PADM530Wk6

| About LexisNexis | Privacy Policy | Terms & Conditions | Copyright © 2023 LexisNexis

Date and Time: Sunday, December 31, 2023 10:19:00AM CST

Job Number: 213567368

Documents (2)

1. NOTE: From Paper to Electronic: Food Stamps, Social Security, and the Changing Functionality of

Government Benefits, 24 Geo. J. Poverty Law & Pol'y 139

Client/Matter: -None-

2. NOTE: From Paper to Electronic: Food Stamps, Social Security, and the Changing Functionality of

Government Benefits, 24 Geo. J. Poverty Law & Pol'y 139_Attachment1

Client/Matter: -None-

NOTE: From Paper to Electronic: Food Stamps, Social Security, and the Changing Functionality of Government Benefits

Fall, 2016

Reporter 24 Geo. J. Poverty Law & Pol'y 139 *

Length: 10484 words

Author: Sarah Carrier *

* J.D. Candidate, Georgetown University Law Center, 2017. Thanks to Anna Gelpern and Adam Levitin. (c) 2016, Sarah Carrier.

Text

[*139] I. INTRODUCTION

In March 2013, the Department of Treasury mandated that all Social Security benefits be transmitted electronically. 1 Prior to the switch, about 1.5 million recipients, or seventeen percent of benefit recipients, were still receiving their benefits by paper check. 2 While the change to electronic benefits has cost and security advantages, older and lower-income individuals may be incurring hidden costs. This Note analyzes a previous transition, from paper food stamps to prepaid cards, to assess the use of electronic disbursement systems in delivering government benefits and its effects on participant relationships.

This Note argues that electronic disbursement changes the function of government benefits. These benefits, which were once delivered via checks and coupons, are now being delivered almost exclusively through direct deposit and prepaid cards, which could be subtly altering their value. These electronic payment mechanisms are useful as money to the extent they act as a (1) medium of exchange; (2) unit of account; and (3) store of value. The shift from paper checks lessens this usefulness because benefits transmitted through electronic mechanisms, particularly prepaid cards, (1) severely limit where recipients can use their benefits and what transactions they can enter into; (2) lose purchasing power at a greater rate than paper benefits; and (3) offer no interest or saving mechanism.

Food stamps, now called the Supplemental Nutrition Assistance Program (SNAP), offer an important lesson in why electronic benefits should not be required for Social Security recipients. SNAP's purpose is to help enable low- income [*140] families and individuals to "buy nutritious food," 3 while Social Security is more generally intended to "provide for material needs." 4 Requiring Social Security recipients to receive either direct deposits or prepaid

1 Social Security Payments Go Paperless: Protecting Seniors from Fraud and Confusion Before the S. Spec. Comm. on Aging, 113th Cong. 1 (2013) (statement of the Hon. Patrick P. O'Carroll Jr., Inspector General, Soc. Security Admin.), http://oig.ssa.gov/newsroom/congressional-testimony/june19 [hereinafterSocial Security Payments Go Paperless].

2 Philip Moeller, Social Security Will Soon End Paper Checks, U.S. NEWS & WORLD REP. (Aug. 15, 2012, 12:15 PM), http://money.usnews.com/money/blogs/the-best-life/2012/08/15/social-security-will-soon-end-paper-checks.

3 Facts about SNAP, FOOD & NUTRITION SERV., U.S. DEP'T OF AGRIC. (Mar. 14, 2016), http://www.fns.usda.gov/snap/facts-about-snap.

Page 2 of 18

cards unduly burdens unbanked and under-banked citizens. The current federal rule only allows waivers for Social Security recipients born before May 1921, meaning individuals aged ninety-five and over) or those facing extreme access burdens such as remote living or mental impairment. 5 This Note addresses the need for an extension of this waiver or alternative consumer protection, given that many Americans will face subtle challenges with electronically-disbursed benefits.

These challenges are present for SNAP recipients, as well. For example, the tracking element of the SNAP program's Electronic Benefit Transfer (EBT) prepaid cards begs the question 6: When does traceability become surveillance? While potential abuses need to be addressed, prepaid cards offer convenience and protection against theft and loss, which many recipients prefer. These advantages should thus carry over to Social Security recipients, but only if they consent. Otherwise, those with the least access to banks, computers, and mobility--often older Americans--will be hurt the most by this transition.

I argue that the relationship between government and Social Security recipients is unique from other benefit programs. This is because most Social Security recipients have contributed money throughout their lives with the expectation that this money will be "repaid" in a sense. While this connection may seem increasingly attenuated, the government--in changing how benefits are disbursed--is mandating the means by which citizens receive their "own" money. This argument will conflict with the Supreme Court's 1960 holding that Social Security affords recipients no contractual "property" right under the Fifth Amendment's Due Process Clause. 7 However, the idea that Social Security is simply a payroll tax coupled with an independent welfare system seems to overlook important facets of the program, such as how some will never receive benefits for being deemed "insufficient earners." 8

Congress's plenary power to change Social Security based on lack of contractual right to the benefits is ultimately beyond the scope of this Note. Whether someone receives their money via a prepaid debit card or a check is insignificant compared to the fears that Social Security in its current form could cease to exist entirely. Nevertheless, allowing Social Security recipients to [*141] choose their method of receiving benefits is desirable policy for retaining confidence in the changing system.

This Note is organized into three parts: Part II of this Note discusses electronic disbursement of government benefits as follows: (1) background; (2) electronic benefit disbursement as money; and (3) advantages and disadvantages. Part III then outlines how these electronic benefits affect participant relationships. These relationships are discussed as (1) network effects; (2) the unbanked and underbanked; (3) and Social Security as a contract. Part IV concludes by looking at the current situation and how viable proposals could affect recipients in the near future.

II. ELECTRONIC DISBURSEMENT OF GOVERNMENT BENEFITS

A. Background

1. The History of Food Stamps

4 SOC. SEC. ADMIN., SOC. SECURITY HANDBOOK 100.1 (2006), http://www.ssa.gov/OP_Home%2Fhandbook/handbook.01/handbook-0100.html.

5 See 31 C.F.R. § 208.4 (2016).

6 Virginia Eubanks, Want to Predict Future Surveillance? Ask Poor Communities, AM. PROSPECT, Jan. 15, 2014, http://prospect.org/article/want-predict-future-surveillance-ask-poor-communities.

7 Flemming v. Nestor, 363 U.S. 603, 610 (1960).

8 Kevin Whitman et al., Who Never Receives Social Security Benefits?, 71 SOC. SEC. BULL. 17, 18 (2011) (estimating about four percent of old age individuals never receive Social Security Income, generally because they are either "late-arriving immigrants" or "infrequent workers").

