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Reply #77: But at what over all cost? [View All]

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happyslug Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Dec-07-11 05:04 PM
Response to Reply #73
77. But at what over all cost?
Remember most people are honest, thus looking over their records and doing an investigation is a complete waste of money. The problem is we do NOT know who is honest and who is not, thus any system of controls must include BOTH. My example does show if you spent the money you would stop the fraud for months afterward, BUT ONLY IF THERE WAS FRAUD. In 99 out of 100 cases NO FRAUD WILL BE FOUND. Even if we assume one case of fraud out of ten, It would take over TEN MONTHS of NOT have to pay the person who committed fraud to over come the cost to investigate all ten people. 100 months (8 years 4 months) to over come the cost if the fraud is only one in 100. AS you can see the price is just to high.

The problem is Welfare, while not paying the high price for controls as my example illustrates, to prevent fraud, is paying much more then what a private party would spend. The reason for this is a private party would look at the numbers and cut off the controls once the cost of the controls equals the actual loss being incurred but Welfare demands a higher level of catching Fraud (Mostly to avoid embarrassment when such fraud is found, then any real effort to avoid fraud).

My example were to show the cost to catch ONE person defrauding the Welfare system, not that such cost must be imposed on both people who are NOT committing Fraud and whose who are defrauding the system.

A good example of this was the Ford Pinto. Ford determined that the cost of lawsuits do to people being burned whenever a Pinto was hit in the rear, was less then the cost of replacing a $2 part with a $3 part on the assembly line. Ford took a lot of heat for that decision when it came out in the litigation involving Pintos burning, but Ford determined the millions they paid to each burned victim was still cheaper then replacing the $2 part with the $3 part (Ford was also the last Car maker to remove the Gas tank from behind the seat in Pickup trucks, for the same reason, Ford saw the move as costing more money then what Ford would pay to burn victims).

Now, for that decision Ford took a lot of heat, as did the Federal Government. The Federal Government finally ORDERED that all new trucks would NOT have the gas tank behind the seat, and Ford complied (And the Federal Government Ordered any new Pinto be built with the $3 part not the $2 Part). The reason the Federal Government acted was simple, the Government responded to complaints of the people, even if the response would cost more money then any potential savings.

My point for bring up the Pinto and the Ford Pickup, is they show how the money works in such situations. The biggest cost is NOT where the Fraud is found (you have a huge savings in such cases, the $3 part in a Pinto hit in the rear would have saved Ford Millions) but is cases where no fraud is found (i.e. the Millions of Pinto sold that were NEVER hit in the rear, or hit did not explode). The same with Welfare, the savings is NOT in the one case where Fraud is found, but in the hundreds (maybe thousands, if not million) of cases where no fraud is found. The cost of the Controls is the same if fraud is found or not, the saving only occur when fraud is found. The problem is most people are NOT trying to defraud the welfare system, thus the real savings is in cutting back on the paper work welfare recipients have to fill out, not is finding fraud.

Side Note: Both the Pinto and the Pickup was done under Henry Ford II, the grandson of Henry Ford. Henry Ford II was NOT as imaginative as his grandfather nor as concern about the buyers of his cars. The present Generation seems to be more like Henry Ford I then Henry Ford II.
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