Just how common is welfare fraud?

Posted at 9:51 AM on July 21, 2010 by Nate Minor (6 Comments)

A few days ago, the Duluth News Tribune reported on a couple accused of welfare fraud.

"James Lauer, 49, and Tari Lee Lauer, 42, ... [are] accused of wrongfully receiving cash, food support, medical assistance and child-care assistance totaling almost $20,000 during various periods from October 2006 to July 2008 while failing to report about $400,000 in income and assets."

A St. Louis county investigator discovered the couple went on a shopping spree, including a $37,000 Chevrolet Avalanche, a $67,094 Cadillac Escalade, a $38,680.07 Nissan Titan, and a $18,283.43 2007 Ford Mustang convertible, none of which were reported to the county.

Five days after the article was published, it is still the most commented on the DNT's website (In the Internet age, that means the story has hit quite a nerve.) Some commenters on the story were upset to see their tax money going to a couple that appears to have not needed it, including this constructive suggestion:

"This is why all welfare should be administered at the most local level. Locals know what's going on and can put a stop to abuse." (Turns out welfare is administered on a local level, as has been pointed out below.)

Many of the comments, including this one, asserted the scope of the problem was huge:

"The fact is it's happening ALOT more than we see."

So is that true? Are most people on government assistance "welfare queens", as President Ronald Reagan implied?

Kaaryn Gustafson, at the Northwestern University School of Law, argued in a recent article (pdf) "The Criminalization of Poverty", that yes, welfare fraud is widespread. However, as you might guess, it's complicated.

"Poor families usually tum to the welfare system only when they are in desperate need and cannot find employment to provide their most basic needs. However, the cash benefits available under [TANF, a federal program] are too low to sustain a family. The gap between resources and need often leads welfare recipients to seek income to supplement their welfare benefits and to hide that income from the welfare office."

While the couple in St. Louis county will be prosecuted, Gustafson would argue it's an extreme case of welfare fraud and not the norm. She references a Los Angeles audit that found only "34 percent of statewide fraud investigations and 30 percent of Los Angeles fraud investigations produced evidence of fraud."

In her own words:

"According to welfare officials, welfare fraud measures are designed to achieve several goals: to catch welfare cheats, to deter would-be and actual welfare cheats, and to reduce governmental costs. The first goal, catching cheats, is one that the system is certainly achieving. The problem, however, is that the vast majority of welfare recipients are technically welfare cheats. If they were not, they would be unable to survive."

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Comments (6)

Oh, so many things going on here.

First, "welfare" IS administered locally by the counties the person lives in. While small population counties may have Financial Workers (those who administer the benefits) who know everyone that is just not the case in medium to large counties, like St. Louis.

In regard to the idea that most people have to lie to keep on programs, I agree that it is pretty much true. There are some crazy rules first of all. Such as if you live with someone, even a stranger who happens to be your roommate, and if you EVER share food, like seasonings, you have to count their income into the food stamps grant. This means if you rent a room from someone and you make $500/month and they make $5000/month and "shared" food at all, their income has to be counted and you will be ineligible for food stamps. Of if you prepared a meal together once, same thing.

Panhandling, can recycling and plasma donations are all required to be reported income that counts against your grant or food stamps. I promise that this is almost never reported. In fact, you are technicall required to report ANY income making schemes you have including illegal ones like prostitution and drug dealing.

If you get a birthday gift of $50 from your parents, that's counted income and needs to be reported. Unless you are required to pay it back or they pay your rent directly.

So yes, lots of welfare fraud going on out there. But the people with multiple cars and lots of income usually get caught. It may take awhile, but we get them. Whe have lots and lots of fraud prevention tools in place. And we are devleoping more all the time. But somethings, like can collection income, will never be caught and I doubt the administration has much interest in trying.

Posted by Kassie | July 21, 2010 11:57 AM

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Kassie - I don't think many people count failing to report your recycling money as fraud. I have known and reported friends that got on welfare and once they got back on their feet never got off. People making over $75K per year.

Posted by BJ | July 21, 2010 1:12 PM

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BJ- The fraud department considers not reporting recycling money as fraud. Same with panhandlers, who can bring is as much as $1600/month. If someone were to get $100 a month in recycling funds that would reduce their grant by $100, which can be about 50%. That's a big deal.

Posted by Kassie | July 21, 2010 1:44 PM

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It bothers me that actions like theirs create such a hostile environment for people who really NEED welfare.

Also, I know this isn't what we're talking about here, but the "ALOT" in the comment Bob quotes above practically compells me to share something amusing:

http://preview.tinyurl.com/y42zurt

It's "a lot," people!

Posted by Heather | July 21, 2010 5:09 PM

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I would give 5 to one odds that there are more tax cheats than those committing welfare fraud and those committing welfare fraud are also tax cheats and we are spending a whole lot more time and energy trying keep the "bad guys" from getting welfare which ends up totally frustrating and keeping many who are deserving off the roles because they can't navigate the system.

Solution: Make welfare applications similar process to filing for taxes and audit a certain ppercentage in hopes of deterring liars/cheats. If it works for the IRS, why not social services? I will double my bet that those audits will be cleaner than the IRS audits. And which audit might be more fiscally productive? HMMMM...

Posted by Minn Whaler | July 22, 2010 6:05 PM

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I'm on a welfare reform kick right now. Seeing this article put a smile on my face. I bearly make it for a family of four, who both have gone through career changes in the past year. I work my butt off, and so does my wife. we managed to keep our home and all our "stuff" by tightening our belt and changing our lifestyle. I'm a mechanic and recently ran into "The county is paying for this." from a customer. The county did , I was shocked! It turned out that the county pays for sheer neglect of a car, it turned out the car needed more than the county was willing to pay due to the stupidity of the owner. She came in and demanded the car back, and made a huge scene. We did not release it to her because it hadn't been paid for yet. She stated she was going to junk the car for $500.00 and wanted it right now. My thought on this is, the county paid $1800 to start fixing the car, the customer lied to us on how and for how long the car was broken, now she wants to get her $500? NO WAY LADY! That car should go back to the state for auction so they can recoup the taxpayers money. I have emailed the news channels and several state reps on this car repair system, to no response yet. This economy is killing everyone and I understand the need for assistance, but the career welfare citizen needs to be CUT OFF!

Posted by Keith Molenda | April 6, 2011 5:22 PM

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