The SNAP Dilemma: Addressing Hunger While Perpetuating Poverty and Government Dependency

The United States federal government is heading toward the longest government shutdown. Aside from the COVID-era Obamacare premium tax credits that precipitated the shutdown, another piece of policy was caught in the crossfire of this debacle: the Supplemental Nutrition Assistance Program (SNAP). More colloquially known as food stamps, SNAP is a federal welfare program to provide monthly food benefits to low-income households. The reason why this became a point of contention is that without a budget passed, SNAP benefits would be paused effective November 1. Last Friday, a couple of federal judges ordered the Trump administration to continue SNAP benefits amid the shutdown. There is still a possibility of those benefits being delayed a bit. 

It was not simply that the SNAP program was saved by a federal injunction that made me think more profoundly about SNAP benefits, an injunction that shows how its near-total reliance on federal funding makes the SNAP program fragile. According to the calculations of the Right-leaning American Enterprise Institute (AEI), if the SNAP benefits had been paused, 2.9 million people would have been pushed into poverty. When I read that, I thought to myself, "Really? That many?" The average monthly SNAP payment is $190.59 per person or $356.41 per household (or $4,276 per annum). After accounting for government transfers, the Congressional Budget Office (CBO) found that average household income for a low-income household was $48,700 (CBO, p. 18). This would mean that slightly less than 10 percent of income post-transfer came from SNAP. 

Although the average enrollment period for SNAP is under a year, the fact that a one-month disruption can cause so much chaos shows how reliant people have become on the government for something as basic as food. It is quite the indictment of the welfare state when nearly 3 million people can end up in poverty due to administrative or political shifts. While it illustrates SNAP's role as short-term relief, it does not contradict the concern that the very existence of SNAP creates structural dependency. This structural dependency is not the only systemic issue with the SNAP program.

• Poverty Relief: SNAP benefits are modest and temporary. They only help against short-term shocks and do not pull a household out of poverty. Furthermore, this program does not address the root causes of poverty in the way that a program such as workforce development would. The fact that SNAP benefits are created to help households survive instead of improving upward mobility shows the limits of the program.
• Administrative Issues: As I pointed out last May, the SNAP program has had a rising overpayment problem in the past decade. SNAP overpayments have increased from 2 percent in 2012 to 10 percent in 2023. How can people rely on such a program for food delivery when it is prone to basic administrative failure? 
• Unintended Health Consequences: In another piece, I wrote about how SNAP exacerbates obesity. SNAP might address immediate hunger, but it doesn't help with long-term health issues or economic mobility, especially since SNAP subsidizes caloric intake without accounting for nutritional value. If a recipient has worse health outcomes as a result of SNAP, it hampers their ability to work or advance economically. In other words, it perpetuates poverty and keeping people on government supports instead of helping alleviate poverty. 
• Disincentive to Earn More: SNAP's eligibility cliffs, which are where benefits phase out sharply as income rises, create a modest disincentive for recipients to increase earnings because small pay raises can lead to a disproportionate loss of support. This can make low-income households more reluctant to move upward financially, thereby staying in a lower income bracket. 
• Disincentive for Self-Sufficiency: Research suggests that children exposed to welfare programs often develop more favorable attitudes toward government dependence and place less emphasis on work (e.g., Hartley et al., 2024; Barón et al., 2008). Although SNAP benefits last less than a year on average, some households participate repeatedly or episodically, which exposes children to government support. This repeated exposure, especially combined with the exposure of other welfare programs, can signal that the government is the primary safety net in life, thereby dampening the incentive for economic self-sufficiency.

Ultimately, SNAP symbolizes the tension between wanting to provide short-term relief for those in need versus long-term economic mobility. It is true that there is evidence that SNAP benefits can help with hunger relief, especially when dealing with such short-term shocks as job loss or sudden illness. It is also true that its modest benefits, the administrative inefficiency, eligibility cliffs, and unintended consequences (e.g., poorer health outcomes) do little to lift SNAP beneficiaries out of poverty. One of the core problems is that a program designed as a temporary safety net becomes a crutch for longer-term dependence a variety of government programs. That is when the focus shifts from self-reliance to dependence. 