24 Geo. J. Poverty Law & Pol'y 139, *140

Page 3 of 18

The Food Stamp Program began in 1939 as part of Franklin D. Roosevelt's New Deal. 9 The initial program aimed to match farm surpluses with low-income individuals after the Great Depression. 10 It did this by allowing qualifying participants to receive $ 1.50 worth of value for every dollar of stamps purchased. 11 The one dollar investment went towards orange stamps (which bought food and household items), while the subsidized $ 0.50 blue stamps could only be used for commodity surplus items. 12 The program and its economic stabilization effects were seen as a general success. The program ended after surpluses and unemployment levels declined. 13

Lyndon B. Johnson later called for a permanent food stamp program administered by the U.S. Department of Agriculture (USDA), which was implemented through the Food Stamp Act of 1964. 14 Stamps became coupons but otherwise functioned similarly. The next major change occurred via the Food Stamp Act of 1977, when the purchase requirement was eliminated. 15 The 1980s saw cutbacks and subsequent innovations. 16 By the late 1990s, Electronic Benefits Transfer Systems were piloted across states and eventually became the exclusive medium. 17

[*142] 2. 1996 Reform and Beyond

In 1996, President Bill Clinton signed the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA). 18 This federal public benefits law made huge changes including the institution of block grants, which gave states greater administrative leeway. 19 Aside from this and other controversial eligibility requirement changes, PRWORA transitioned food stamps from paper coupon disbursement to electronic transfer. 20 PRWORA mandated that all states transition their food stamp programs to Electronic Benefit Transfer (EBT) by 2002. 21

In 2008, the Food Stamp Program was renamed the Supplemental Nutrition Assistance Plan (SNAP). While state programs differ, recipients must meet certain resource and income tests. 22 Typically, a household of four is eligible for benefits if its net income is below $ 2,021 and it has a maximum of $ 2,250 in countable resources (such

9 The History of SNAP, SNAP TO HEALTH! http://www.snaptohealth.org/snap/the-history-of-snap/(last visited Oct. 18, 2016).

10 Id.

11 See id.

12 See id.

13 See id.

14 See Food Stamp Act of 1964, Pub. L. No. 88-525, 78 Stat. 703 (1964) (codified as amended at 7 U.S.C. § 2011(2012)).

15 See The History of SNAP, supra note 9.

16 See id.

17 See id.

18 See Personal Responsibility and Work Opportunity Reconciliation Act of 1996, Pub. L. No. 104-193, 110 Stat. 2105 (1996) (codified as amended in scattered sections of 42 U.S.C.); David A. Super, The Quiet "Welfare" Revolution: Resurrecting the Food Stamp Program in the Wake of the 1996 Welfare Law, 79 N.Y.U. L. REV. 1271, 1271 (2004).

19 Id. at 1277.

20 Personal Responsibility and Work Opportunity Reconciliation Act, Pub. L. No. 104-193, § 825, 110 Stat. 2105, 2324 (1996).

21 Id.

22 Supplemental Nutrition Assistance Program (SNAP): Eligibility, FOOD & NUTRITION SERV., U. S. DEP'T OF AGRIC., http://www.fns.usda.gov/snap/eligibility (last visited Oct. 18, 2016).

24 Geo. J. Poverty Law & Pol'y 139, *141

Page 4 of 18

as a bank account). 23 Today about seventy billion dollars in SNAP benefits are electronically distributed annually, with the average monthly allocation totaling $ 126.83 per person. 24

3. The History of Social Security

Congress passed the Social Security Act of 1935 as part of the Second New Deal. The Act was similar to the Food Stamp Program, as it sought to address problems spurred by the Great Depression. 25 Social Security aimed to ameliorate the hardship of senior citizens, over fifty percent of whom were in poverty. 26 The main provisions of this Act sought to facilitate a "social insurance program" where workers could continue receiving income after [*143] retirement at age sixty-five. 27 The program also covered other beneficiaries such as those unable to work due to disability. 28

Benefit payments are funded by a payroll tax on current employers and employees. 29 This is called a pay-as-you- go tax. 30 It is collected by the Internal Revenue Service and placed in a trust fund which is then invested in special-issue Treasury securities, which earn an average 3.8% return annually. 31 These funds are then distributed to individuals based on lifetime earnings. 32 Today, Social Security is the highest cost item on the federal budget, with over $ 845 billion dollars paid out per year. 33

4. Electronic Shift

As of March 1, 2013, the Department of Treasury required all Social Security benefits become electronic. 34 The Department of Treasury offered recipients two options: they could either have their benefits directly deposited into a

23 Id.

24 FOOD & NUTRITION SERV., U. S. DEP'T OF AGRIC., SUPPLEMENTAL NUTRITION ASSISTANCE PROGRAM PARTICIPATION AND COSTS (2016), http://www.fns.usda.gov/sites/default/files/pd/SNAPsummary.pdf.

25 Historical Background and Development of Social Security, SOC. SEC. ADMIN., http://www.ssa.gov/history/briefhistory3.html (last visited Oct. 18, 2016);Special Collections: Detailed Chronology of Social Insurance & Social Security, SOC. SEC. ADMIN., http://www.ssa.gov/history/chrono.html (last visited Oct. 18, 2016)

26 Historical Background and Development of Social Security, supra note 25.

27 Id.

28 See id.

29 IRS Topic 751 Social Security and Medicare Withholding Rates, INTERNAL REVENUE SERV. (Jun. 30, 2016), https://www.irs.gov/taxtopics/tc751.html.

30 See What is Social Security?, NAT'L ACAD. OF SOC. INS., https://www.nasi.org/learn/social security/overview (last visited Oct. 18, 2016).

31 See How is the Social Security Trust Fund Invested?, INVESTOPEDIA (Nov. 4, 2016, 9:11 AM), http://www.investopedia.com/ask/answers/110614/how-social-security-trust-fund-invested.asp.

32 NAT'L ACAD. OF SOC. INS., SOCIAL SECURITY BENEFITS, FINANCES, AND POLICY OPTIONS: A PRIMER 12 (2016), https://www.nasi.org/sites/default/files/research/2016_Social_Security_Primer.pdf.

33 ROMINA BOCCIA, THE HERITAGE FOUNDATION, SPECIAL REP. NO. 162, FEDERAL SPENDING BY THE NUMBERS, 2014: GOVERNMENT SPENDING TRENDS IN GRAPHICS, TABLES, & KEY POINTS (Dec. 8, 2014), http://www.heritage.org/research/reports/2014/12/federal-spending-by-the-numbers-2014.

34 See Moeller, supra note 2.

24 Geo. J. Poverty Law & Pol'y 139, *142

Page 5 of 18

bank account or deposited onto a prepaid card. 35 The prepaid card is available to all beneficiaries but is mainly marketed for those without bank accounts. 36 In 2013, only 3.2% of total Social Security payments were disbursed via prepaid card. 37 Benefit recipients with special circumstances can attempt to get around the electronic payment requirement through obtaining a waiver. 38

[*144] B. Electronic Disbursement Systems Are Effective to the Extent Benefits Function as Money.

Money is only useful because of the three primary functions it serves. Money is a (1) medium of exchange, (2) unit of account, and (3) store of value. 39 An assessment of government benefits show these three functions change when using electronic disbursement systems because recipients lose a lot of the flexibility associated with paper benefits. The following discussion will focus primarily on prepaid cards, as directly deposited Social Security funds generally operate as "regular" money once withdrawn.

