In American culture, there is a deeply ingrained moral value placed on work. On having an “entrepreneurial spirit” and a strong work ethic. It is part of what makes America a great country. “Greed is good” may be the slogan we use to describe capitalism, but for those of us who get up in the morning to go to work, it isn’t greed that motivates us. It is the sense of purpose and dignity that we get from our jobs and from doing those jobs well. And, from needing to eat.

Most Americans agree that there is a standard of living that we should not allow our citizens to fall below, even if it means that we use some of our resources to help them. We don’t think it is morally right for fellow citizens to starve, especially children. Our policies on public assistance reflect that belief and try to provide the very basics of life to everyone.

These policies also reflect a tension between American generosity and the American ideal of the entrepreneurial spirit. In an effort to both prevent hunger and to protect the American work ethic we reformed assistance programs to eliminate cash benefits and to tie receiving benefits to work or the search for work. It has led many recipients of SNAP assistance, more commonly referred to as food stamps, to sell their benefits for cash rather than using them for food. This is a crime and may carry fines, jail time, and a loss of benefits. One that we spend a lot of time and effort trying to eradicate. But should we? Or should we be turning a blind eye to, or maybe even encouraging, the sale of food stamps for cash?

Say It With Cash

Take your net income per month and divide it by 30. For most of us, the amount is probably more than $2. Yet many Americans are living on $2 a day or less.

In the book “$2 A Day: Living on Almost Nothing In America,” authors Kathryn Edin and Luke Shaefer go into a detailed explanation of the history of welfare reform in recent decades and a series of interviews with Americans who live on $2 a day or less. In October 2015, PBS interviewed Edin who spoke about some of the book’s major themes:

The book’s central theme is that while food is the most important necessity for people in poverty, they also have other needs that can only be met with cash. Goods like electricity, clothing, and phones might be considered luxury items but are vital tools in looking for work. Because they have no other source of income they end up selling things to get cash–like plasma, sex, and food stamps. The cash that they get is able to be used for necessities that food stamps can’t pay for.

The beauty of cash is that it allows you to purchase whatever you need with it. If at that particular time your most pressing need is clothing, cash allows you to sacrifice your need for food in favor of clothing. It gives the person the choice of how to best allocate their resources. The downfall of course, from the point of view of the taxpayer, is that a recipient of cash may decide that drugs or alcohol, and not food, is their most pressing need and use the cash for that. It is partly this fear of misuse that encouraged the reformation of welfare from cash benefits to benefits like SNAP, where recipients are locked into only buying food with their EBT cards. It also drives the movements emerging in many states to prevent these benefits from being used for certain luxury food items or junk food items.

Contract Of Adhesion

For many, the main concern with the sale of food stamps is not that people are selling them but how much they are getting. Selling your food stamps is a terrible deal. The going rate for $100 worth of food stamps is between $50-60 dollars depending on what part of the country you are in. By selling your food stamps, you’re losing about half of your purchasing power. In some places, if the store owner is particularly friendly, it can be a little better, but generally, sellers take a loss.

The relationship between food stamp buyer and seller is an unorthodox example of the legal concept of a contract of adhesion. A contract of adhesion is a legal phrase for “raw deal.” Essentially, when the bargaining power of the parties is very unbalanced, so much so that the weaker party really can’t meaningfully negotiate the terms of the contract, courts may take a look and invalidate the contract or provisions of the contract that are “unconscionable.” Typically, contracts of adhesion are things like insurance contracts, mortgages, and credit cards. The little guy versus the big guy. These contracts are often “boilerplate” meaning that they are pre-written and the same for everyone. The little guys here aren’t special and don’t really have a way to haggle with the big guy to get a better deal. So courts will give those contracts a closer reading in a light that favors the little guy.

Selling your food stamps is a lot like that. For one thing, if you need the cash you NEED the cash. Just like someone who is buying a house really does need a place to live and maybe can’t negotiate with the lender. Only perhaps more so because a home buyer doesn’t necessarily need that specific house. The cash buyer may not also have the luxury of shopping around for the best rate. Just as a home buyer may not have enough good options for a line of credit, the cash buyer may not have enough potential buyers they can go to–there may only be a few people willing to buy food stamps in a given area.

