When the new Congress begins work after the holidays, well see if all those promises to end wasteful spending were hot air or really meant something.
A good test case might be Lifeline, the 30-year-old government program intended to provide low-income Americans with subsidized phone service.
Under the program, individuals who meet certain income requirements or who qualify for other forms of government assistance, such as welfare or food stamps, can obtain phones and service plans for free or at a very low cost.
Like most other government programs, Lifeline began modestly, with roughly 1 million people initially qualifying after its launch in 1984. The program was expanded in 1997, and again in 2008 to include cell phones.
From 2008 to 2011 enrollment skyrocketed and annual costs more than doubled, from $819 million to $1.75 billion. By 2011 more than 16 million people were participatingmore than 5 percent of the U.S. population. The expanded program, dubbed Obamaphones by opponents, even became an issue in the 2012 presidential campaign.
Out-of-control costs are not the only problem, however. The Federal Communications Commission, which oversees the programs service providers, reported last year that as many as 41 percent of participants couldnt demonstrate that they met eligibility requirements or declined to provide the needed information. The FCC also reported in 2013 that as many as 2 million subscribers were deliberately defrauding the program, including thousands who had improperly requested and received more than one subsidized line. To make matters worse, the FCC also found that many beneficiaries werent really using their Lifeline phones; they were selling them for cash.
Subscribers are not the only ones suspected of abuse. In 2013, the FCC proposed some $32.6 million in fines against three Lifeline providers for a variety of violations.
There have been several attempts in recent years to amend or end the program. Rep. Tim Griffin, R-Ariz., for example, citing corruption and uncontrolled costs, proposed legislationthe Stop Taxpayer Funded Cell Phones Actthat would effectively eliminate the program. But there was serious pushback, not only from Lifeline subscribers and low-income advocacy groups, but from the telecommunications industry, which is making a bundle from the program.
Government reimbursements to telecom companies generate massive revenues. One service provider alone, Tracfone, has more than 4 million Lifeline subscribers. In 2011, revenues from the Lifeline program generated some $452 million for the company. AT&T and Sprint took in nearly $275 million each that year. With such huge revenues at stake, these companies have a strong incentive to keep the program in place.
Significant changes need to be made to the program. Lifeline advocates claim the service provides participants with a lifeline to the outside world. Without the program, they claim, individuals would lack access to police, fire, and other emergency services.
This isnt true. Many, if not most, Lifeline users already had phones and phone service before they signed up for Lifeline; they use the program to obtain free equipment or services. Besides, phone companies are required by law to connect emergency calls free of charge. Phone customers pay a Universal Service Charge every month to make such connections possible.
Various improvements certainly are needed. A greater effort could be made, for example, to implement anti-fraud measures the FCC began in 2012. Many of the proposed changes have not been pursued with great energy or applied consistentlyand fraud remains a problem. Others have suggested capping program expenditures, tightening eligibility requirements, or requiring users to pay a modest monthly fee.
Although these suggestions may help to some degree, they wont solve the underlying problem with the program: When something is seen as free it becomes addictive.
This is not unique to Lifeline. Its one of the fundamental problems with the welfare state and the real problem the new Congress will need to confront.
|Abigail R. Hall is a Research Fellow at the Independent Institute and an Assistant Professor of Economics at the University of Tampa.|