Prepaid cards are not an ideal medium of exchange because they are not universally accepted modes of payment. Money works as an effective medium of exchange because it replaces the need for two participants to both want what the other has. 40 Instead, they can go into the market with the medium and know it will be accepted in lieu of bartering.

Electronic benefits on prepaid cards do not allow the freedom of exchange necessary to make them effective. Only a few states allow SNAP Program recipients to use SNAP cards at fast food restaurants or to buy certain foods at grocery stores. 41 SNAP benefits may not be used to purchase "hot foods" and prepared foods that are typically eaten in store. 42 There are also more detailed prohibitions, such as energy drinks without nutrition facts or birthday/special occasion cakes if too much of the purchase price is allocable to non-edible decorations. 43 Importantly, SNAP benefits also preclude participants from using their funds to purchase everyday items such as soaps, pet food, and vitamins. 44

35 Id.

36 Emily Brandon, Social Security Debit Cards: Seven Things you Need to Know, U.S. NEWS & WORLD REP. (Jun. 11, 2008, 12:30 PM), http://money.usnews.com/money/retirement/articles/2008/06/11/social-security-debit-cards-7-things-you-need-to- know.

37 BD. OF GOVERNORS OF THE FED. RESERVE SYS., REPORT TO THE CONGRESS ON GOVERNMENT- ADMINISTERED, GENERAL-USE PREPAID CARDS 13-14 (July 2014), http://www.federalreserve.gov/publications/other- reports/files/government-prepaid-report-201407.pdf.

38 Treasury Department regulations provide that a beneficiary can file a waiver request if electronic transfer would impose hardship because of a mental impairment or remote geographic location). See 31 C.F.R. § 208.4 (2016).

39 David D. Friedman & Kerry L. Macintosh, The Cash of the Twenty-First Century, 17 SANTA CLARA COMPUTER & HIGH TECH L.J. 273, 274 (2001).

40 Id.

41 See Cynthia Hsu, Food Stamps Accepted in Restaurants in AZ, CA, FL, MI, FINDLAW: LAW & DAILY LIFE BLOG (Sept. 8 2011, 5:43 AM), http://blogs.findlaw.com/law_and_life/2011/09/food-stamps-for-restaurants-accepted-in-az-ca-fl-mi.html; Supplemental Nutrition Assistance Program (SNAP): Eligible Food Items, FOOD & NUTRITION SERV., U.S. DEP'T OF AGRIC. (Mar. 21, 2016), http://www.fns.usda.gov/snap/eligible-food-items.

42 FOOD & NUTRITION SERV., U.S. DEP'T OF AGRIC., supra note 41.

43 See id.

44 See id.

24 Geo. J. Poverty Law & Pol'y 139, *143

Page 6 of 18

Another downside is that businesses lose the ability to freely sell to a large consumer base. Stores must meet USDA-prescribed requirements to be eligible to make SNAP sales. To be an eligible retail store, the store must either offer three varieties of qualifying staple foods or derive more than half of their total sales from the sale of eligible staple foods. 45 These standards could very easily alter business management, especially for gas stations and smaller stores without the resources of big name retailers. Limitations on where and for what [*145] the card's value can be exchanged disrupt the instrument's functionality for both the buyer and seller. One consequence of this could be a secondary barter system, which distorts prices. 46

These problems are especially burdensome to Social Security recipients. The Food Stamp Act of 1964 had the official purpose of providing "improved levels of nutrition among low-income households," so excluding certain purchases is understandable. 47 However, the requirement that Social Security beneficiaries must use prepaid cards places limits on funds that are not required to be used for any particular purpose. Therefore, the mandate would unreasonably hinder many older and disabled recipients from paying cash for services rendered, such as rent.

This is especially unfair to those without bank accounts, who cite "personal loans" as their main financial alternative. 48 For such people, prepaid cards would add an extra, burdensome step when paying back personal lenders such as family or friends. The medium is not suitable here as it limits recipients' ability to freely exchange when their payments, unlike SNAP benefits, are supposed to be disbursed absent contingencies.

Electronic Benefits are also imperfect as a unit of account. Prepaid cards only provide a meaningful mechanism for price and value comparison if they retain purchasing power. This has not been the case for SNAP EBT cards. These cards are adjusted annually at the beginning of the fiscal year, 49 but given prices fluctuate more quickly than this, value is lost. This discrepancy between the USDA's prescribed cost of a nutritional diet and food price inflation (using the Consumer Price Index) was at its height in Fiscal Year 2008, when approximately twenty-two dollars of value per month (or seven percent of benefits) was found to be lost. 50

One way to address gaps such as this would be to adjust benefits semiannually. In the case of SNAP, researchers found this adjustment would have lowered the Fiscal 2008 shortfall from twenty-two dollars to $ 16.20. 51

45 Retail Store Eligibility USDA Supplemental Nutrition Assistance Program, FOOD & NUTRITION SERV., U.S. DEP'T OF AGRIC. (Mar. 21, 2016), http://www.fns.usda.gov/snap/retail-store-eligibility-usda-supplemental-nutrition-assistance-program.

46 See Caroline Humphrey, How is Barter Done? The Social Relations of Barter in Provincial Russia, in THE VANISHING ROUBLE: BARTER NETWORKS AND NON-MONETARY TRANSACTIONS IN POST-SOVIET SOCIETIES 259, 282-85 (Paul Seabright ed., 2000).

47 See A Short History of SNAP, FOOD & NUTRITION SERV., U.S. DEP'T OF AGRIC. (Nov. 20, 2014), http://www.fns.usda.gov/snap/short-history-snap. It should be noted that some of the exclusions from purchases may engender paternalism arguments.See generally Rebecca L. Goldberg, No Such Thing as a Free Lunch: Paternalism, Poverty, and Food Justice, 24 STAN. L. & POL'Y REV. 35, 59 (2013) (examining government initiatives to limit the purchase of sweetened beverages).

48 AARP PUB. POLICY INST., A PORTRAIT OF OLDER UNDERBANKED AND UNBANKED CONSUMERS: FINDINGS FROM A NATIONAL SURVEY 13 (2010), https://www.fdic.gov/about/comein/aarp.pdf.

49 See Kenneth Hanson & Margaret Andrews, U.S. Dep't of Agric., Higher Prices Can Take a Bite Out of SNAP Benefits, AMBER WAVES (Mar. 2009), http://www.ers.usda.gov/amber-waves/2009/march/higher-food-prices-can-take-a-bite-out-of- snap-benefits/.

50 Id.

51 Id. at iv.

24 Geo. J. Poverty Law & Pol'y 139, *144

Page 7 of 18

However, they estimated this would have cost the government an additional [*146] $ 790 million. 52 Thus, more accurately tying benefits to real market prices is a complex fiscal policy decision.

