SNAP Fraud

 Federalist article about why states have no incentive to seek out SNAP fraud:

President Donald J. Trump’s Department of Justice uprooted hidden millions May 29, charging an employee at the U.S. Department of Agriculture (USDA) and five New York residents with defrauding the federal government of “$66 million in unauthorized transactions under the Supplemental Nutrition Assistance Program (‘SNAP’) — colloquially known as food stamps.”

“Yesterday was, if not the largest, one of [the] largest stings,” said Agriculture Secretary Brooke Rollins, my former boss at the Texas Public Policy Foundation, of the bust, “At [the] USDA, we are hyper-focused . . . on rooting out that waste, fraud and abuse.”

While $66 million may sound extensive, the fraud scheme lasted about five years, which averages to about $13.2 million a year. That’s only 0.2 percent of New York’s $6.5 billion in SNAP spending last year....

States administer the program and essentially bill the federal government for SNAP subsidies paid out. States split a modest administrative fee 50-50 with the federal government.

This arrangement means there is little incentive for a state to combat fraud because the federal government automatically covers any extra spending. Even fraudsters spend their ill-gotten gains somewhere — most likely in the state where they are operating. Who cares if there is a little fraud? Of course, the U.S. taxpayer does.

Previous academic studies have noted a disconnect in the amount of SNAP subsidies reported by states as paid out and the amount of SNAP subsidies claimed by people receiving them on U.S. Census surveys. One study found that about 35 percent of SNAP beneficiaries will not report receiving benefits out of the approximately 3.5 million households annually who receive the American Community Survey (ACS), while 50 percent of those receiving food welfare fail to report this in response to the 60,000 Current Population Surveys sent out every month.

This underreporting matters for policymakers because SNAP subsidies, as well as other federal, state, and local welfare for the poor, only show a reduction in poverty rates if the income is reported to Census.