By creating a system in which people rely on the government for something as essential as food, it perpetuates economic vulnerability instead of promoting economic self-sufficiency. If the idea is to help low-income Americans thrive, policymakers need to take a harder look at reforms that steer people more toward economic stability rather than temporary sustenance and perpetually being in survival mode. 

It Is Not a Snap Judgment to Criticize SNAP's Rising Overpayment Problem

Everyone needs to eat. If people do not eat food, they die. It is part of why the Supplemental Nutrition Assistance Program (SNAP), also known as food stamps, is touted as playing a crucial role in fighting food insecurity across the United States. This is especially the case considering that SNAP benefits are second to unemployment insurance in terms of providing assistance during economic downturns. While it is purported as being this wonderful lifeline for struggling Americans, the reality is quite different. 

I am not referring to obesity rates exacerbated by SNAP  benefits (see my 2023 analysis here). When I was doing some research a couple of days ago on what to write about next, I came across a recently released report from the Mercatus Center entitled Reducing Waste and Fraud in SNAP. The most shocking finding of this report was that overpayment rates increased from 2 percent in 2012 to 10 percent in 2023. What this translates to is it costing U.S. taxpayers $10 billion in SNAP overpayments. It is smaller than the $31.1 billion in Medicaid improper payments I criticized last month, but it is still a jarring amount given the size of SNAP.

It is mind-blowing because in spite of the U.S. Department of Agriculture (USDA) spending more on improving retailer integrity and fighting trafficking in SNAP benefits, the overpayment rate continued to surge. Part of the reason for the surge is because USDA applied an improved methodology in 2017 and did not re-calculate the pre-2017 data. Then there are the matters of eligibility misreporting, Electronic Transfer Benefit (ETB) technical issues, and SNAP benefits trafficking, the latter of which account for about 40 percent of overpayments. 

This September 2024 report from the General Accountability Office (GAO) gives a better sense of weak oversight. For example, the GAO recommended in 2018 to increase penalties for when a retailer exchanges recipients' SNAP benefits for cash instead of food. As of September 2024, the USDA did not implement that recommendation provided in a GAO 2018 report. In that same 2018 report, the GAO criticized USDA for not applying previous recommendations from 2016. The Mercatus Center came up with a few recommendations on how to deal with these overpayment rates:

1. Create an office of program integrity within the FNS.
2. Require the disclosure of payment errors of any size, instead of just those over $57.
3. Allow states to retain more of the funds that they recover when they detect fraud.
4. Permit states to dis-enroll retailers that are taking advantage of SNAP. 
5. Encourage states to move over to SNAP EBT cards with chips.
6. Close loopholes that allow those with higher income and assets to collect SNAP benefits so that only genuinely needy households qualify.

I would also add some of the recommendations that I wrote about back in 2013, including separating SNAP benefits from agricultural subsidies, eliminating broad-based categorical eligibility, and modify the gross income limit from 130 percent to 100 percent of the poverty line, and enacting spending caps for SNAP. Sadly enough, there has been such little reform made on SNAP that these recommendations are still by and large applicable about 12 years later. The fact that so little has been done this century to improve SNAP benefits is troublesome.

Aside from the fact that this costs millions in taxpayer dollars a year, why should we care? Misallocating resources vis-à-vis overpayments means fewer dollars actually going to those in need. Eroding public trust in the program can mean less support for SNAP, which can harm those who rely on those benefits. More to the point, if the government cannot manage a program such as SNAP with competence, it makes it more difficult to justify its existence. Yes, libertarian economist Frederich Hayek believed that there should be at least a minimal social safety net. At the same time, all the USDA's intransigence and recalcitrance show is that SNAP should be as small and minimal of a social safety net as possible.

SNAP Benefits Exacerbate Obesity and Diet-Related Disease: Can Something Be Done?