Social Security shares this problem of inadequate adjustment mechanisms. To alleviate this, President Obama offered a proposal in 2013, which would link Social Security to "chained CPI." 53 Chained CPI measures cost of living changes over time while adjusting for substituted goods associated with inflation. 54 Some economists believe this measure is more accurate as it accounts for realistic changes consumers make in reaction to inflationary effects. 55 The Congressional Budget Office estimated this change would lower the deficit by $ 233 billion over ten years. 56 However, the proposal was abandoned after push back that it would unduly burden low- income recipients whose benefits would grow between 0.25% and 0.3% slower than it currently does with the CPI. 57

Regardless of what decision is ultimately made, there will always be some discrepancies between prepaid cards and actual prices. This coupled with the political discretion that goes into deciding how effectively benefits should match inflation leads to substantial uncertainty. Prepaid benefit cards are an unstable unit of account.

Lastly, prepaid benefit cards are insufficient as a store of value because unlike other financial assets, they offer no interest. 58 Therefore, many unbanked Social Security recipients will have less incentive to save. Given those without bank accounts generally have less assets, not having enough savings could be problematic in the event of emergency. This problem is also present for SNAP program participants because benefits expire one year after issuance. 59 So, while someone may want to save and cushion their finances for the future (in case there is an unexpected job loss, for example), they lose the freedom to apportion their benefits. This difficulty with storing value subsequently hurts the people who likely need it the most.

[*147] C. Cost Advantages of Electronic Benefits Must be Assessed Alongside Their Subtler Disadvantages

Cashless benefits share many of the same advantages as cashless money. Direct deposit and prepaid cards allow consumers to enjoy (1) convenience; (2) loss liability; (3) record keeping; and (4) lower costs (such as reduced fees for check cashing). 60 It is no surprise most recipients prefer them, 61 just as most consumers increasingly prefer

52 Id.

53 See Jeanne Sahadi, Obama Drops Controversial Social Security Proposal, CNN MONEY (Feb. 20, 2014, 5:33 PM), http://money.cnn.com/2014/02/20/news/economy/obama-social-security-chained-cpi/.

54 See id.

55 Id.

56 Id.

57 Id.

58 See Scott Schuh, Director, Fed. Reserv. Bank of Boston, Presentation at NACHA, The Electronic Payments Association Conference: Understanding Consumers' Evolving Use of Prepaid Cards 3-4 (Apr. 21-24, 2013), http://www.bostonfed.org/economic/cprc/presentations/2013/Schuh04212013.pdf.

59 See 7 U.S.C. § 2016(h)(12)(C) (2014).

60 See Georgios Papadopolous, Electronic Money and the Possibility of a Cashless Society (Working Paper No. 18.02.2007), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=982781&download=yes.

61 See, e.g., ANDREW A. ZEKERI, S. RURAL DEV. CTR., OPINIONS OF EBT RECIPIENTS AND RETAILERS IN THE RURAL SOUTH 4-5 (2003), http://srdc.msstate.edu/ridge/publications/archive/fa/fa_6.pdf (finding that among Macon County, Alabama EBT Recipients, 74.4% preferred EBT, 19.6% preferred coupons, and 6% had no preference).

24 Geo. J. Poverty Law & Pol'y 139, *145

Page 8 of 18

credit and debit cards. Additionally, the government prefers these methods of disbursement because of lower printing and mailing costs. According to the Department of Treasury's Fiscal Assistant Secretary, it costs $ 0.09 to electronically disburse Social Security, compared to $ 1.25 to print and mail a benefit check. 62

However, despite their many advantages, cashless benefits open the door to many potential problems. Much like with cashless money in general, those with less Internet knowledge and access become especially vulnerable to these problems, as they cannot constantly monitor the status of their benefits. In addition to the functionality shortcomings mentioned earlier, the main disadvantages of cashless benefits include fees, fraud, and surveillance abuse.

1. Fees

Electronic Benefits are primarily touted for their cost savings; however, the costs they create must not be overlooked. To address the costs created, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 began requiring an annual report on "Government-Administered, General-Use Prepaid Cards." 63 The Report found that in 2013, Issuers across government programs collected over $ 500 million in fee revenue. 64 These fees were broken down to about sixty-five percent interchange fees, which are typically covered by merchants, and thirty-five percent fees to cardholders. 65

[*148] This high number can be understood because most government issued prepaid cards allow only one free withdrawal per month. 66 The next highest cardholder fee of fifteen percent was customer service inquiries and the remaining twenty-seven percent was attributed to penalty, overdraft, and over the counter cash withdrawals. 67 Thus, even with Dodd-Frank's introduction of the "reasonable fee" requirement, 68 government administered prepaid cards carry with them substantial costs, which are effectively being reallocated to benefit recipients.

2. Fraud and Identity Theft

Electronic Benefits do benefit program efficiency through preventing fraud and misuse. While the electronic shift has helped keep SNAP fraud low, it has actually created sophisticated opportunities for Social Security identity theft. The majority of SNAP fraud occurs through trafficking or attempting to exchange benefits for cash. The USDA prescribes a very expansive definition for trafficking. 69 Their definition includes any attempts to directly trade EBT cards or even indirectly receive cash (for example through "water dumping," which consists of buying beverages only to pour out the contents and return the bottle for cash). 70 Stringent regulations such as these have kept fraud

62 Daniel Wagner, Senators Grill Treasury Official About Debit Card Program, THE CTR. FOR PUB. INTEGRITY (May 19, 2014, 12:19 PM), http://www.publicintegrity.org/2013/06/20/12876/senators-grill-treasury-official-about-debit-cardprogram.

63 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) of 2010, 15 U.S.C. § 1693o-2(a)(7)(D) (2014).

64 "Issuers" here refers to contracted financial institutions. Revenue received derives from both cardholder and interchange fees. See generally BD. OF GOVERNORS OF THE FED. RESERVE SYS., supra note 37, at 1, 7.

65 See id. at 7, fig. 2.

66 See id. at 7, 9.

67 See id. at 10.

68 12 U.S.C. § 5301 (2014).

69 See USDA Announces Additional Steps to Reduce Fraud and Misuse in Supplemental Nutrition Assistance Program, FOOD & NUTRITION SERV., U.S. DEP'T OF AGRIC., (Jan. 14, 2014), http://www.fns.usda.gov/pressrelease/2013/fns-000213.

70 See id.

24 Geo. J. Poverty Law & Pol'y 139, *147

Page 9 of 18

fairly low, especially at large supermarkets and retailers, where eighty-two percent of benefits are spent. 71 There, the rate of trafficking is steadily under 0.5%. 72

Social Security, on the other hand, poses a unique identity theft problem by allowing recipients to choose between direct deposit and prepaid cards. The Social Security Administration's Office of the Inspector General (OIG) testified to Congress about this problem in 2013. In less than two months after the paperless mandate, the OIG received over 37,000 reports of questionable changes to account information. 73 The OIG illuminated how the introduction of the "Online Portal" system for managing benefits exposed many recipients to fraud. 74

This fraud was not limited to "typical" schemes such as fake lotteries and phishing attempts. Rather, many instances consisted of perpetrators simply redirecting benefits to different direct deposit accounts or onto prepaid cards. 75 [*149] The OIG subsequently issued a statement of steps recipients can make to protect their benefits. 76 These include the creation of their own online account (so others cannot do so fraudulently) and "regular monitoring" of financial accounts. 77 This poses problems for those lacking Internet knowledge and access. Even with the Social Security Express initiative in 2014, which included providing assistance at libraries, senior centers, and federal agencies, there were only seventeen million visits to the online portal per month. 78 This indicates that for roughly twenty-eight percent of the sixty million current recipients, 79 the portal is less of a resource and more of a liability. Electronic benefits, thus, have a worsened effect on Social Security than they do on SNAP. Program efficiency should be measured accordingly.

