The Biden-GOP debt deal did not cut spending for the Supplemental Nutrition Assistance Program (SNAP), but it did adjust work requirements. However, with SNAP outlays projected to rise from $63 billion in 2019 to an estimated $145 billion in 2023, cuts will be necessary. Congress will have the opportunity to reform the program later this year when it is reauthorized as part of the farm bill.
One of SNAP’s chronic problems is the loss of billions of dollars through fraud and abuse. Fraudulent activities include the theft of benefits 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 reveal ten types of fraud and abuse in SNAP.
The first type involves individuals swiping their EBT cards at corrupt retailers and receiving part of the value in cash. Store owners in Baltimore illegally gained $16 million in SNAP benefits, while meat market owners in Cincinnati were convicted of $3.4 million in illegal SNAP transactions. In Fresno, a bakery owner was charged with $5 million in illegal SNAP transactions. The second type involves individuals selling their EBT benefits to others at a fraction of the value for cash. Some people even put their own food stamps for sale online, while others traffic in stolen EBT card numbers and PINs.
The third type involves individuals buying food with their EBT cards and then reselling it to other retailers for cash at a fraction of the value. In one example, a government worker and her associates pocketed $1.8 million by buying energy drinks with EBT cards and reselling them to corner stores. In Brownsville, Texas, a pair of thieves gained $1.2 million from SNAP transactions partly by buying food with fraudulent EBT cards and then reselling it in Mexico.
The fourth type involves EBT benefit theft through card skimmers, which has soared across the nation at retailers from corner stores to Walmart. EBT numbers and PINs are a great target for theft because the cards do not have chips. The fifth type involves phishing and other sorts of EBT data hacks, which are on the rise. Thieves posing as government caseworkers use text messages to SNAP recipients to gain card numbers and PINs.
The sixth type involves people falsifying their income, assets, employment status, number of children, allowable deductions, and other personal details to gain SNAP benefits illegally. The seventh type involves individuals claiming benefits in multiple states. In one example, 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.
The eighth type involves retailers who are ineligible for SNAP falsifying their applications to get approved, and retailers disqualified from SNAP for trafficking reapplying under different names. The government has greatly expanded the number of SNAP-approved corner stores, which have higher trafficking rates than major grocery chains. The ninth type involves state governments falsifying their records 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. The tenth type involves crooked state administrators pocketing SNAP benefits.
SNAP spending is soaring, and fraud and abuse appear to be rising. Card-skimming has become a particularly severe problem. SNAP is difficult to police 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 that “what happened during the pandemic was a seismic shift in benefit fraud in government programs.” Criminals learned that government is easy to steal from because they lack technology.
Because the federal government funds SNAP benefits, state administrators have little reason 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, and so they have strong incentives to minimize all types of waste when funding their own programs.