The debt ceiling fight wages on in Congress. One of the items that is part of this fight is Supplemental Nutrition Assistance Program (SNAP), more colloquially known as food stamps. Part of what the Republican Party is negotiating is to raise the work requirements for able-bodied adults without dependents (ABAWD) from 50 to 56. This reform would potentially affect over 1 million Americans currently receiving SNAP benefits. 

The people over at USA Today make it seem like a callous move by the Republicans. As I explained last month, this reform is a step in the right direction. It is needed to maintain the long-term solvency of the program. These new work requirements would improve employment rates, as well as the well-being of unemployed ABAWD individuals on SNAP benefits. That being said, the issues with SNAP go beyond budgetary or labor market issues. 

According to the U.S. Department of Agriculture (USDA), "SNAP provides nutrition benefits to supplement the food budget of needy families so they can purchase healthy food and move towards self-sufficiency." You would think that with "nutrition assistance" in the title, SNAP would actually deliver nutritious options to those who need it. Much like with the Inflation Reduction Act or the Affordable Care Act, the Supplemental Nutrition Assistance Program fails to live up to its name.  

Earlier this month, the center-Right American Enterprise Institute (AEI) released a report entitled Promoting Mobility Through SNAP: Toward Better Health and Employment Outcomes. AEI took a look at data from the U.S. Department of Agriculture (USDA) and the National Health Interview Survey (NHIS). One of the main findings of this report is that SNAP recipients have poorer health outcomes than non-recipients. The first shocking aspect is that SNAP recipients are more likely to have diet-related diseases. 

What is just as concerning is that SNAP recipients across all age categories are more likely to be obese than non-recipients, regardless of income bracket (AEI, p. 12). 

This finding lines up with a 2018 USDA report on the nutritional quality of food purchased by Americans. As we see from this report, SNAP recipients are more likely to purchase empty calories and refined grains. SNAP recipients are also less likely to purchase fruits, vegetables, protein, and whole grains. 

A 2016 USDA study similarly shows that 23 percent of SNAP benefits were spent on sweetened drinks, desserts, salty snacks, candy, and sugar. In other words, the U.S. government uses SNAP to spend $25 billion a year subsidizing junk food. The 2016 study found that soft drinks was the single largest commodity purchased under SNAP (USDA, 2016, p. 5). 

One has to ask why there is a correlation between SNAP benefits and poorer health outcomes. Advocates posit it is because SNAP recipients do not have nearby access to healthy food, that they live in food deserts. The USDA begs to differ: "Further, on all of our measures of nutritional quality, SNAP-participating households with low household-level access to food stores did not differ from SNAP-participating households with better access (USDA, 2018, p. 15)."  

Price of healthy food does not seem to be the culprit, either: "Contrary to conventional wisdom, research shows that when measured properly (per nutrient or per serving, for example), healthy foods actually cost less than unhealthy foods (AEI, p. 15)." You cannot blame American culture or poverty on these disparities because SNAP participants have worse health outcomes than low-income non-participants. Many who advocate for greater SNAP benefits would like to ignore that cost or access to healthier options are not the issue with SNAP, so what is?

While it is easier to identify what is not the cause of the health disparities, figuring out what is turns out to be a more difficult task. Part of these poor health outcomes comes from the fact that SNAP program has no nutrition standards whatsoever (AEI, p. 1). It still does not explain why SNAP recipients have worse health outcomes, even worse so than low-income individuals who do not receive SNAP benefits. Subsidies act as an economic incentive, that much is true. In this case, SNAP benefits are subsidizing a disproportionate amount of unhealthy eating and exacerbate public health outcomes, including the obesity epidemic. Do SNAP benefits incentivize poor health decisions or is this a demographic that happens to make more unwise decisions when it comes to their health?

Whether SNAP benefits are explicitly causing poor health or not, what remains clear is this: after years of food stamps and having increased funding for SNAP spending, nutrition and health outcomes for SNAP recipients remains poor. The question is whether anything could be done to reform SNAP.  I detailed in 2013 how we could reform the SNAP program. 