3. Surveillance Abuse

"Poor women are the test subjects for surveillance technology," according to one EBT welfare recipient. 80 Many scholars agree, citing client information systems as tracking devices which are ultimately used for the purpose of harsh scrutiny and control. 81 Traceability of SNAP funds is not in itself bad; it helps the government enforce food

71 Id.

72 Id.

73 Social Security Payments Go Paperless, supra note 1, at 1.

74 Id. (discussing the Social Security Administration's testimony that 22,000 potentially fraudulent online accounts had been opened in the few months since electronic transition).

75 Id. at 1-2.

76 Office of External Relations, Protect Yourself from Electronic Social Security Fraud, SOC. SEC. ADMIN. (June 26, 2013), http://oig.ssa.gov/newsroom/blog/june26-post.

77 Id.

78 OFFICE OF THE INSPECTOR GEN., SOC. SEC. ADMIN., A-02-16-50118, FISCAL YEAR 2015 INSPECTOR GENERAL STATEMENT ON THE SOCIAL SECURITY ADMINISTRATION'S MAJOR MANAGEMENT AND PERFORMANCE CHANGES 18 (Nov. 9, 2015), http://oig.ssa.gov/sites/default/files/audit/full/pdf/A-02-16-50118_0.pdf.

79 Social Security Beneficiary Statistics, SOC. SEC. ADMIN., https://www.ssa.gov/oact/STATS/OASDIbenies.html (last visited Oct. 26, 2016).

80 Eubanks, Want to Predict Future Surveillance?, supra note 6.

81 See generally Virginia Eubanks, Technologies of Citizenship, in SURVEILLANCE AND SECURITY: TECHNOLOGICAL POLITICS AND POWER IN EVERYDAY LIFE 89 (2006); TORIN MONAHAN, SURVEILLANCE IN THE TIME OF INSECURITY 118-20 (2010) (citing JOHN GILLIOM, OVERSEERS OF THE POOR, SURVEILLANCE, RESISTANCE, AND THE LIMITS OF PRIVACY (2001)) (using EBT trackings to show how database surveillance imposes restrictions on poor women).

24 Geo. J. Poverty Law & Pol'y 139, *148

Page 10 of 18

program restrictions on allowable purchases and may even flag suspicious activity where a benefit card is unknowingly stolen and used.

However, the USDA offers state officials financial incentives for investigating potential SNAP trafficking violations. 82 This creates a striking conflict of interest, where officials can haphazardly accuse and investigate recipients based on huge amounts of transaction data.

Equally troublesome are the breadth of factors which may indicate trafficking. 83 The USDA's "suspicious patterns" include recipients (1) shopping at a smaller store rather than a large supermarket, (2) transactions occurring [*150] close in time, (3) or incurring multiple even-dollar-amount transactions. 84 These may very well be correlated with benefit abuse, but the wide discretion they allow on use of transaction history is extensive.

While many cases will be fruitless, the few that do lead to disqualification will encourage prosecutors to open cases with no regard for participant privacy. Disqualification for certain program violations can even mean dramatically reduced benefits to those sharing a household with the disqualified participant. 85

The SNAP program also has a lot of traceability issues associated with varied state applications. This spurs much of the backlash that program surveillance reflects "relations of power, domination, and conflict that are embedded in institutional structures and fueled by cultural assumptions about criminality of the poor." 86 Whether or not this is true, the food program is unfortunately unique in its complexity and arguably paternalistic oversight.

Social security, on the other hand, will face traceability issues similar to that of cashless money in general, many of which are at odds with democratic values of liberty and equality. Along with lack of anonymity, users of prepaid cards may become subject to cloaking, chilling, and compliance costs. 87

When analyzing the Social Security shift, it is essential to look not only at printing and administrative costs, but also to these intangible yet inconvenient costs. Cloaking costs are the actual costs of bypassing traceability. 88 This may be through doing business via a corporation to hide economic activity or even just using cash. Chilling effects are less tangible as they reflect foregone activities and purchases. 89 This would be similar to someone deciding not to transact online for certain, more discreet purchases. The flip side of this is that the government may more effectively monitor and deter illegal acts such as fraud. Lastly, the burden of complying is both direct (through facilitation costs such as point of service (POS) terminal upkeep) and indirect (personal feelings of invasion or stigmatization).

82 David A. Super, Food Stamps & the Criminal Justice System, THE CHAMPION, Nov. 2001, at 20, 27.

83 See Overissued . . . Because the County Welfare Office Thinks the Household Committed Fraud, LSNC Guide to Calfresh Benefits, LEGAL SERVS. OF N. CAL., http://calfresh.lsnc.net/overissued-because-the-county-welfare-office-thinks-the- household-committed-fraud/ (last visited Oct. 26, 2016).

84 See id.

85 See 7 U.S.C. § 2015(b)(1) (2014); 7 C.F.R. § 272.11(c) (2014).

86 Eubanks, Want to Predict Future Surveillance?, supra note 6.

87 See Peter P. Swire, Financial Privacy and the Theory of High-Tech Government Surveillance, 77 WASH. U. L. Q. 461, 472 (1999).

88 See id. at 475.

89 See id. at 473.

24 Geo. J. Poverty Law & Pol'y 139, *149

Page 11 of 18

Finally, unlike with SNAP, the government has no occasion to monitor Social Security recipient transactions. The data is nevertheless being created and stored. Due to the sheer volume of transactions with countless merchants, card users become vulnerable to hackers or private companies who may use consumer data for private benefit.

[*151] III. PARTICIPANT RELATIONSHIPS ARE ALTERED BY THE CHANGE TO ELECTRONIC BENEFITS.

A. Network Effects

Electronic Benefit Transfers operate as a modified "Automated Clearing House." 90 Settlement is triggered when a participant swipes their card at either an Automated Teller Machine (ATM) or merchant Point of Sale (POS) terminal. As such, these transactions are processed by NACHA, the National Automated Clearing House Association.

NACHA has created various protocols, called "QUEST" rules, which include standards for card specifications, liability, and indemnification and requirements for issuers, acquirers, and merchants. 91 They also establish dispute resolution mechanisms. 92 These rules are important because they protect benefit recipients at each stage of the settlement.

Figure 1. Diagram of QUEST Protections

Protections such as these are important to payment system usefulness. Checks gained success through legal and regulatory encouragements, such as UCC protections and negotiable instruments laws. 93 So long as they are monitored, Electronic Benefit Transfer can evolve similarly as a reliable payment system.

