America’s welfare system is broken, and the Minnesota scandal is a loud warning of that reality.
The failure of political leaders on many fronts bears some of the blame. But the main culprit is the massive federal welfare system that passes hundreds of billions of dollars annually to states to dole out, with the philosophy that the more people on the roll, the better.
The structure of the U.S. welfare system creates incentives for states to expand the rolls — and little incentive to ensure the money gets to those who really need it. As welfare rolls grow, programs receive more money. It is a system based on the democratic perspective that the government should provide more support to more people.
And the American Social Security system is enormous. It consists of roughly 90 different programs costing more than $1 trillion annually.
BESSENT INCREASES EXTENSIVE FRAUD PROGRAMS IN MINNESOTA AS TREASURE STAFF ARE TAKEN TO THE SITE
Because the majority of U.S. welfare funding comes from the federal government, states have incentive to expand their roles and little financial incentive to protect against waste and fraud.
And massive fraud is what happened in Minnesota.
The state’s welfare scandals went like this: Nonprofits, or so-called non-profits, claimed to serve people in need. That allowed them to receive hundreds of millions in federal funding, or a mix of state and federal dollars. The scammers then pocketed the money that was supposedly for the needy. Fraudsters used this playbook to steal money from a federal child nutrition program, a Medicaid housing program and a federal program for children with autism, to the tune of billions of dollars.
Over the course of a few years — including the COVID years where government spent not just like drunken sailors, but like drunken sailors on top — the number of “people” these Minnesota “nonprofits” served skyrocketed, along with the tax money they received to finance their ‘services’. As the so-called roles for these programs continued to expand, the government provided more dollars. And the scammers left like bandits.
It’s not that the blue state of Minnesota and its politicians are happy about the fraud that has occurred, or that they applaud welfare scammers. But if the mentality is that growing wealth flows are a sign of success, and that people are entitled to benefits – and if social security financing flows easily – the ground is fertile for exploitation.
In addition to the fraud and unsustainable costs of the current U.S. welfare system, perhaps even more tragic is its failure to address the root causes of poverty. It is a system based on input rather than promoting upward mobility.
SECRETARY OF LABOR ANNOUNCES ‘STRIKE TEAM’ GOING TO MINNESOTA TO INVESTIGATE UNAUTHORIZED FRAUD
After six decades of war on poverty, taxpayers are spending an increasing amount of money on welfare programs. Yet poverty – or rather, self-sufficiency – in the US has remained flat.
The government throws money at material poverty, but fails to address the deeper human needs that cause poverty, such as underemployment and family breakdown. And unfortunately, the welfare system undermines or punishes work and marriage, which are the greatest protectors against poverty.
The scandal in Minnesota should be a wake-up call on several fronts. One of the urgent calls should be the need for social security reform. There are many ways the system should be reformed—work requirements for able-bodied adults, eliminating marriage penalties, and better prioritizing spending—but perhaps most relevant to the current scandal is changing the funding structure and the way success is measured.
First, to better protect themselves against fraud, states should be required to finance a greater share of the social security system themselves. Passing dollars from the federal government to states creates a lack of accountability and makes it easier for fraud. But this is not the only change. After all, not all of the money that was diverted from Minnesota was federal funding.
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Programs should also be funded based on whether they promote upward mobility, rather than the number of people they serve. The 1996 welfare reform restructured the largest cash assistance program of the time, in part, by ending the structure of more money for bigger social services.
Instead, states received a steady funding stream and were rewarded if they helped get people into and out of work. The 1996 reform worked to reduce poverty, even among some of the most vulnerable populations. More wellness programs should be designed this way.
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Another option would be one pay-for-outcomes structurewhere programs are funded when they produce an agreed upon outcome: increasing graduation rates, boosting employment, increasing participants’ incomes, etc. Instead of paying for inputs, a pay-for-outcomes model rewards a program after it has proven itself.
These are just a few recommendations. But they would be a good start to turning the broken welfare system into what it should be: a system that helps people improve their lives. These reforms would also ensure that what happened in Minnesota never happens again.