The illegal nature of the sale has the effect of making the contract even more unfair for the seller because the buyer is charging a fee to assume that risk. The greater the risk of a fine or jail time to the buyer, the more the money cost. So instead of getting $60 for your $100 worth of food stamps you might get $50. These are the same issues that prevent the seller from negotiating for a better price. Someone might be perfectly willing to give them $85 in cash for $100 in food stamps. But sellers may be reluctant to shop around because doing so increases the likelihood that they could be caught. Increasing sting operations, which are designed to stop the sale of food stamps, may only drive the price down and may not have diminished sales meaningfully.

This video from Democracy NOW! provides another account of how SNAP recipients are selling their food stamp benefits.

In 2012, the USDA’s Office of the Inspector General, which is in charge of prosecuting SNAP fraud, devoted half of its resources to combating SNAP fraud and abuse. This includes both fraud in collecting benefits when you shouldn’t as well as “trafficking,” the official term for selling food stamps. That year it investigated 15,000 stores and did 4,500 sting operations. Out of the 15,000 stores, 2,100 of were either shut down or sanctioned, meaning that 14 percent of the stores were punished. The 4,500 undercover investigations resulted in 342 convictions, about 0.75 percent.

The problem with the selling of food stamps is that we aren’t sure what the sellers will be buying with their cash. Most of us are sympathetic when we hear about a woman who sells her food stamps to buy diapers, which you can’t buy with food stamps. Even if that activity is illegal, many of us do not find it to be quite so immoral. But because the sale of food stamps is a contract of adhesion that mother, and many like her, is able to buy a lot fewer diapers than she normally would be able to after selling her food stamps. And we fear that she won’t be using it to buy diapers at all but to buy alcohol or drugs.

This is a legitimate fear. Changing the program to one that is purely cash assistance would allow recipients to use the money on anything they want to. That is both the benefit and the drawback of that change. They may choose to buy diapers or electricity, or they may buy vodka. There would be no way to effectively control their spending if the benefit was pure cash.

The Parable of The Talents

There was one story in “$2 A Day” of a SNAP recipient spending her benefits on junk food. Rather than buying healthy foods, she chose to spend it partly on transportation (through an illegal conversion from food stamps to cash) and partly on cups and Kool-Aid. She was able to make popsicles and then sell them for a dollar each–increasing her income with that initial investment. Rather than taking the 50 percent value of her food stamps in cash and buying her other necessities, she took that cash and turned it into more cash.

She’s a criminal and an entrepreneur. The cash from the food stamps was a greater benefit to her than the food stamps themselves. So how do we craft a policy that will protect the taxpayer interest in keeping that money from being spent in inappropriate ways while still promoting the core American value of the entrepreneurial spirit?

Proposed Reforms

Reformers from all points on the political spectrum have advocated amending welfare benefits such as SNAP and TANF (Temporary Aid To Needy Families) in an attempt to help those programs combat poverty in a more meaningful way. Many of these reforms focus on trying to change the incentives for beneficiaries by encouraging behaviors that are thought to alleviate poverty and provide social benefits, particularly marriage, in addition to encouraging work. Republican presidential hopeful Jeb Bush proposed eliminating the various programs that we call “welfare” (TANF, SNAP, etc.) and instead provide states with block grants so that they can choose how to provide benefits. Currently, states have a lot of leeway in how they structure their benefits–which leads to a lot of differences in the support people can receive in various states–but they are all within the framework of meeting federal government criteria to get funding. That usually means work requirements. Eliminating the need to satisfy federal requirements would allow states to experiment further.

One positive aspect of that approach is to use federalism to our advantage and allow states to each try a slightly different method of delivering benefits to low-income individuals. But it does not change the need that many poor individuals have for cash benefits who qualify for SNAP but not TANF. States are unlikely to adopt less stringent work requirements for aid, in fact, the trend has been in the opposite direction. In Maine work requirements were tied to food stamp benefits in 2015, which resulted in a sharp reduction in the number of people receiving SNAP benefits.