Even with these rules, the change to Electronic Disbursement Systems is complex because it alters the government-recipient relationship. One way it does this is by introducing third parties that disrupt participant expectations. For example, by creating a government-service provider-recipient relationship, the government creates a dependency on privately controlled technology. 94 This is not in itself bad, but it raises concerns that those private entities may have incentives which do not operate to the recipients' benefit. 95

[*152] Electronic benefits have proved profitable for these private entities. From 2004-2012, J.P. Morgan Chase (which controls EBT contacts in twenty-one states, Guam, and the Virgin Islands) made over half a billion dollars on government distributions. 96 This occurred prior to the Social Security shift, so this amount is likely set to magnify. These huge profits could arguably be a byproduct of free market capitalism. However, the consumers providing the profit are unique because they cannot go elsewhere.

90 See Stephen Wilks, The Governance Ecology of Electronic Food Stamp Delivery: Is it Time for a New Praxis?, 30 HARV. J. RACIAL & ETHNIC JUST. 311, 317, 322 (2014).

91 Id. at 324.

92 Id.

93 Id. at 316.

94 Id. at 326.

95 Id. at 331-34.

96 Virginia Eubanks, How Big Banks are Cashing in on Food Stamps, THE AM. PROSPECT (Feb. 14, 2014), http://prospect.org/article/how-big-banks-are-cashing-food-stamps.

24 Geo. J. Poverty Law & Pol'y 139, *150

Page 12 of 18

Instead, the delivery of electronic benefits appears to act under a monopoly of sorts. For example, SNAP allows states to choose vendors. 97 This flexibility of contracting has allowed only three providers to survive: J.P. Morgan, Xerox, and Fidelity (with some states using a mixture of these three). 98 These companies are huge and credible so they probably do offer good, streamlined services, but nevertheless there is a problem: states have to choose between effective program implementation and the whims of private payment systems.

One way lawmakers are attempting to stop banks from profiting off of those with low bargaining power is through regulations. For example, the Dodd-Frank Act implemented a "Reasonable Fees" provision for all payment card transactions. 99 If banks respond, this may be an effective way to balance the trade-offs of these systems. Regardless, attention should be paid not only to the explicit costs but also to those stemming from this shared governance.

Similar problems have arisen in regards to Social Security. The Treasury Department relies on one company, Comerica, to carry out electronic prepaid card disbursement. 100 Comerica has not been popular with consumers, who Comerica aggressively targeted after the Treasury Department's 2013 self-imposed deadline. 101 According to an anonymous Treasury official, low-income individuals were targeted and even sent prepaid cards without request. 102 Review of Comerica call-center transcripts and interviews with call center employees revealed that customer service employees were trained to convince consumers to prepaid cards, regardless of whether it was actually in the consumer's best interest. 103 One former employee conducted a personal investigation and found that, on seven out of every ten calls he placed, operators provided false information. 104

[*153] Another problem associated with Comerica's contract is that it was initially slated to be free for taxpayers but has since become costly through amendments to the deal between Comerica and the Treasury Department that yielded profits for Comerica. 105 For example, one contract change (that was publicly criticized by Senator Elizabeth Warren) gave Comerica more than thirty million dollars without any clear reasoning for advantages the extra funds would provide. 106 If third-party private entities are going to be involved in the electronic benefit disbursement process, mandatory disclosures of the bidding and delivery process must be continuously imposed.

Government contracting poses problems for both SNAP and Social Security. The National Commission on Electronic Transfers acknowledged as such when it advised, "It should be unlawful to require an individual to accept

97 See id.

98 Wilks, supra note 90, at 325.

99 Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, § 1075(a)(2), 124 Stat. 1376, 2068 (2010).

100 Press Release, Bureau of the Fiscal Serv., U.S. Dep't of the Treasury, U.S. Treasury Introduces Direct Express Debit Card for Social Security Payments (June 10, 2008), https://www.fms.treas.gov/news/press/directexpress_launch.html.

101 Daniel Wagner, Benefit Change Hurts Poor Fees Mount under Debit Card System, CTR. FOR PUB. INTEGRITY (Sept. 15, 2014, 12:13 PM), https://www.publicintegrity.org/2013/06/19/12857/benefit-payment-change-hurts-poor.

102 Id.

103 Id.

104 Id.

105 Daniel Wagner, Treasury to Comerica: Take Our Money Please!, CTR. FOR PUB. INTEGRITY (March 28, 2014 6:00 AM), https://www.publicintegrity.org/2014/03/28/14499/treasury-comerica-take-our-money-please.

106 Id.

24 Geo. J. Poverty Law & Pol'y 139, *152

Page 13 of 18

a particular [electronic fund transfer] service or do business with a particular depository institution as a condition of employment or receipt of Government benefit." 107

This recommendation, while persuasive, may oversimplify the situation. These contracts with big banks provide many efficiencies. Freedom of consumer choice is important, but as benefits are a unique medium, assessments will need to balance the costs and benefits rather than making exclusive contracts per se "unlawful."

1. Consumer Protections

The Electronic Transfer Fund Act's Regulation E offers consumer protections for most payment mechanisms. 108 However, the important benefits of Regulation E, including disclosure requirements, error resolution, and liability limitations, are not always required for government benefit recipients. 109 Particularly for SNAP benefits, Regulation E does not automatically carry over for all EBT programs. 110

The key argument against extension of Regulation E's protections is the cost. Many argue liability protection can be both expensive and complex [*154] because it leads to recipient fraud. 111 For example, proponents of this benefit recipient exemption argue it will encourage participants to sell their cards for cash, claim the card was stolen or lost, and seek reimbursement for the funds. 112 However, there is a fifty dollar loss limitation, meaning even if such fraud was rampant, it would not be an overwhelming cost. 113 While cost is a consideration, the seemingly inherent distrust of benefit recipients should also be analyzed as a motivating factor.

Lastly, protections are necessary because electronic systems create confusion by changing the existing understanding of banking relationships. 114 For example, recipients never even really have possession of funds or an account, per se. Electronic benefits systems merely operate through settlement mechanisms controlled by multiple parties, with varied purposes and incentives. 115 The only contracted relationship is between a financial agent and the Department of the Treasury, rather than to the typical debtor. 116 This makes protections, particularly disclosures, key to maintaining consumer expectations. It is essential to clarify the terms of the relationships, where rights and obligations which consumers would traditionally expect become unavailable.

107 DONALD I. BAKER ET AL., 2-17 THE LAW OF ELECTRONIC FUND TRANSFER SYSTEMS § 17.04[1] (2015).

108 12 C.F.R. § 1005.1(b) (2013).

109 EFTA section 904(d)(2)(B) ("Exemption generally.--The disclosures, protections, responsibilities, and remedies established under this subchapter, and any regulation prescribed or order issued by the Bureau in accordance with this subchapter, shall not apply to any electronic benefit transfer system established under State or local law or administered by a State or local government."); § 1005.15(a)(2); Air M. Cohen, Note, Protecting the Underserved: Extending the Electronic Fund Transfer Act and Regulation E to Prepaid Debit Cards, 5 BROOK. J. CORP., FIN. & COM. L. 215, 227-30 (2010).

