Just how common is welfare fraud?

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.”