Welfare quarantining in America

A conservative conspiracy to make government bigger, bury retailers in red tape and tell people how to live their lives, or just another example of populist grandstanding?

The young man wanted a pack of cigarettes but when he pulled out his welfare card to pay, 65 year old cashier Jackie Whiton asked him : "Do you think that the man in line behind you and the lady behind him want to buy you your cigarettes?"

"I’ve never seen the likes of it," Whiton said later. "People who could work using welfare money to buy cigarettes and beer? And it happens all the time. A friend of mine was in another store last week and watched a woman buy three 18-packs of beer with an EBT card."

In the US most welfare recipients access their payments through an Electronic Benefits Transfer (EBT) card. Issued by state governments, these cards work much like a bank-issued debit card. People receiving benefits through cash welfare programs such as Temporary Assistance to Needy Families (TANF) can withdraw cash from ATMs as well as make purchases at supermarkets and other stores.

Jackie Whiton was fired from her job after the man she dressed down at the counter complained to her boss. He later wrote a letter that was published in the Concord Monitor. Explaining that he received welfare for a health condition he said:

Ironically, the same people obsessed with individualism and the free market seem to need to tell individuals how to spend their money. Why do people who are sick or unemployed need to justify their spending habits, simply because they are in receipt of support from their community (transferred via the government in the form of cash)?

Whiton might have lost the battle but others are taking up the cause. Citing the example of a supermarket that has signs saying "use Your EBT Card to buy lobsters today," New Hampshire’s House Speaker William O’Brien wants to legislate to put limits on what people can buy with EBT cards.

In the past, benefits were paid using cheques. EBT cards have made it much more obvious what recipients are buying with welfare money. It’s not just check-out operators who see the card, but often other shoppers as well. Ever since the change, pundits and politicians have argued over what welfare recipients should be allowed to buy with their cards.

In 2005 Minnesota representative Marty Seifert sponsored a bill to prevent Minnesota Family Investment Program recipients from using their cash payments to buy alcohol or tobacco products.

In 2010 Jack Dolan of the Los Angeles Times reported that California welfare recipients could their EBT cards to withdraw cash at casinos and poker rooms. Governor Arnold Schwarzenegger responded to the story by saying: "It is reprehensible that anyone would use taxpayer money for anything other than its intended purpose" and issued an executive order making welfare recipients to promise they will use cash benefits only to "meet the basic subsistence needs" of their families.

In Colorado, ABC news reported that welfare recipients were withdrawing money from ATMs at liquor stores, casinos and strip clubs. Reporters interviewed Penn Pfiffner, a former state legislator and Colorado Union of Taxpayers board member, who said: "If you’re accessing money in a strip club, you’re accessing money in a casino, it’s unlikely you’re there to go buy food for your kids."

Last year President Obama signed legislation that will require state governments: "to maintain policies and practices as necessary to prevent assistance provided under the State program funded under this part from being used in any electronic benefit transfer transaction in any liquor store; any casino, gambling casino, or gaming establishment; or any retail establishment which provides adult-oriented entertainment in which performers disrobe or perform in an unclothed state for entertainment."

The federal law gives state governments until 2014 to comply with the new requirements or face a penalty. As state administrations draft new legislation to comply with the new requirements, state politicians are taking the opportunity to show how tough they can be.

In Massachusetts Governor Deval Patrick supported a bill that would prevent liquor stores, casinos, strip clubs, gun shops, and cruise ships from accepting EBT cards. But house lawmakers wanted to go further. They put forward measures that would prevent welfare recipients from using their cards on specific items including alcohol, lottery tickets, tobacco, jewelry, tattoos and pornography.

In Minnesota Governor Mark Dayton signed a bill that will penalise recipients of general assistance and Minnesota supplemental aid programs who use their EBT card to buy alcohol or tobacco.

Critics accuse politicians of grandstanding on the issue. As StateImpact’s Emily Corwin explains, governments moved from cheques to EBT in order to save money on administration. But according to a survey of agency directors by the E-Government Payments Council, preventing welfare recipients from using ATMs located in prohibited premises is likely to be difficult and expensive.