110 Id.

111 Brian Miller, Regulation E Threatens Welfare EBT, GOV'T TECH. (Dec. 31, 1994), http://www.govtech.com/magazines/gt/Regulation-E-Threatens-Welfare-EBT.html.

112 Id.

113 12 C.F.R. § 1005.6(b) (2013).

114 Kathryn O'Neill Pulliam, Note & Comment, Muddying the Water: Electronic Benefits Transfer After the Welfare Reform Act of 1996, 14 GA. ST. U. L. REV. 515, 541 (1998).

115 Id. at 518-19.

116 Id.

24 Geo. J. Poverty Law & Pol'y 139, *153

Page 14 of 18

B. The Unbanked and Underbanked

At least one quarter of American households are either "unbanked" or "underbanked." 117 "Unbanked" refers to those with neither a checking nor a savings account, while "underbanked" participants have an account but also choose to use alternative financial service providers like check-cashing outlets, title lenders, and rent-to-own stores. 118 These alternative financial service providers often trap consumers in high interest situations with substantial risk of asset loss (such as car loan and pawn shop transactions). 119

Americans who are sixty-five years old or older, as a whole, are more likely than other age groups to have bank accounts. 120 However, the prepaid card requirement will significantly hurt the minority of Americans who are sixty- five years old or older who do not have bank accounts. 121 Paper checks often cost money to cash (with the exception of at some supermarkets). 122 However, once [*155] checks are cashed, individuals have free use of their benefits, unlike with prepaid cards.

Those without checking accounts cited personal loans as their main financial alternative. 123 Prepaid cards remove the ability to payback these loans. As for paying landlords and service providers who require check payments, the problem of the unbanked remains: Most will have to purchase money orders to pay their bills. Removing the prepaid requirement is just one component of a larger banking access problem.

Lastly, among underbanked and unbanked persons over sixty-five years old, reasoning for not having banks, while mostly monetarily driven, is divided among racial and ethnic groups. Black people and Hispanic people over the age of sixty-five are half as likely to have a checking account than similarly-aged white people. 124 This may indicate subtle cultural reasons for unbanking. 125 While all racial and ethnic groups saw "not enough money to be useful" as the driving force behind their unbanking, forty-five percent of Black beneficiaries and thirty-three percent of Hispanic beneficiaries cited "hidden fees and charges" as a reason not to have an account. 126 Additionally, more than fifty percent of Black survey participants indicated "concerns about misuse of personal information" as a reason they chose to remain unbanked. 127 This was double the rate of white and Hispanic participants. 128

Although providing some sort of tiered system of lower-income banking access could be very expensive, simply better informing consumers and promoting trust may be a key, inexpensive way to encourage banking. This would lead to a more adequate Social Security deposit system, lessening the need for problematic prepaid cards.

117 AARP PUB. POLICY INST., supra note 48, at 5.

118 Id. at 2.

119 See id. at 8-9.

120 Id. at 10.

121 Id.

122 See id. at 8.

123 Id. at 13.

124 Id. at 10.

125 Id.

126 Id. at 11 (comparing the elevated concern for "hidden fees and charges" among black and Hispanic beneficiaries to the concerns of white beneficiaries, only 7% of whom cited "hidden fees and charges").

127 Id.

128 Id.

24 Geo. J. Poverty Law & Pol'y 139, *154

Page 15 of 18

C. Social Security as a Contract

Social Security payments fall within Congress' power to spend money in promotion of the "general welfare." 129 With this authority, Congress enjoys the "right to alter, amend, and repeal any provision." 130 Such plenary power rests on recipients' lack of any contractual right to benefits as the Supreme Court held in Flemming v. Nestor. 131

However, Congress should reconsider the recent electronic benefit modification because (1) the facts of Flemming were unique and should not [*156] govern; (2) the government can recognize benefits as a contract-like right while still allowing program flexibility; and (3) the valid expectations of benefits include the means through which they are received.

Flemming v. Nestor dealt with a citizen who, along with his employer, paid taxes toward Social Security for nineteen years, only to be denied benefits once he was deported. 132 He was deported based on his Communist Party affiliation. 133 This fact, as Justice Black points out in his dissent, was likely a consideration, if not the foundation of the court's five-to-four decision to uphold his benefit revocation. 134

In Flemming, the Supreme Court held that benefits were not an "accrued property right" under the Fifth Amendment's Due Process Clause. 135 While this holding was grounded in previous case law which held that Social Security was a gratuity lacking a vested right, 136 it overlooked important legislative history differentiating the program from other government programs.

As Senate Finance Committee Chair at the time and co-author of the Social Security Act, Walter F. George, stated, "Social Security is not a handout; it is not charity; it is not relief. It is an earned right based upon the contributions and earnings of the individual." 137 In the eyes of the originators, Social Security was thought to be "contributory social insurance." 138

In viewing the benefits as insurance, the court should have relied on Lynch v. United States. 139 There, a unanimous Court held that Congress had to follow through on payments promised to soldiers who had made contributions via the War Risk Insurance Act of 1917. 140 The Lynch court relied on the Fifth Amendment's just

129 U.S. CONST. art. 1, § 8, cl. 1. See Helvering v. Davis, 301 U.S. 619, 640 (1937).

130 42 U.S.C. § 1304 (2014).

131 Flemming v. Nestor, 363 U.S. 603, 610 (1960).

132 Id. at 604-08.

133 Id. at 605.

134 Id. at 621-26 (Black, J., dissenting).

135 Id. at 608.

136 See id. at 610; see also Helvering v. Davis, 301 U.S. 619, 640 (1937).

137 102 CONG. REC. 15,110 (1956) (statement of Sen. George).

138 Flemming, 363 U.S. at 621-24 (Douglas, J., dissenting).

139 Lynch v. United States, 292 U.S. 571 (1934).

140 Id. at 575-85.

24 Geo. J. Poverty Law & Pol'y 139, *155

Page 16 of 18

compensation clause to prevent such repudiation of payment. 141 Similar reasoning should be used in cases of Social Security based on the analogous contribution-payout model.

The Flemming Court was correct in some aspects. The majority indicated that establishing a formally contractual right to benefits "would deprive it of the flexibility and boldness in adjustment to ever-changing conditions which it demands." 142 Rapidly shifting market, demographic, and global conditions make it essential that Social Security be malleable.