Other Possible Solutions 

One solution might be to develop a hybrid system for benefits. Like most of the changes proposed it would require more of an investment in the program. But we could set up a system where the SNAP benefits are primarily for food, with a small portion of the benefits made available in cash as well. That cash might be used for bad purposes, but if only a portion of the benefits was available in cash then not all of the benefits would be “wasted.” Some would still need to be used for food though they could still be sold on the black market. The initial investment would be in determining the correct ratio of cash to food stamps but it wouldn’t require as much monitoring as other options.

There is a government program already in existence, TANF, which does provide cash assistance to families that qualify. This program was designed as a replacement to Aid To Families With Dependent Children (AFDC) and sought to tie cash assistance to work requirements. To get funding for the program from the federal government, states must maintain certain percentages of working recipients. The goal of tying work requirements to the receipt of assistance is to encourage people to seek work and to make sure that families do not develop a cyclical dependence on TANF. There are also time limits placed on the benefits for that same reason.

The problem is that for many people, particularly after the Great Recession, they are unable to find employment that can satisfy these work requirements. This has cut the amount of people receiving cash assistance drastically since 1996. In 1996, 68 out of 100 families in poverty received TANF. In 2013, only 26 out of 100 families in poverty received it. Cutting the number of people who are eligible makes it so fewer people receive benefits, but that does not actually reduce the number of people in need. Even if TANF was an effective program to assist the working poor it does nothing for families who have fallen out of the mainstream economy almost completely.

Another option is to increase the number of vendors of legitimate products that we want people to purchase who accept food stamps. Instead of making food stamps into cash just make them more like cash. Encourage, or require, utility companies and clothing stores to accept EBT cards as payment. That way recipients can use an EBT card to pay for electricity or clothing without having to take the loss of purchasing power that accompanies turning it into cash on the black market.

There are some programs that attempt to deal with the needs for a phone and for utility subsidies for low-income Americans. For example LIHEAP (Low-Income Home Energy Assistance Program) provides federal funding to states to assist families with their utility costs. However, each state can set its own eligibility standards, which is true of the other programs as well. As a result, the rate of people receiving benefits ranges widely across states. In states where you need to receive TANF in order to qualify for LIHEAP, the non-working are once again left out.

A final option would require more manpower to distribute aid but might do the most to both encourage personal responsibility on the part of the benefits recipients as well as eliminate potential fraud: working with beneficiaries to help figure out what their greatest needs are and then tailoring their benefits accordingly. The poor are not a monolithic group. Those in rural areas may be able to supplement their diet with home-grown food and so may need less in food stamps but more in their transportation budget. Someone who is poor in an urban area might be able to travel on foot while they hunt for work but because they live at a shelter they need a cell phone to be able to contact potential employers. Matching the benefits more closely to the individual needs satisfies our core value of encouraging personal responsibility while also protecting our interest in only spending our tax dollars on items we approve of.

Conclusion

SNAP recipients selling their benefits for cash is a growing phenomenon that is unlikely to go away even with more vigorous efforts to combat it. The types of needs that the poor have here in America almost require the use of cash rather than food stamps alone. Even so, Americans struggle with how to balance our values: concern for the poor and the promotion of the entrepreneurial spirit.

Resources

Goodreads: $2.00 A Day: Living On Almost Nothing In America

Fox News: State Food Stamp Purchases

The New York Times: Food Stamp Fraud, Rare But Troubling

Cornell University Law School: Legal Information Institute: Contract of Adhesion

CBS: Food Stamp Recipients Selling Benefits For Cash

United States Department of Agriculture: Food and Nutrition Service: Fraud

The Weekly Standard: Food Stamp Trafficking Up 30 percent From 2008-2011

The American Prospect: Stop Worrying About Food Stamp “Fraud”

Government Accountability Institute, Profits From Poverty: How Food Stamps Benefit Corporations

SNAP to Health: The History of SNAP

Center on Budget and Policy Priorities: Policy Basics: An Introduction to TANF

Journalist’s Resource: Inequalities In U.S. “Safety Net” Programs For The Poor

CNN Politics: Jeb Bush Releases Welfare Reform Proposals

International Business Times: Which US States Have The Most Welfare Program Benefits?