While it is possible to block EBT cards from specific ATMs, state administrators must first create a list of where those machines are located. For many welfare bureaucrats, the best list they have will be the Yellow Pages. According to the council’s report: "The blending of merchant categories, the reuse of terminal IDs on ATMs and the movement of terminals from one location to another all make enforcement of restriction laws an highly subjective, manual process for those called on to enforce the law, say survey respondents."

States typically use EBT for a number of benefits and it may not be possible to block access for TANF recipients without also blocking access for recipients of payments such as Old Age Assistance, Aid to the Disabled and Refugee Assistance.

In addition, the state agencies responsible for welfare benefits usually have no ability to regulate the operators of casinos, liquor stores and strip clubs. As a result, effective enforcement will depend on cooperation between agencies and additional legislation.

As advocates for welfare recipients point out, media coverage of the issue further stigmatises low-income families and bans of ATMs in places like liquor stores may just make life more difficult for people who just want to use the closest and cheapest ATM to withdraw money for rent bills or bus fares.

According to a report in Stateline by Pamela Prah, the Federal Funds Information for States (FFIS) has questioned whether the costs of administering the restrictions is out of proportion to the problem:

FFIS said a few states have studied the use of welfare electronic benefits at bars and casinos and found a very small percentage (less than 0.1 percent) of TANF transactions occurred at these locations. "This means that states could incur substantial costs to address an issue that does not appear to be a widespread problem," FFIS said in a February brief.

If preventing welfare recipients from accessing ATMs in places like liquor stores is an administrative nightmare, enforcing bans on the purchase of specific goods seems almost impossible without drastically increasing the size of the bureaucracy and improving the ability of different government agencies to work together.

And in the end, as long as welfare recipients can go to an ATM somewhere and withdraw cash, there’s nothing to prevent spending the money on whatever they want.

What about food stamps?

EBT cards are used not just for cash benefits like TANF, they are also used for the Supplemental Nutrition Assistance Program (SNAP). Previously known as food stamps, SNAP benefits can only be spent on eligible food items. For many people, SNAP will be the only benefit they receive through their EBT card. Those who are also receiving cash welfare can have a single card that carries credit for both.

Since the global financial crisis, the number of people receiving assistance through SNAP has exploded. According to the New Republic’s Jonathan Cohn, around one in seven Americans benefit from the program. Recently there have been proposals to further restrict the kinds of food recipients are able to buy. New York Mayor Michael Bloomberg recently proposed banning New York City food stamp recipients from buying soft drink. However the agency responsible for SNAP — The US Department of Agriculturerejected the plan.

USDA has considered this issue before and decided that distinguishing between healthy and unhealthy food is too difficult. "The task of identifying, evaluating and tracking the nutritional profile of every food available for purchase would be substantial", says a departmental report. The burden would fall on an expanded bureaucracy or on food producers. And on top of that, check-out operators would need enforce the new rules.

But none of this has stopped people debating the issue. According to an opinion piece at Bloomberg.com "banning drinks sweetened with sugar and high-fructose corn syrup, such as Coca-Cola or Gatorade, is an idea worth revisiting." The Village Voice has also canvassed the idea of a ban on junk food while a 2010 article in the Atlantic proposed a calorie cap. The "food stamp program should be restructured to cap the total calories purchased each month" suggested Hank Cardello, a senior fellow at the Hudson Institute and author of Stuffed an insider’s look at who’s {really} making America fat.

Florida state politician Ronda Storms recently advocated a ban on purchases of cake, cookies, chips and sodas. A proposal nicknamed the ‘No Twinkie Left Behind bill’. Linda Chavez at Human Events urged conservatives to support her.

USDA runs a much more restrictive nutrition program known as the Special Supplemental Nutrition Program for Women, Infants and Children (WIC) that only allows recipients to buy specific foods (eg infant cereal, eggs, cheese, tofu, whole-wheat bread, fruit and vegetables). Critics of the food stamp program say this demonstrates that restrictions are possible. Some states currently deliver the program using EBT.

