February 28, 2012; Source: Stateline

Nonprofit activists working on poverty issues, take note: in the legislation that extended the payroll tax cut, Congress also included a modification of one Temporary Assistance for Needy Families (TANF) rule that Stateline refers to as the “strip club loophole.” TANF recipients will now be prohibited from getting their electronic benefit transfer (EBT) welfare payments (sort of like a debit card instead of a check) in transactions at machines in liquor stores, casinos, gaming establishments, or “adult entertainment” venues. 

Stateline reports on several instances of TANF recipients using their EBT cards in “questionable locations.” A 2010 Los Angeles Times story found $1.8 million in TANF funds accessed at casinos and $12,000 accessed at strip clubs. A Fox 5 story in Atlanta disclosed that $150,000 in TANF payments came from transactions in liquor stores, bars, and nightclubs. And USA Today reported that a Michigan probe found $87,000 in TANF benefits were accessed at one Detroit casino in a one-year period. 

Is this Congressional action a good idea or simply the latest in a series of stories aimed at stigmatizing welfare recipients, sort of the newest “welfare queen” narrative? The Center for Law and Social Policy, a respected Washington, D.C.-based nonprofit advocacy organization, charged that “the idea that TANF recipients are using their cash benefits on gambling sprees or drinking them away may make for sensational headlines but is not based on facts.” 

States that don’t find a way of restricting these liquor store, casino, and strip club venues for accessing TANF payments could lose five percent of their annual TANF funding. It will be a challenge for the states, however, to figure out which ATMs are off-limits and which aren’t.  Somehow they and members of Congress might have to understand that in some low-income neighborhoods, an ATM at a liquor store might be the most accessible and least costly place for a TANF recipient to use his or her EBT card—and that the person getting cash many not be doing so to buy a bottle.  Apparently, despite the Los Angeles, Michigan, and Georgia probes, other studies suggest that the problem involves less than 0.1 percent of TANF transactions.

Is this good policy-making by Congress to nip a budding problem or an overreaction to some incendiary strip club headlines?—Rick Cohen