Conceptually, it would be nice to have nutrition requirements on SNAP benefits to help SNAP recipients have better health outcomes. Either banning the purchase of soda or having a certain percentage of benefits allotted towards fruits and vegetables comes to mind. I would even be for a limited Fruits and Vegetables program instead of no nutrition requirements. That alternative would cost only about $20 billion instead of $127 billion allotted for SNAP benefits in FY 2023. 

Much like with Social Security, I wonder if it would be simpler to scrap SNAP instead. The government getting the food pyramid wrong is an example of why the government does not have the best track record in telling people how they should eat. We cannot even get Congress to pass something as minimal as stricter work requirements after Biden did away with them in 2021. Plus, the Secretary of the USDA recently commented that nutrition requirements are not an option because they would stigmatize the obese. The intransigence in Congress gives me little hope that SNAP would be eliminated. Government gets spending regardless of whether a program works, and once established, it is hard to eliminate a government program. 

At the same time, I hope that private charities can step in while Congress gets its act together. Private food-related charities are at least incentivized to be more efficient with spending and fund programs that succeed. Regardless of the outcome in Congress, it does not change the fact the SNAP benefits do a poor job at promoting nutrition for its recipients. 

We Need to Strengthen Work Requirements in SNAP and Other Safety Net Programs

The drama with the debt limit continues. The deadline to deal with the debt ceiling is in about two months. Biden wants a no-strings-attached increase of the debt limit, but the Republicans are playing hardball with a series of proposed reforms called Limit, Save, Grow. One of the reforms in this proposal is strengthening work requirements for food stamps, also known as Supplemental Nutrition Assistance Program (SNAP). 

The proposal raises the top age for the able-bodied adults without dependents, or ABAWD, category from 48 to 56. Looking at USDA data, that would affect around 1 million SNAP recipients. According to the bipartisan Committee for a Responsible Federal Budget (CRFB), the work requirements for SNAP, Medicaid, and Temporary Assistance for Needy Families (TANF) in Limit, Save, Grow will save $100 billion over the next ten years. If passed, all the reforms would reduce debt over the next decade from a debt-to-GDP of 118 percent to 107 percent (CRFB). While this country has a ways with reigning in its debt issues, it highlights the importance of work requirements in safety net programs.

Opponents of work requirements view work requirements as punitive, especially for the needy. In 2016, I wrote about why SNAP benefits need work requirements. One reason why I supported and still support work requirements is because it helps with the longevity of the program. In 2021, the Biden administration ended the work requirement policies that the Trump administration put into place. The American Enterprise Institute estimates that not enforcing SNAP work requirements costs us $20 billion per annum. As we see with the CRFB projections, having lax requirements seeks to drive debt. 

In the Road to Serfdom (p. 148), Frederich Hayek advocated for some provision of a social safety. To channel Hayek: if there is going to be a safety net, it should go to those who are neediest and should be temporary. Although a temporary, minimal safety net can be a net social positive, having a safety net for too long can create a disincentive to get back to work. As the American Enterprise Institute points out, we do not have definitive conclusions about work requirements for SNAP or Medicaid due to data limitations. There is some information from the Upjohn Institute that shows marginal effects on employment for SNAP recipients (Harris, 2018).

If we want to get a better idea of how work requirements could impact employment, we can use another safety net program as a proxy: TANF. A working paper from the Congressional Budget Office (CBO) shows that work requirements in TANF are effective at offsetting the work disincentives (Falk, 2022). This CBO finding has been consistent with other research on the topic (e.g., Hamilton et al., 2001). Similarly, data show that unemployment insurance creates disincentives to go back to work. 

Finally, long-term unemployment is bad for the unemployed. This is more than a matter of long-term employment prospects or lifetime earnings. As the Left-leaning Urban Institute illustrates, it can reduce life expectancy by a year and a half (Nichols et al., 2013). In its recent analysis, the Right-leaning Heritage Foundation gets into some of the benefits on not being long-term unemployed. 

Increasing work requirements for social safety net programs such as SNAP will help with debt reduction. It will help the macroeconomy given that we are facing a labor shortage. It will also help SNAP recipients that are ABAWD because in the long-run, working is better for physical and mental health than being on welfare. Increasing the work requirements only scratches the surface on what could be done for safety net reform, but it is a good start. 