Even if deemed a non-contractual right, Social Security needs limits. The Flemming Court established a standard where non-contractual benefits should [*157] only be a question of judicial concern where modifications were "utterly lacking in rational justification." 143 This is an enormous amount of flexibility. 144

There has to be a middle ground between complete congressional discretion and requiring just compensation for each recipient every time program modifications are made. At the very least, Social Security implies some sort of social contract. 145 Allowing recipients to decide their mode of benefits is a small, fairly harmless way the government can easily acknowledge the social contract. This confidence is essential to the system because it indicates some regard for the Social Security recipient in a time of unprecedented transition. Changes to Social Security are expected soon, likely with regard to the age of the recipient or to what extent payments should reflect lifetime earnings. Change is acceptable, as long as there is emphasis on not disappointing "just expectations to a fund which the government compelled." 146

Social Security benefits may not be property according to the common definition. However, they indisputably have property-like attributes. In his work The New Property, scholar Charles Reich expands the definition of property to include items of "deliberate construction by society." 147 He adds that once viewed as such a construction, we can understand "property" not just by how it originated, but also by what "job it should be expected to perform." 148

Government benefits, like money, are designed to serve a function. Thus, when the functionality changes, for example through technological development, our understanding and regulation of government benefits must also change. The expectation of Social Security benefits, as it has historically been marketed, 149 is that of an earned

141 Id. at 578.

142 Flemming, 363 U.S. at 610.

143 Id. at 611.

144 See id. at 610.

145 See generally James P. Cooney & H. D. Prior, Social Welfare--An Emerging Doctrine of Statutory Entitlement, 44 NOTRE DAME L. REV. 603 (1969) (arguing that rights to public assistance go beyond traditional property rights and encompass the right of individuals to demand from their government certain economic necessities of life).

146 Flemming, 363 U.S. at 624-25; Charles A. Reich, The New Property, 73 YALE L.J. 733, 737 (1968) (arguing the Social Security taxpayer "is a participant in public insurance by compulsion").

147 Reich, supra note 146, at 771-73.

148 Id. at 779.

149 See Karen M. Tani, Flemming v. Nestor: Anticommunism, the Welfare State, and the Making of "New Property," 26 LAW & HIST. REV. 379, 394 (2008) (citing a pre-Flemming letter from The Health, Education, and Welfare Secretary stating the Social Security program entailed "rights to benefits" created through "the act of working in covered employment"); Robert Pear, Chipping Away at the Idea of Entitlement, N.Y. TIMES (Feb. 9, 1986), http://www.nytimes.com/1986/02/09/weekinreview/chipping-away-at-the-idea-of-entitlement.html (quoting statement of former

24 Geo. J. Poverty Law & Pol'y 139, *156

Page 17 of 18

right. Making it unduly difficult for those who have earned such right to access and spend their expected benefits does not serve the purposes of the program.

[*158] IV. CONCLUSION

The last major Social Security overhaul was in 1983. 150 However, with 108.5 million baby boomers, individuals born between 1934 and 1961, 151 approaching retirement age, another is inevitable. The Social Security Act of 1935, now codified as 42 U.S.C. Chapter 7, established a system purposed on supplying "adequate provision" to the aged, disabled, and others needing assistance. 152 What constitutes adequate provision has not yet been solidified in case law aside from the "just expectations" discussed in the Flemming case; many Americans are subsequently unsure of the Social Security program's existing obligation to them. 153 Defining "adequate provision" will become increasingly important as changes to Social Security are made.

One change gaining traction is the increase of the retirement age to sixty-seven. 154 This may not lower costs as much as expected, given the majority elect to take benefits early, beginning at age sixty-two. 155 Other proposals include an increase in the associated payroll tax. 156 Regardless of what is ultimately decided, the plenary power of congress to alter these benefits is set to become contentious very soon. Removing the mandatory electronic benefit requirement is a small, yet simple way to instill stability in the minds of recipients.

For the reasons presented here, the Social Security system is unique from the Food Benefits program (SNAP). Whereas one hundred percent of food benefits, totaling seventy-five billion dollars in 2013, are paid out onto prepaid cards, only 3.2% of Social Security benefits are distributed via prepaid card. 157 This is only $ 29.9 billion of the $ 810 billion total payments. 158 Thus, the cost [*159] savings here would be less significant than those seen during the Food Stamp Electronic transition.

The most effective way to leverage these efficiencies would be to look more closely at the entire payments ecosystem when making big decisions like the electronic Social Security mandate. As shown in the discussion of

Senate Finance Chair Walter F. George that Social Security "is an earned right based upon the contributions and earnings of the individual.").

150 Social Security Amendments of 1983, Pub. L. No. 98-21, 97 Stat. 65 (1983) (codified as amended at 26 U.S.C. §§ 86, 6050F and 42 U.S.C. §§ 910-11).

151 HARRY S. DENT, THE DEMOGRAPHIC CLIFF: HOW TO SURVIVE AND PROSPER DURING THE GREAT DEFLATION AHEAD 18 (2014).

152 Social Security Act of 1935, ch. 531, Pub. L. No. 74-271, 49 Stat. 620 (codified as amended at 42 U.S.C. ch. 7). See also Legislative History: The Social Security Act of 1935, SOC. SEC. ADMIN., http://www.ssa.gov/history/35act.html.

153 Michael D. Tanner, Is there a Right to Social Security?, CATO INST. (Nov. 25, 1998), http://www.cato.org/publications/commentary/is-there-right-social-security.

154 David C. Wittenburg et al., How Raising the Age of Eligibility for Social Security and Medicare Might Affect the Disability Insurance and Medicare Programs, 63 SOC. SECURITY BULL. 17 (2000), http://www.ssa.gov/policy/docs/ssb/v63n4/v63n4p17.pdf.

155 Emily Brandon, The Most Popular Ages to Sign Up for Social Security, U.S. NEWS & WORLD REP. (June 1, 2015, 11:24 AM), http://money.usnews.com/money/retirement/articles/2015/06/01/the-most-popular-ages-to-sign-up-for-social-security.

156 Emily Brandon, 5 Potential Social Security Fixes, U.S. NEWS & WORLD REP. (Nov. 14, 2014, 2:57 PM), http://money.usnews.com/money/blogs/planning-to-retire/2014/11/14/5-potential-socialsecurity-fixes.

157 BD. OF GOVERNORS OF THE FED. RESERVE SYS., supra note 37, at 5.

158 See id.

24 Geo. J. Poverty Law & Pol'y 139, *157

Page 18 of 18

unbanked and underbanked beneficiaries, the problems of payments are not limited to government benefits. They may be exacerbated in that context, but the true problem comes down to lack of consumer information, banking accountability, and income disparities. These heavy problems are not easily fixable. However, law makers should seek to better understand these problems' relationship to delivery mechanisms. This will ensure that certain groups are not overlooked when Social Security inevitably shifts.

Therefore, whether it be through loosening the 2013 electronic benefits mandate, extending consumer protections, or offering free withdrawals to recipients, legal regulations are necessary for Social Security's disbursement system to remain successful. New payment systems inevitably cause difficulties when first implemented. The efficiencies they provide are too important to financial inclusion to be completely outweighed by access burdens.

Finally, over time, Social Security recipients will become increasingly comfortable with using electronic benefits services. The need for alternative means of delivery will dissipate and the mandate will not be so troublesome. In the meantime, protecting these few negatively affected recipients will restore confidence in the program as a whole at a relatively insubstantial cost.

Georgetown Journal on Poverty Law & Policy Copyright (c) 2016 Georgetown Journal on Poverty Law & Policy Georgetown Journal on Poverty Law & Policy

End of Document

24 Geo. J. Poverty Law & Pol'y 139, *159

NOTE_ From Paper to Electronic_ Food Stamps, Social Security, and the Changing Functionality of Gove.png