The National Review: Getting Welfare Right

Mary Kate Leahy

Mary Kate Leahy (@marykate_leahy) has a J.D. from William and Mary and a Bachelor’s in Political Science from Manhattanville College. She is also a proud graduate of Woodlands Academy of the Sacred Heart. She enjoys spending her time with her kuvasz, Finn, and tackling a never-ending list of projects. Contact Mary Kate at staff@LawStreetMedia.com

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The idea of a “welfare queen” has been a political talking point for several decades. It began as a term used by President Reagan in a story he told while he was running for election in 1976:

‘In Chicago, they found a woman who holds the record…She used 80 names, 30 addresses, 15 telephone numbers to collect food stamps, Social Security, veterans’ benefits for four nonexistent deceased veteran husbands, as well as welfare. Her tax-free cash income alone has been running $150,000 a year.’

The idea of a welfare queen has evolved into being characterized as a woman who stays on welfare, receiving benefits, and continuing to have children so she can get even more money from the government to support those children. In the eyes of many, the stereotype is thoroughly racist–she’s an under-performing black woman, living off of taxpayers’ money. The term is seen by many as a dog whistle of sorts, a way to play on the public’s racial anxieties without actively saying so.

Read More: No Strings Attached: Replacing Welfare With a Guaranteed Income

Some claim that Reagan’s story was a complete lie, but, there is some proof that it was at least based on reality. It now appears that there wasn’t just one welfare queen, but the subject of Reagan’s story  was actually an amalgamation of three different women. Craig R. Smith, a former speechwriter for Presidents Ford and George H.W. Bush said,

It hangs together as a good story because it’s consistent with people’s perception of the real world…Like in any good mythology, you need heroes and villains and in the Welfare Queen, you had a villain who was taking advantage of the system.

Regardless of the truth, this story changed the minds of many Americans about the state of the welfare system and the people who receive the benefits.

 What is the “Welfare Queen” law?

Nearly two decades ago, California  passed a law that many have come to call the “Welfare Queen” law. It states that a family that has any additional children while on the welfare system is barred from getting any increases in the grant it already receives from the state. There are exemptions made if the couple in question can prove that birth control measures such as sterilization, IUD, or Norplant failed. There are also concessions made if the case involves rape or incest. In cases like those, the mothers were more quickly offered medical, physical, and monetary help. California is not the only state to use a variation of this law. In fact, other states including Arizona, Mississippi, and Virginia have similar measures.

Senate Bill 23

California Democrats are fighting to repeal the measure, calling it “classism” and “prejudicial” to the citizens of the state. Holly Mitchell, a Senator from Los Angeles, is working for the third time to abolish the law. She introduced Senate Bill 23, which would repeal the “welfare queen” law.

Advocates for the poor are mounting their strongest efforts ever to repeal the “maximum family grant” ruling as the state is about to set its budget for the next year. These changes come after it was announced that California was named the state with the highest child poverty rate.

“It is a classist, sexist, anti-democratic, anti-child, anti-family policy whose premise did not come to fruition,” said Mitchell, the author of Senate Bill 23. “It did not accomplish what it set out to accomplish. So it’s appropriate to take it off the books.”

California is very split on this topic, ranging from those who would like to impose stronger rules against the so called “welfare queens” to those who want to completely annul the law.

Arguments to Eliminate the “Welfare Queen” Law

The average cost to raise a child in America, from birth to 18 years old, is $241,080, according to CNN Money. That breaks down to about $1,116 a month–something that many low-income families will not make. If a family has more than one child, many families will go without in order to provide for the children instead.

Advocates for repeal also argue that when it comes down to it, the law is aimed at controlling women. According to Sacramento Bee, Toni Atkins (D-San Diego) said reversing the policy is “critically important to families, telling a recent women’s policy summit in Sacramento that the criteria are “’invasive (and) insulting.’” Some have even compared the law to China’s One Child Policy. Women’s groups and Planned Parenthood find fault with this measure as well, citing that it is more controlling than necessary.

In addition, those who want to repeal it say that it unfairly punishes children for the actions of their parents. Newborns need care and support, and not allowing the parents of newborns to gain the necessary resources can endanger the health and wellbeing of those children.