Is Strengthening Food Stamp Work Requirements for Able-Bodied Adults Without Dependents a SNAP Decision?

This past week, the Trump Administration's Department of Agriculture (USDA) finalized rules for the Supplemental Nutrition Assistance Program (SNAP), more colloquially known as food stamps. When initially proposed last February, USDA had proposed reforms on three aspects of SNAP. The rule the USDA passed last week only covered one aspect: able-bodied adults without dependents (ABAWD). Those who are ABAWD are those who are of working age (18-49 years), who are physically and mentally able to work, and are without dependents.

As part of the Personal Responsibility and Work Opportunity Reconciliation Act, which is the major welfare reform act from 1996, federal law requires ABAWDs to work, train, or participate in volunteer programs for at least 20 hours a week for those who were receiving more than three months of SNAP benefits within a three-year period. While this has been the law for over twenty years, there has also been allowance for waivers for areas when certain economic conditions were met, most notably when unemployment for a given area had 20 percent higher unemployment than the national average for a two-year period.

When the Great Recession hit, every jurisdiction received a waiver to deal with the difficult times. However, as the American Enterprise Institute brings up, there were those districts used various tactics to maintain their waivers post-recession. Illinois and California are two such states that have done so to its maximum effect. Those two states account for over two-thirds of the waivers in this country, in spite of accounting for 16 percent of the overall U.S. population.

This waivers exist in spite of the fact that the average unemployment rate for these waived jurisdictions was at 4.5 percent as of this past August. As of 2018, nearly fifty percent of ABAWDs lived in districts that allowed for these waivers (USDA). On top of that, about a third of ABAWDs already have income (USDA, Table 3.2). These facts illustrate that the usage of the waivers in their current form undermine the intent of the waivers.

What the new USDA rules intend to do to restrict the waivers by requiring that the unemployment rate for a given area is to be 6 percent. How would that play out?

What Will Be the Effects of the USDA Rule?
According the USDA statistics, 2.99 million out of 20.60 million households on SNAP are ABAWD (Table 3.2). While 14.5 percent of SNAP recipients are ABAWD, this does not mean that 14.5 percent of SNAP recipients are affected because it only affects those who will no longer be exempted from the waiver. The Left-of-center Urban Institute estimated earlier this year that such a rule would affect 588,000 households (3 percent), which about to 716,000 fewer people (1.8 percent reduction of SNAP recipients). These estimates are close to what the USDA calculated, which was 688,000 individuals off the benefits that are to save $5.48 billion over five years.

Other studies have measured the impact of stricter work requirements for SNAP. The Foundation for Government Accountability (FGA) preliminarily found that work requirements in Arkansas, Florida, and Mississippi have been successful. The Upjohn Institute for Employment Research had more modest findings: for every five individuals who stop receiving SNAP benefits due to work requirements, only one individual receives a job (Harris, 2019). Taking the Upjohn findings at face value, it comes off as a 5:1 ratio in terms of individuals being affected. At the same time, losing SNAP benefits does not have the same magnitude as being able to have a job and better support your household.

If you want to read more about SNAP and work requirements, you can read my 2016 analysis on the topic.

Where Do We Go From Here?
One of the underlying bases of economics is that we live in a world of scarcity. It is not realistic to think we can provide everything for everyone, and that goes for SNAP benefits. As such, there is a line that needs to be drawn for eligibility, which means not everyone can qualify or receive SNAP benefits.

SNAP beneficiaries are at 36.4 million [as of 9-2019], which is about the same as the 36.9 million in September 2009 during the height of the Great Recession (USDA). We're not in a recession anymore. If SNAP is supposed to a welfare benefit that meets counter-cycical demand, then the number of beneficiaries should have, at the very least, dropped to pre-recession levels.

