The Real Obama Phone Scandal

So-called Obama phones — a misnomer for federally subsidized mobile devices for the poor — are back in the spotlight, owing to accusations of fraud in dispensing this government benefit. The contretemps over this taxpayer-funded handout helps to illuminate some of the more obscure, or even illogical, corners of the federal leviathan. What business does Uncle Sam have, after all, in handing out free phones to the citizenry? The free phones are a feature of the federal Lifeline program, which is meant to subsidize communications services. The Federal Communications Commission reports that these subsidies are being misspent, to the tune of at least $262 million. The FCC adds that it has barred IM Telecom, one of the “largest recipients of federal Lifeline subsidies,” from enrolling new subscribers due to “improper and potentially unlawful behaviors.”Yet the real scandal here could prove to be what is legal. Obama phones emerged as a political issue in 2012 when the Tea Party Victory Fund put out a TV ad featuring an Ohio woman crowing that “everybody in Cleveland” had been given “Obama phones.” The voter added: “He gave us a phone, he’s gonna do more.” The ad sought to make hay of a “program that provides low-income people with free or cheap phones,” per the Times. Yet the free phones are a bipartisan foible that first emerged under President Reagan. In 1985, the FCC launched Lifeline, citing the Communications Act of 1934, which directed the agency to “make available” to Americans communications service “at reasonable charges.” On that tenuous basis the FCC, too, created a Universal Service Fund, paid for by user fees, that amounts to a tax in all but name. In 2024 the services fee cost Americans $8.4 billion.The fee runs afoul of the Constitutional precept that the power to tax rests with Congress, not an executive branch agency like the FCC. Yet when the legitimacy of the fee reached the Supreme Court last year, a majority of the justices decided to let the levy slide. In a dissent, Justice Neil Gorsuch had the constitutional clarity to mark the aberration that “an executive agency may decide for itself what rates to apply and how much to collect.”When the dispute over the Universal Service Fee was pending before the Nine, these columns excoriated the de facto tax as a reminder of the “need to restore constitutional limits on federal power.” For now, though, the fee, and the Lifeline program, are on the books. Reagan-era bureaucrats initially set Lifeline to subsidize poor Americans’ phone bills. In 2005, under President George W. Bush, the federales expanded the program to subsidize mobile phones.In 2016, the FCC again expanded the program, subsidizing internet services — “on a stand-alone basis, or with a bundled voice service,” per the Congressional Research Service. The Trump administration is mooting legal concerns about Lifeline benefits wrongly being directed toward illegal immigrants and other ineligible recipients. With such flimsy legislative justification for this program, it’s no wonder questions over accountability are rife.Viewed through this lens, the FCC claims of fraud in the Lifeline program seem nigh-tangential. Even a stalwart of the welfare state, FDR, grasped how “continued dependence” on federal handouts “induces a spiritual and moral disintegration fundamentally destructive to the national fibre.” A “narcotic, a subtle destroyer of the human spirit,” FDR called such welfare benefits. America would be wise to hang up on Obama phones.

The Real Obama Phone Scandal

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