The Very Short History of Food Stamp Fraud in America

7 minute read

The reform of the United States’ approximately $1 trillion in welfare programs is a perpetual subject for lawmakers to debate, but few federal welfare initiatives regularly undergo as much scrutiny from would-be reformers as the Supplemental Nutrition Assistance Program (SNAP), also known as food stamps. Stories of possible misuse of the program easily grab headlines, the budget proposed by President Donald Trump — who has been vocal about his opposition to the program as it exists today — would result in some cuts to the program, and Americans are divided about whether the current system works.

This $70 billion program provides essential food to just under 44 million low-income Americans, the majority of whom are women and children. But the initiative itself has ballooned rapidly since the recession in 2008 and now costs nearly twice as much as it did just a decade earlier. (This is largely because the economic upheaval caused more Americans to need the help of food stamps to feed their families.) Such rapid growth has in turn made the program a target for budget-minded lawmakers like Speaker Paul Ryan.

Critics often base their opposition to the program on a belief that SNAP itself is riddled with fraud. They claim groups of welfare recipients are ripping off the American taxpayer by claiming benefits for which they aren’t eligible, claiming more benefits than those to which they are legally entitled, and by selling off food stamps to buy other non-food items, such as guns or drugs.

However, the real history of food-stamp fraud reveals that — while such fraud has been an issue confronted by the United States Department of Agriculture, the federal agency in charge of SNAP — that concern is misplaced today.

The first formal food stamp program in the United States was implemented in 1939 as a means to help the United States at last pull itself out of the Great Depression. All throughout the 1930s, farm prices had plummeted and farmers were struggling to sell their surplus crops. At the same time, millions of America’s jobless were going hungry. And so Uncle Sam stepped in with the “Food Stamps Plan,” an initiative in which families that purchased $1 worth of orange stamps to buy their groceries would receive an additional $0.50 blue stamp with which they could purchase goods the government had labeled “surplus.” By 1943, some 20 million people had used the program in some form or another.

Unfortunately, less than six months after the USDA implemented this first federal food-stamp initiative, a retailer, one Nick Salzano, was caught mischarging customers who were paying with the stamps. Mr. Salzano’s case was widely publicized as the first known incident of food-stamp fraud, though his efforts do not appear to have been widely replicated in the early years of the program.

While the increasing economic prosperity of the World War II era ended the first food stamp effort, the need for such a program reemerged as a national issue during John F. Kennedy’s campaign for the White House in 1960. While most of the country had flourished during the 1950s, certain pockets remained riddled with poverty and plagued by hunger. One such corner was West Virginia coal country and when the then-candidate Kennedy and his wife Jackie campaigned in the region they were shocked by what they encountered. As Ted Sorensen, Kennedy’s former speech-writer and later biographer, wrote:

“He was appalled by the pitiful conditions he saw, by the children of poverty, by the families living on surplus lard and corn meal, by the waste of human resource… He called for better housing and better schools and better food distribution… He held up a skimpy surplus food package and cited real-life cases of distress.”

In 1961, following his rousing victory in the presidential election, Kennedy’s first executive order was to reinstate a national food stamp program similar to that of the Great Depression. Three years later this pilot program was made permanent under President Lyndon B. Johnson by the 1964 Food Stamp Act.

The program, which Congress initially estimated would only serve at maximum 4 million people, grew beyond anyone’s expectations. By 1970, already some 5 million Americans were buying stamps through the initiative, a number that doubled to 10 million by the end of the next year. With support from the nation’s farmers, who were still benefitting from supplying the program even though specific goods were no longer deemed “surplus,” and thanks to strong advocacy by poverty groups, in 1977 the requirement to spend money to purchase stamps in order to participate was eliminated, meaning now the poorest of the poor could benefit from the national effort to eliminate hunger. By 1979, roughly 20 million low-income Americans depended on the program, the vast majority of whom were using food stamps properly to feed themselves.

Unfortunately, as the program grew, so too did incidences of abuse. Throughout the 1970s, and 1980s, USDA agents uncovered food-stamp trafficking rings in Chicago, St. Louis, and Philadelphia. Prisoners locked up in Tennessee were claimed to be at home by family members trying to get their benefits while food-stamp recipients in Ohio sold their coupons to store merchants for cash. Federal Agents working in Nevada in the early 1980s told reporters at TIME that they were able to purchase “four guns, two diamond rings, a handsaw, cocaine, a macaw from Mexico, the proffered services (declined of course) of two prostitutes, even a three-room house on Tamalpias Avenue,” all with food stamps.

Between 1981 and 1983, a federal task force of 900 employees uncovered evidence leading to 1,390 indictments of food stamp fraud nationally and one study in the 1970s found a fraud rate in certain cities as high as 55.4%. Although these indictments represented just a tiny number of the some 22 million food stamp recipients by the early 1980s, their impact was estimated to be some $1 billion of the then-$30 billion initiative. And these cases were merely what the task force was able to track down; as one former inspector General for the Department of Agriculture told TIME in 1982, “There is so much fraud we don’t catch that it’s mind-boggling.”

Incidents of high-profile fraud eventually birthed the myth of the “welfare queen” and made the food stamp program “the most unpopular social welfare program by a wide margin” in the early 1980s. With Congress receiving reports of national fraud rates between 10 and 20%, the program became a ripe hunting ground for Ronald Reagan’s efforts to slash government spending.

Reagan’s food-stamps reforms came in a myriad of forms, from altering how eligibility was determined to slashing school-lunch programs to giving USDA inspectors more tools for enforcement, but the most effective effort to reduce fraud actually came from simply altering food-stamp technologies.

For most of the history of the food stamp program, benefits had been distributed via physical paper stamps on a small scale by local municipalities, which meant the coupons themselves were easy to counterfeit and often difficult to track. But in the late 1980s, states began introducing the now-common Electronic Benefits Transfer (EBT) card. These cards are how SNAP participants continue to receive their benefits today. They are tied directly to government identification records, require a PIN to authorize payments, and don’t involve an exchange of cash during transactions, all modifications that eliminate a host of potential sources of fraud as the stamps pass from families to store-owners.

While critics still like to use old arguments of rampant abuse to lambast a program that feeds millions of Americans, the fraud rate has decreased from “about 4 cents on the dollar in 1993 to about 1 cent” by 2006.

And this decline has only continued, with the 3.5% rate of fraud in 2012 reducing to less than 1.5% today.

Emelyn Rude is a food historian and the author of Tastes Like Chicken, available now.

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