I don't want to get into a debate about whether long-term usage of food stamps creates an unwanted dependency because that it is another discussion for another time. I will, however, conclude here. The United States has reached over $22 trillion in federal debt. Looking at the Congressional Budget Office's projections on debt, things are only going to get worse from here. When taken into consideration with everything I have mentioned so far, any reasoned argument would ask about tradeoffs or how to rank priorities. Who is greatest need of SNAP benefits? Are those who are ABAWD really in need of them in comparison to other recipients? And if they are not, should they still be SNAP beneficiaries?

I have been saying for years that we need to reform the SNAP program. It would be nice to have that discussion, but given how polarized this country is, it would be nigh impossible to do so, certainly on the national level. Politicians such as Alexandria Ocasio-Cortez have already played the emotional card by saying how Trump's reform could have affected a younger version of herself. If we cannot even have a debate about a $5.5 billion cut over a five-year period because it is easier to accuse those with whom you disagree politically of being callous towards the poor, then I have little hope for the fiscal future of this country.

"Harvest Box": Food Boxes Are a Terrible, Paternalistic Form of Food Assistance Reform

The Trump administration recently released its FY2019 Budget Proposal. One of the budget reforms that caught my eye was with regards to the Supplemental Nutritional Assistance Program (SNAP), colloquially known as food stamps. Right now, the 42 million Americans who receive SNAP benefits have a special debit card, known as an EBT card, with which they can buy unprepared food at authorized stores. I wrote a lengthy piece on how we need to reform SNAP. Although I wrote it about four years ago, the reforms I suggested are essentially still relevant since they have not been implemented. Trump's Budget Proposal does not simply have a $200 billion cut in SNAP benefits over the next decade (To put that budget cut into context, the U.S. Department of Agriculture [USDA] spent $70.9 billion on SNAP in 2016, and $68.1 billion in 2017). In addition to the budget cut, Trump added a SNAP reform to the Budget Proposal. He wants to replace some of the food stamps with what has been referred to as a Harvest Box. What is a Harvest Box?

SNAP is currently under a voucher system. Instead of getting all of their benefits to spend on groceries, Trump proposes that recipients receive a Harvest Box. A Harvest Box is a food box with "shelf-stable" products (e.g., milk, cereals, pasta, canned meat, canned fruits and vegetables) that are "100 percent American produced and grown." For recipients who currently receive $90 or more in SNAP benefits, the recipients would pay for the Harvest Box with their benefits and get the remainder on the EBT card. This Harvest Box change is expected to affect 81 percent of SNAP recipients. The Trump Administration's reason for this is twofold. One is to cut back on fraud rates, even in spite of the fact that SNAP-related fraud is at a low 1.5 percent. The second is for those receiving benefits to have a healthier diet. Prior research shows that those on SNAP have a slightly less healthy diet than those not on food stamps. Additionally, the USDA estimates that Harvest Box would save $130 billion over ten years because the USDA can buy the food items at wholesale prices. What could possibly go wrong? Given the criticism out there, a lot. It is bad enough where both the Right and Left are less than pleased with Trump's Harvest Box idea.

One issue with the Harvest Box is severely limiting food choice for a demographic that already has limited food options. It is not simply displacing the private sector and running a parallel, state-run distribution center that is reminiscent of low-income socialist countries. It is not only the government being intrusive or hubristic enough to tell people that they know what diet is best for millions, when these millions of people have different consumer preferences, dietary needs, and variety in ethnic cuisine that allows for a more expansive palette. It is not only that food pantries have shifted from providing food boxes to allowing for individuals to peruse the pantry's shelves for what they need. It will increase food prices because that is what happens when you constrict supply to American-only products from select suppliers. As I brought up when discussing the "buy local" movement, not only is it unfeasible to determine if a product is "100 percent American" since value chains are so complex, but limiting free trade is bad both from an economic growth standpoint and a consumer welfare standpoint.

The food choice also makes me question the health claims. Let's forget for a moment that the USDA has yet to study the health effects of the Harvest Box. The Harvest Box is not going to be sending fresh foods like Blue Apron does. It will be sending shelf-stable items, ready-to-eat cereals, and canned items. More non-perishable items and less fresh produce is less likely to improve nutrition. The food decisions SNAP recipients currently make might not be the best. For example, SNAP could bar sugary drinks. At the same time, they are relatively good choices given the context: low-cost items that fit within the monthly budget, easy to cook, and are reasonably filling.