One thing that may discourage the federal government from restricting what recipients can buy with food stamps is lobbying from the food and retail industries. When Mayor Bloomberg proposed removing sugar laden drinks from SNAP, the American Beverage Association declared that the mayor’s plan was "just another attempt by government to tell New Yorkers what they should eat and drink, and will only have an unfair impact on those who can least afford it."

Grandstanding

EBT industry professionals are sceptical about the benefits of blocking ATM machines located in places like strip clubs and casinos. According to a post on the eGovernment Payments Council blog: "Compliance costs may in the end exceed the amount of money that is currently being diverted to spirits, slots and strippers."

Laws that go beyond blocking particular ATMs and try to prevent welfare recipients from buying particular kinds of goods are even more difficult to implement and enforce. Last year Massachusetts set up a special commission to look at the use of EBT cards. It looked specifically at the idea of banning particular goods and services and recommended against it.

In the end, many legislators ignored the report. As Governor Deval Patrick explained:

Some of the EBT sections before me now include provisions specifically rejected by the EBT Commission. Specifically, the extensive prohibitions on the purchase of items or services was carefully considered by the EBT Commission, and ultimately rejected for reasons of feasibility, enforceability, cost and undue harm to households enrolled in cash assistance programs. The Commission instead concluded that prohibitions on usage in particular establishments, rather than prohibitions on particular items, were appropriate and feasible. I see no reason, other than political grandstanding, to deviate from that basic conclusion.

It’s likely that many of the restrictions proposed for EBT cards are impossible to enforce without a massive investment in bureaucracy and cross-departmental efforts at regulation. But perhaps some politicians don’t care whether the rules are enforced or not. Maybe simply voting for them sends enough of a message to the people who really matter — voters who, like Jackie Whiton, are angry about people getting welfare.

Related post: America’s food stamp program — It’s welfare, but not as we know it

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Peter Patton
Peter Patton
9 years ago

We have a similar dynamic in Australia. For example, whenever a Media Studies PhD grad hears that a tradie has just bought a flatscreen TV, or taken the family on a holiday to Bali.

derrida derider
derrida derider
9 years ago

This is exactly what the Income Management scheme – currently being extended from blackfellas to politically unfavoured welfare beneficiaries – does. There is extensive international experience available on what works and what doesn’t (mostly the latter) in this area, all of which the government has steadfastly ignored.

Apart from its other problems it is a tremendous waste of taxpayer’s money which could be much better spent elsewhere.

Ken Parish
Admin
Ken Parish(@ken-parish)
9 years ago

I’d be interested in finding out the actual dollar cost of Income Management in Australia, but I suspect the ongoing cost in a direct sense isn’t that great. Once you set up recipients with a Basics Card that can only be redeemed against food and clothing from designated stores that have appropriate bar code systems to accommodate it, the ongoing marginal cost probably isn’t that great. It’s not like the US scheme Don discusses because you can’t use the Basics Card to withdraw cash from an ATM.

The real point is that the positive benefits of the scheme are almost certainly zero or minimal at the very best. Any benefit of allowing Aboriginal recipients to resist “humbugging” by aggressive drunken male family members is outweighed by the detriment of patronising, authoritarian, paternalistic loss of control of one’s life and dignity.

Moreover, as Don’s post DOES highlight, it’s effectively impossible to classify foodstuffs etc with enough precision to ensure that recipients won’t spend much of the Basics Card food allowance on soft drinks, chips, takeaways etc. In the absence of effective basic education programs about health, hygiene and nutrition, which are very difficult with recipients who in many cases are just about completely illiterate, innumerate and don’t speak functional English, a Basics Card system just can’t work (and the statistics fairly clearly show it isn’t working even on the basic level of providing better nutritional choices than previously). It isn’t really surprising that if you treat adult parents as irresponsible dependant children you’re not going to get very good results. What you get is passive aggressive resentment.

Pedro
Pedro
9 years ago

It’s pretty easy to imagine how you could scam the basics card. My main issue is simple; if welfare is provided to parents I want to know the money is being used to properly support the kids. If there is significant evidence of problems in a community, I want the authorities to make sure the kids don’t suffer any more than cannot be avoided.

