Courtesy of Mish.
In response to Just How Distorted is the U.S. Unemployment Rate Number?, reader Bjorn asked “care to take a guess on the percentage of fraud among the population receiving disability compensation?“
Fraud Incentive
My Reply Follows:
I suspect fraud is in the neighborhood of 25-50% (and higher would not surprise me one bit). The reason is that States Have an Incentive to Promote (Not Stop) Disability Fraud.
This all goes back to 1996 when president Bill Clinton promised to “end welfare as we know it“. He did indeed do just that, and fraud is the result.
Why?
The federal government pays disability, but states pay part of welfare costs. This creates a huge incentives for states to actively promote disability fraud (simply to get people off state-sponsored welfare programs).
Fraud escalated dramatically in the wake of the housing crash as jobs became scarce.
I discussed this previously in Unwilling to Work; 25% in Hale County AL Collect Disability, 14 Million Nationwide; A Simple Solution
Here is the key snip.
Clinton Ends Welfare As We Know It
In 1996 Bill Clinton signed a welfare reform act, that he proclaimed to be the “End of Welfare As We Know It”. It was. People moved off welfare on to even easier to get disability programs….