There is a matter of increasing stigma for SNAP recipients. One of the nice features of switching from actual food stamps to an EBT card is that a SNAP recipient can go into the grocery store and purchase food as any other consumer would. Having SNAP recipients required to visit a food distribution center or have a Harvest Box delivered on their front doorstep will increase the likelihood of stigma. This stigma could also deter recipients from wanting benefits in the future.

Another criticism I have is that there is little reason to trust the government to deliver these Harvest Boxes. This would be the same Administration that contracted with an incompetent company to deliver pre-made meals to Puerto Rico after Hurricane Maria, only to have the vast majority of those meals not delivered. This is the USDA that told us back in the 1990s [with the Food Pyramid] that we should eat a lot of carbohydrates and avoid all fats. It turns out that the government was wrong, and that such advice arguably increased the obesity rate in this country (see video below). Plus, Harvest Boxes are less reliable than SNAP benefits since food delivery can be more easily disrupted than an EBT card.

Then there is the matter of creating a new distribution network for delivering the Harvest Boxes. The USDA estimates that it would only cost $2.5 billion a year. I am skeptical of this figure in part because the USDA doesn't provide detail on how it will purchase, package, and ship these Boxes to millions of Americans. USDA spokesperson Tim Murtaugh even admitted that the projected savings do not include shipping door-to-door for all recipients because such decisions will be left at the state level. That's a pretty big expense to omit! Looking at the Commodity Supplemental Food Program (a USDA program implemented at the state level that helps the elderly), administrative and distribution costs amount for 25 to 33 percent of overall costs. Those costs are much higher percentage wise than with SNAP at 6.8 percent, which gives reason to believe that the USDA is underestimating distribution costs. Plus, the current SNAP program piggybacks off the already-existing distribution centers in the private sector, whereas the USDA very well would have to create its own. The USDA has never done anything like this on such a scale. Aside from creating a whole new distribution network, here are some other logistical questions:

• Who will be delivering these boxes? USPS? UPS? FedEx? Some new government entity? And how will the government absorb the increased costs when Trump is looking to cut the SNAP budget?
• Would boxes be delivered door-to-door? Do recipients need to be home? Would recipients pick them up at a distribution center?
• What happens to recipients who move around frequently or are temporarily homeless?
• What if food is stolen or delayed?
• What happens in the event of a snowstorm, hurricane, or other natural disaster?
• How will USDA deal with delivery in remote, rural areas?
• How will this distribution account for dietary needs and food allergies? How about children who are picky eaters?

I have plenty of criticism about SNAP, don't get me wrong. At the same time, more central planning and using fewer market forces is not efficient. Fortunately, there is not much likelihood that this will pass Congress. If Trump wants to reap the harvest on this one, he will need to think of another way to approach food assistance reform.


3-3-2018 Addendum: If you need more verification that the Harvest Box is a bad idea, here is a survey of prominent economists stating that a Harvest Box would lower SNAP recipients' well-being and lower their food security.

Why Food Stamps Should Come With Work Requirements

About two and a half years ago, I wrote a thorough piece on reforming the Supplemental Nutrition Assistance Program (SNAP), or what is commonly referred to as food stamps. I went through ten possible means of reform, and I concisely analyzed each one. Considering the issues that come with SNAP, one can only hope that reform takes place. Since I wrote that entry, one of the reforms actually came into fruition. Over the course of 2016, 23 states will have implemented time limits of three months on receiving SNAP benefits (see map below). This will bring the count to 40 states with time limits. The time limit statute originates from the 1996 welfare law, and had a provision that stated that states can waive the time limit on a state-by-state basis if unemployment is unusually high. Since unemployment has been dropping in many states, the waiver no longer applies for those states, hence the reinstatement of the time limits.

