part of the farm bill.
One of SNAP’s chronic shortcomings is that billions of dollars are lost to fraud and abuse. Benefits are stolen by individuals, businesses, and organized gangs. The switch from paper food stamps to electronic benefits transfer (EBT) cards two decades ago created new opportunities for abuse. News stories and auditor reports have revealed ten types of fraud and abuse in SNAP.
First, benefits are sold to retailers. Individuals swipe their EBT cards at corrupt retailers and receive part of the value in cash, typically 50 cents on the dollar. For example, in Baltimore, a dozen store owners illegally gained $16 million in SNAP benefits, while in Cincinnati, owners of a meat market were convicted of $3.4 million in illegal SNAP transactions. Recently, in Fresno, a bakery owner was charged with $5 million in illegal SNAP transactions. Second, benefits are sold to individuals. People sell their EBT benefits to others at a fraction of the value for cash. Some people put their own food stamps up for sale online, while others traffic in stolen EBT card numbers and PINs.
Third, individuals buy food with their EBT cards and then resell it to other retailers for cash at a fraction of the value. Fourth, EBT benefit theft through card skimmers has soared across the nation at retailers from corner stores to Walmart. EBT numbers and PINs are a prime target for theft because the cards do not have chips. Fifth, phishing and other sorts of EBT data hacks are on the rise. With phishing, thieves posing as government caseworkers use text messages to SNAP recipients to gain card numbers and PINs.
Sixth, people falsify their eligibility to gain SNAP benefits illegally. They falsify their income, assets, employment status, number of children, allowable deductions, and other personal details. Seventh, some people claim benefits in multiple states, while in Florida, a couple used stolen identities from nearly 700 individuals to apply online for EBT cards, and 100 of the applications were approved. The couple pocketed nearly $200,000 by swapping the cards for cash at a corrupt retailer.
Eighth, retailers ineligible for SNAP falsify their applications to get approved, and retailers disqualified from SNAP for trafficking reapply under different names. The government has greatly expanded the number of SNAP-approved corner stores, which have higher trafficking rates than major grocery chains. Ninth, state governments are supposed to tackle SNAP recipient fraud. The federal government provides bonuses and penalties for the states based on their payment-error rates, but this system has induced some states to falsify their records. Tenth, crooked state administrators pocket SNAP benefits. In one recent case in North Carolina, a SNAP caseworker altered food-stamp account information and sent EBT cards to her home address, which she then used to pocket $234,000 of benefits and cash.
SNAP spending is surging, and fraud and abuse appear to be increasing. Card-skimming has become a particularly severe problem. Policing SNAP is challenging because it includes 250,000 retailers and 42 million recipients, who have changing income levels, job statuses, and other factors that affect eligibility and benefit levels.
Haywood Talcove, the head of LexisNexis Risk Solutions, has tracked the rise of SNAP abuse. He warns that we are seeing an “alarming attack on the food-stamp program,” which could cost $20 billion a year. He argues, “What happened during the pandemic was a seismic shift in benefit fraud in government programs. The criminals learned that government is really easy to steal from because they don’t have technology.”
Because the federal government funds SNAP benefits, state administrators have little incentive to minimize fraud and abuse. The solution is to get the feds out of food stamps and let the states fund their own food programs. State lawmakers must balance their budgets, so they have strong incentives to minimize all types of waste when funding their own programs.