In an unlikely collaboration, Linda Wanner, the associate director of government relations at the California Catholic Conference, said that her group favors annulment of the bill as well, but for other reasons: “We have the opportunity to remove burdensome county processes, reduce the number of children living in poverty, and, more importantly, eliminate the incentive to terminate a pregnancy,” she said.

Arguments to Keep the Law in Place

Those who oppose abolishing the law say that removing it to raise the amount of money that the family gets will not lift any family out of poverty. According to the Sacramento Bee, Mary L.G. Theroux, senior vice president of The Independent Institute, a nonprofit research organization based in Oakland, said she doesn’t disagree that the law did not prevent births. “The opportunity cost of them having another kid is not going to stop them from doing it,” she said. However, she continued to say that giving more money would not give the growing families the incentive to get help from charities, family members, or find higher paying jobs. She then continued, “What these programs are doing is completely handicapping people from learning how to take care of their families and how to help their children have a better life than they do.” In addition, many feel that these programs that provide complete care to parents and children actually hinder further development of the child and his or her autonomy.

There’s also a concern that repealing the law would be a huge economic strain on the state of California. The state’s economy has been struggling since the recession in 2008, and pouring more money into welfare could harm its rebound even further. One analyst claimed that repealing the law could cost up to $205 million a year, although that number is difficult to reliably quantify.

According to the Sacramento Bee, Senate Republican Leader Bob Huff (R-Diamond Bar) said that helping families in poverty is an important role for officials in the state government as well as people outside of the state, and is even a nationwide issue. The question is whether repealing the maximum grant is the best thing to do with the money. “Putting $200 million into an effective job training program or providing child care for working mothers would be a better use of resources,” Huff said. Huff “pointed to a long list of other needs for both the parents and children in the state, including services for the developmentally disabled and foster children.”

Conclusion

This is not the only time that discussions have been developed around the “welfare queen” law. In 1996, President Bill Clinton signed a welfare reform law, and then-Governor of California Pete Wilson and lawmakers compromised on a statewide program called CalWORKS in 1997. This bill stiffened the work requirements and set time limits, sanctions, grant levels, and eligibility requirements for California welfare recipients.

So how much fraud is there really in the welfare system? According to Eric Schnurer of the Atlantic it’s actually not so clear.

It’s not easy to get agreement on actual fraud levels in government programs. Unsurprisingly, liberals say they’re low, while conservatives insist they’re astronomically high. In truth, it varies from program to program. One government report says fraud accounts for less than 2 percent of unemployment insurance payments. It’s seemingly impossible to find statistics on ‘welfare’ (i.e., TANF) fraud, but the best guess is that it’s about the same. A bevy of inspector general reports found ‘improper payment’ levels of 20 to 40 percent in state TANF programs — but when you look at the reports, the payments appear all to be due to bureaucratic incompetence (categorized by the inspector general as either ‘eligibility and payment calculation errors’ or ‘documentation errors’), rather than intentional fraud by beneficiaries.

The number of people living in poverty in California, and nationwide, has continued to grow and grow. The face of welfare has changed since the 1980s, as has the amount of money that is needed to raise a child, especially in a state where the cost of living is high.

Resources

Primary

California Legislature: Senate Bill No. 23

Additional

Cal Coast News: California May Repeal “Welfare Queen” Law

CNN: Return of the ‘Welfare Queen’

NPR: The Truth Behind the Lies of the Original ‘Welfare Queen‘

New York Post: When Welfare Pays Better Than Work

CNN: Average Cost to Raise a Child

Huffington Post: California Poverty Rate

Slate: The Welfare Queen

Nieman Reports: The ‘Welfare Queen’ Experiment

SCPR: Lawmakers Debate Repeal of Welfare Queen Law in California

Jezebel: Reagan’s ‘Welfare Queen’ Was a Real Person and Her Story is Bananas

Editor’s Note: This post has been updated to credit select information to the Sacramento Bee. 

Noel Diem

Law Street contributor Noel Diem is an editor and aspiring author based in Reading, Pennsylvania. She is an alum of Albright College where she studied English and Secondary Education. In her spare time she enjoys traveling, theater, fashion, and literature. Contact Noel at staff@LawStreetMedia.com.

