Food Stamps for Cash

Perhaps the foolish ones are those who keep working.

Recipients of food stamps — now called the Supplemental Nutrition Assistance Program (SNAP) — are not supposed to be able to use their cards at ATMs or otherwise receive cash back from purchases made at grocery stores.

But that didn’t stop one store in Glendale, Ariz. from entering into arrangements to convert the welfare benefits into some $2.3 million of cash, splitting the proceeds with select recipients. The couple running to store was arrested for fraud with multiple felony counts.

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.”

That is to say, about 1 out of every 10 stores the agency reviewed in 2012 was either converting benefits into cash, or selling improper items like alcohol or tobacco. Yet, the investigation in Glendale took three years to produce indictments.

Trafficking is not the only way to get cash from food stamps. Some recipients have been known to sell their EBT cards for, say, 50 cents on the dollar — just to get their hands on cash.

But all of that may just be the tip of the iceberg.

As it turns out, many federal and state-based welfare programs, including the federally funded $17.3 billion a year Temporary Assistance for Needy Families (TANF), legally allow for cash withdrawals from ATMs and cash back options at grocery stores and elsewhere.

Several states, like California, New York, and Massachusetts even publish instruction brochures on how to convert welfare benefits into cash.

The restrictions that do exist on EBT withdrawals and cash back in some states are often limited to casinos, bars, liquor stores, strip clubs, and the like. Which is a rather pathetic statement in itself.

Why even bother? If recipients were really dedicated to misusing welfare funds, couldn’t they just go to a bank on their way downtown?

But, once one considers the scope of assistance programs the federal government undertakes, it becomes virtually impossible to estimate how much taxpayer money being mishandled — or how to even possibly enforce restrictions if there were any.

The government does $50 billion a year Supplemental Security Income, $57 billion a year for the Earned Income Tax Credit that often results in negative tax rates for recipients, $33 billion a year for Pell Grants, or even $800 billion a year Social Security program — where there are no limitations at all to converting benefits into cash or what they can be spent on.

There is simply no accountability in such a system.

One assumes the vast majority of the cash is indeed going to pay for basic living expenses and the like. Yet for all of the good intentions of these programs, because almost all of it is convertible into cash, there is simply no way to know.

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