One stock narrative is the tale of the fraud committed by the poor in regards to government programs. Donald Trump, for example, has claimed that a lot of fraud occurs. Fox News also pushes the idea that government programs aimed to help the poor are fraught with fraud. Interestingly enough, the “evidence” presented in support of such claims seems to be that the people making the claim think or feel that there must be a lot of fraud. However, there seems little inclination to actually look for supporting evidence—presumably if someone feels strongly enough that a claim is true, that is good enough.
The claim that the system is dominated by fraud is commonly used to argue that the system should be cut back or even eliminated. The basic idea is that the poor are “takers” who are fraudulently living off the “makers.” While fraud is clearly wrong, it is rather important to consider some key questions.
The first question is this: what is the actual percentage of fraud that occurs in such programs? While, as noted above, certain people speak of lots of fraud, the actually statistical data tells another story. In the case of unemployment insurance, the rate of fraud is estimated to be less than 2%. This is lower than the rate of fraud in the private sector. In the case of welfare, fraud is sometimes reported at being 20%-40% at the state level. However, the “fraud” seems to be primarily the result of errors on the part of bureaucrats rather than fraud committed by the recipients. Naturally, an error rate that high is unacceptable—but is rather a different narrative than that of the wicked poor.
Food stamp fraud does occur—but most of it is committed by businesses rather than the recipients of the stamps. While there is some fraud on the part of recipients, the best data indicates that fraud accounts for about 1% of the payments. Given the rate of fraud in the private sector, that is exceptionally good.
Given this data, the overwhelming majority of those who receive assistance are not engaged in fraud. This is not to say that fraud should not be a concern—in fact, it is the concern with fraud on the part of the recipients that has resulted in such low incidents of fraud. Interestingly, about one third of fraud involving government money involves not the poor, but defense contractors who account for about $100 billion in fraud per year. Medicare and Medicaid combined have about $100 billion in fraudulent expenditures per year. While there is also a narrative of the wicked poor in regards to Medicare and Medicaid, the fraud is usually perpetrated by the providers of health care rather than the recipients. As such, it would seem that the focus on fraud should shift from the poor recipients of aid to defense contractors and to address Medicare/Medicaid issues. That is, it is not the wicked poor who are siphoning away money with fraud, it is the wicked wealthy who are sucking on the teat of the state. As such the narrative of the poor defrauding the state is a flawed narrative. Certainly it does happen: the percentage of fraud is greater than zero. However, the overall level of fraud on the part of the poor recipients seems to be less than 2%. The majority of fraud, contrary to the narrative, is committed by those who are not poor. While the existence of fraud does show a need to address that fraud, the narrative has cast the wrong people as the villains.
While the idea of mass welfare cheating is thus unfounded, there is still a legitimate concern as to whether or not the poor should be receiving such support from the state. After all, even if the overwhelming majority of recipients are honestly following the rules and not engaged in fraud, there is still the question of whether or not the state should be providing welfare, food stamps, Medicare, Medicaid and similar such benefits. Of course, the narrative does lose some of its rhetorical power if the poor are not cast as frauds.