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A new concept is sweeping the United States, one that many of our peer countries have had for years: paid sick leave. Yesterday, Governor Jerry Brown of California signed a law requiring most employers in the state to provide at least three paid sick days per year to their workers. While some American cities have already created similar laws, and the state of Connecticut has paid sick days in place for businesses that fall under certain requirements, California makes history as the first state to sign such an inclusive bill with regard to this benefit.

The idea is pretty simple — sickness is unpredictable. And sometimes people who have already used their vacation days, or simply can’t afford to take a day off, ever, get sick. When those people who can’t take a day off from work get sick, they not only most likely prolong their own illness, but also open up those they work with to sickness as well.

California’s law, although passed after Connecticut’s, is certainly more inclusive. Connecticut’s law, passed earlier this year, applies only to businesses with 50 employees or more. Manufacturers and certain types of tax-exempt organizations, regardless of the number of employees, aren’t required to follow the law. Day workers, non-hourly workers, and salaried employees also aren’t included — although that may be because salaried workers are often given sick days anyway. Connecticut’s law does, however, allow workers to accrue up to five sick days and while it was a unique and ground-breaking step, California’s law is significantly more far-reaching.

California’s law, on the other hand, applies to almost all employees, allowing them to acquire one hour of paid sick time for every 30 hours worked. Assembleywoman Lorena Gonzalez explained the motivation behind the more inclusive law, saying:

We become the first state in the nation to guarantee paid sick days for every single private-sector worker in the state — no matter what industry they work in, no matter if they are part-time or seasonal, and regardless of the size of their employer. This means more than 6.5 million more workers in this state will be able to take up to three days off when they or their child is sick without fearing the loss of income, hours or their job.

Paid sick time off is an especially notable issue to examine because of the incredibly fast way in which it became a conversation in the United States. Less than 10 years ago, there were really no laws requiring paid time off for workers; now two different states have passed statewide laws to that effect, and many other cities require paid time off as well now.

The main argument against paid sick days is that it will hurt the economy, but we have pretty convincing evidence to show that simply isn’t the case. The Connecticut economy has reported no dramatic negative changes due to the implementation of the paid sick day law. Some cities, such as Seattle, Washington, have also reported seeing no economic downturn after the law was passed; Seattle has actually seen economic growth.

And given that extending paid sick days to the vast majority of employees doesn’t lead to any economic issues, the full humanitarian benefits of the law really can be realized. As Governor Brown put it when he signed the bill into law:

Whether you’re a dishwasher in San Diego or a store clerk in Oakland, this bill frees you of having to choose between your family’s health and your job. Make no mistake, California is putting its workers first.

Anneliese Mahoney

Anneliese Mahoney is Managing Editor at Law Street and a Connecticut transplant to Washington D.C. She has a Bachelor’s degree in International Affairs from the George Washington University, and a passion for law, politics, and social issues. Contact Anneliese at amahoney@LawStreetMedia.com.

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The Detroit bankruptcy filing will arrive in court Wednesday despite several attempts to block the massive $18 billion debt restructuring.  U.S. Bankruptcy Court Judge Steven Rhodes agreed to an expedited hearing shortly after Emergency Manager Kevin Orr filed for Chapter 9 municipal bankruptcy last Friday.  The main opponents of the bankruptcy are retirees and workers who are primarily concerned with their ability to receive retirement benefits.

On Monday Ingham County Circuit Court Judge Rosemarie Aquilina claimed that the law allowing Michigan Governor Rick Snyder to approve the emergency manager’s bankruptcy filing is unconstitutional.  This ruling was based on the grounds that the governor would be violating the state’s constitutional protections for public workers’ retirement benefits.  In response, State Attorney General Bill Schute has filed an appeal on behalf of the governor to the state appeals court.

[NBC News]

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Featured image courtesy of [Ian Freimuth via Flickr]

Kevin Rizzo

Kevin Rizzo is the Crime in America Editor at Law Street Media. An Ohio Native, the George Washington University graduate is a founding member of the company. Contact Kevin at krizzo@LawStreetMedia.com.

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