I’m not sure what objection can be raised to tied as compared to open charity, leaving aside the practical issues. I don’t have a moral problem with it and I think the most important question about the provision of taxpayer-forced charity is its efficiency in meeting the goals of the charity. Dignity-schmignity. If we are giving people money and can’t effectively stop them spending it unwisely then don’t waste money trying. But if the govt could effectively control spending on vices then it wouldn’t worry me if they did.

On Ken’s humbugging comment, I guess there is an assumption about which is really worse. I can imagine it helping if the doubly parasitical behaviour is being materially reduced and a limited visa debit card is not exactly a high price to pay. I’d like to see hard research showing that EBT systems make welfare even more damaging to the recipients.

As a general observation, it would probably save money if welfare recipients smoked and drank themselves into an early grave, so as a heartless libertarian what more could I say than: “drink up, and here, let me give you a light”!

fxh
fxh
9 years ago

One of the original rationales for welfare and things such as adequate benefits for “single mothers” was that children should not suffer for the sins of the parents. The payments and services were to ensure that kids were essentially fed well in the essential pregnancy / early years phase which sets the path for many health/illness issues. It was to breed healthy future Australians.

So that a kid, in pregnancy or early years, should not suffer especially nutritionally if the mother was an illiterate teenager, intellectually disabled, drunk or whatever. Fathers, then and now, seem to be seen as incidental to any parenting or caring or responsibility issues.

It does make sense that we should endeavor to see that the nutritional (and shelter and education) needs of kids are met. The issue is how to do it.

Lefty libertarian rhetoric for “dignity”, “rights” etc lets no hoper parents booze, gamble and inject money away and kids suffer.

As DD notes above, any attempt to introduce a bit of evidence in to the debate falls on deaf ears, (and can be a shortcut to not getting work -IME). \

So we have silly programs administered by public servants , and due to demands for “accountability” by every know all idiot from right and left, we have an enormous cumbersome bureaucracy that to fund will cost many more times what it would cost to drop free drugs, booze and food off at the letter box each week.

Mel
Mel
9 years ago

Peter Patton:

“We have a similar … ”

Peter, you’ve told us on previous occasions that you generally comment on blogs after downing a handful of Xanax and a bottle of gin. Is this still the case? Have you tried the drug and alcohol hotline? Serious question, sweetheart.

Tel
Tel
9 years ago
Reply to  Mel

Saying “sweetheart” proves it is not a serious question.

Ken Parish
Admin
Ken Parish(@ken-parish)
9 years ago
Reply to  Tel

Not necessarily. It could mean that Mel has an entirely sincere curiosity about whether this particular troll’s behaviour has purely psychiatric roots or includes pharmacological elements. There are at least a couple of PhDs in studying the origins of the psychopathology of Internet trolls, I reckon. Imagine the depths of weirdness to be plumbed by studying Graeme Bird, for example.

derrida derider
derrida derider
9 years ago

I’d be interested in finding out the actual dollar cost of Income Management in Australia, but I suspect the ongoing cost in a direct sense isn’t that great.

At a minimum its about $4,000 per head per annum (costing is sensitive to what you include under the rubric). For perspective the single adult rate of Newstart is currently $12,700 and employment agencies are given $500 a head to help the long-term unemployed find work.

If this is about agency problems – ie deadbeat dads beating the kid’s money out of mum and pouring the proceeds down their throat – why is it extended to singles? And why the blanket criteria for unpopular groups (eg young unemployed who’ve been on the dole for 13 out of the last 26 weeks) rather than a case-by-case social worker asssesment?

For those interested in what is actually being done, the Parliamentary Library has a nice neutral summary here.

Tollard Royal
Tollard Royal
9 years ago

One of the things that is particularly objectionable in the Australian policy is how it will severely restrict where people who haven’t been identified as having any special problem will be able to buy the “basics” from. I heard Jenny Macklin on Bush Telegraph this morning and got the strong impression they weren’t having a great deal of success in signing up smaller retailers to participate in the scheme except in remote communities (my interpretation of her answer to that question anyway).

