Sometimes it’s hard to figure out which is more infuriating for taxpayers: illegal fraud in a government program, or legal abuse of that program. The State of New York recently took $140 million in federal “stimulus” money and handed it out with no strings attached to people on welfare for the ostensible purpose of back-to-school needs.

What did the welfare recipients do with the extra cash? From CBS News:

“We had different retailers calling us and saying people were coming in with their benefit transaction card, and they are purchasing flat screen TV’s, iPods and video gaming systems,” [County Executive Maggie] Brooks told CBS News.

Businessman Josh Babin says the day stimulus money went into the welfare accounts, business at his Rochester cell phone store doubled. And he doesn’t sell school supplies. “Most of them came in, picked up most of their accessories, most of their products.”

Welfare recipients were also free to withdraw the money as cash. That led to an unexpected run on ATM’s across the state. Brenda Smith, manager of a Wilson Farms store in Monroe County, said most of her increase in sales when the stimulus funds were disbursed were not in school supplies, but in “pre-pay cell or credit cards.” She said her store’s ATM was wiped empty. Managers of three Wilson Farms convenience stores in Rochester also reported empty ATM machines and increases in beer, lotto and cigarette sales. Managers of four Tops Markets stores in Rochester had similar stories. On West Avenue, the store’s three ATM’s were all depleted by noon on August 11th.

Like good Keynesians, New York state officials defended the program by saying that “no matter what welfare recipients purchased with the taxpayer funds, it served to stimulate the economy.” The Dept. of Health and Human Services, from which the taxpayer dollars originally came, is apparently looking into the matter. However, it’ll be impossible to figure out where the money was ultimately spent. As CBS concludes, it’s “Little consolation to taxpayers who were promised that they’d know how every dime of stimulus funds was spent.”

See here for more on fraud and abuse in government programs.