No doubt people on welfare will often choose to shop at the larger cheaper chains anyway, but there are many circumstances where that won’t be the case, eg if you just need milk and bread and the nearest Woollies is two suburbs away or you’re a Chinese immigrant who wants to buy something at your local Asian grocery. It will also make it harder to cope with large “non-basic” expenses like a mechanical problem in your car or an annual insurance bill (if you can afford those sorts of things) by skimping on everything else for a while, which might be an entirely appropriate thing for someone to do in certain circumstances.

All the evidence Macklin cited in the interview to support the scheme was anecdotal, although I missed part of it.

Stephen Hill
Stephen Hill
9 years ago

Yeah, I heard that Macklin interview on RN – and I noticed she didn’t really answer about the economic impact on smaller retailers (of which there will be an even more diverse range of stores in urban areas).

The biggest problem I can see if this is administered universally on a large group of welfare recipients is that there will be a black market trading of the cards. If it was only targeting a smaller percentage of people with evidence of problems (say a notification from DOCs) there might not be the economies of scale to encourage this, but I think when this is rolled out into urban areas it will encourage a new form of entrepreneurial behaviour between welfare recipients unhappy with the changes and a new group of opportunists.

Dan
Dan
9 years ago

As a taxpayer I’m interested in my money being spent efficiently. If income management costs more to administer that what it recoups in, uh, suitable spending, then shitcan it. Obviously.

Whichever way you go, there’s social harm and I don’t think that’s easy to quantify or offset.

As for ‘get a jerb’, that’s a completely vicious and pointless attitude to take if there are no jerbs.

Pedro
Pedro
9 years ago
Reply to  Dan

What if income management is necessary to make sure a reasonable percentage of the welfare gets to the kids? Does admin efficiency trump results?

Dan
Dan
9 years ago
Reply to  Pedro

Is it, though? And do the flow-on effects more than offset the first-round benefits?

Mel
Mel
9 years ago
Reply to  Dan

What are the alternatives, Dan? I don’t like welfare quarantining and I very much doubt it is going to be a long term solution but I don’t know of any great alternative either, other than another round of child removal.

Dan
Dan
9 years ago
Reply to  Dan

I don’t know. What I do know is that there are plenty of dysfunctional and neglectful families that are not subject to welfare quarantining, or perhaps even welfare.

Pedro
Pedro
9 years ago
Reply to  Dan

“Is it, though?” I don’t know, I’m only making the point that admin efficiency isn’t everything. Transfer funds that are wasted are better not transferred.

” What I do know is that there are plenty of dysfunctional and neglectful families that are not subject to welfare quarantining, or perhaps even welfare.”
That’s not an argument against WQ.

derrida derider
derrida derider
9 years ago
Reply to  Pedro

People need to familiarise themselves with the concept of opportunity cost. The pool of taxpayer’s money is strictly limited – every $4000 we waste on this stuff is $4000 we can’t spend on something that might actually help. “Admin efficiency” actually matters.

Dan
Dan
9 years ago

Indeed.

Tel
Tel
9 years ago

USDA has considered this issue before and decided that distinguishing between healthy and unhealthy food is too difficult. “The task of identifying, evaluating and tracking the nutritional profile of every food available for purchase would be substantial”, says a departmental report. The burden would fall on an expanded bureaucracy or on food producers. And on top of that, check-out operators would need enforce the new rules.

That’s a very strange comment when you consider that the USDA sends inspectors into schools to punish the kids if their parents made them an non-approved lunch (I’m not making this stuff up, go do a search). They can somehow decide what parents should be offering their own kids, but can’t figure out how to effectively deliver welfare. It’s almost like they aren’t trying, or maybe they are just focussed on the wrong things.

My feeling is that food is intrinsically non-linear. If you haven’t eaten for two days then food is guaranteed to be high on your priority list. If you just put down a big meal then you are going to have great difficulty eating another of the same. Thus, if you give people the ability to walk in, swipe their card and sit down to a meal, then when they walk away they most likely won’t die on you from hunger or disease, nor will they try to stuff an extra meal into their stomach while no one is looking. It’s simple, it does the job, it is hard to scam, and your average government bureaucrat can get her head around how it works.