The purpose of the time limit via a work requirement is to incentivize individuals to regain employment shortly after losing their initial job. This incentive exists in order that individuals don't become dependent on government welfare, and so that what is supposed to be a safety net can remain solvent in the long-run. There are those, such as the analysts from the Left-leaning Center for Budget and Public Priorities (CBPP), that view the work requirements as too punitive. From the CBPP's point of view, the work requirements are a severe time limit that should not be punishing those who are actively looking for work, but simply cannot find work.

What comes off as punitive to some might actually be necessary for the longevity of the program. Much like with unemployment benefits, food stamps create a disincentive to work. Using the most recent data from the US Department of Agriculture (USDA), one can see that from 2008 to 2012, 52 percent of SNAP recipients had been on food stamps for over two years. Although the data are not as recent, we can use a time period in which a) countercyclical demand would boost the need for SNAP benefits, and b) a time period in which the vast majority of states removed their time limits. Although the Great Recession played a role, what really helped bolster SNAP benefit recipient numbers was increasingly lax eligibility requirements and active outreach from the USDA to recruit more recipients. Using USDA data [Table A.16], we can also see that 83.1 percent of adults who are capable of work and have no dependable children (ABAWDs) who are on SNAP don't work. A lack of work requirements reduces the number of people working (Hoynes and Schanzenbach, 2011). The State of Kansas serves as an example of how reinstating work requirements increased the likelihood of ABAWDs who are SNAP benefit recipients to actually go to work (Ingram and Horton, 2016).

Not only would this help individuals get off of government dependency, but it would help from a budgetary standpoint. Looking at Congressional Budget Office (CBO) projections, the budget outlays for SNAP are not expected to significantly decrease over the next decade. According to the Right-leaning Heritage Foundation, reinstating work requirements for ABAWDs would create an estimated savings of $9.7 billion annually. I would agree with the CBPP that there should be better job training opportunities for SNAP recipients (particularly for those who are extremely poor), but I still contend that social safety nets should not devolve into long-term dependency on government benefits. Social safety nets should encourage and expect people who are readily available to work to do so. Without such incentives as work requirements, we merely perpetuate the cycle of economic stagnation and frustration for a sizable number of Americans.

Why We Need to Reform the Food Stamps Program and How to Approach Reform

Facebook debates can be nasty and unproductive at times. Yesterday, I was in the middle of one about food stamps that was, on the whole, productive. We talked about countercyclical demand and the merits of the food stamp program. In a more ideal world, there would not be a demand for food stamps because food insecurity would be all but non-existent. I would also like to live in a world where government intervention is not the answer to everything. However, I don't live in such a world. I have to address this problem with the Supplementary Nutritional Assistance Program (SNAP) as the status quo. Even if you want to argue that SNAP has any merit, it is hard to deny that the program does not come without its fair share of downsides. As I pointed out a couple of months ago, the program has a plethora of problems, including fraud, high administrative costs, increased unemployment, lack of transparency, bureaucratic redundancies that cause inefficiencies, increased dependency on government, lack of wealth creation, inability to provide healthier dietary habits, and scant evidence that SNAP actually helps with hunger relief. That is quite a list of deficiencies. There is a part of me that has a knee-jerk reaction to cut the program based on this long list. However, given that eliminating the program is the least politically feasible of existing options, I would need to take a more gradual approach that either results in significant downsizing or being totally stamped out in the medium-to-long term. Here are some reforms that I decided to analyze:

1. Separate SNAP from agricultural subsidies. This is a means-tested welfare program, not an agricultural program. The USDA is ill-equipped to handle the food stamps program. If you're going to keep this program on the federal level, at least have the Department of Health and Human Services (HHS) run the program. And while we're at it, let's legislatively separate SNAP from agricultural subsidies. It's blatant politics when you have to sneak in something as economically inept as agricultural subsidies into the bill with food stamps. They are two separate policies. Let's keep them that way. Plus, farm bills are renewed every five years, which is way too infrequent to reevaluate a program such as SNAP, which is larger than that of agricultural subsidies.  
2. Remove bonus payments for increased registration. Rewarding states for increasing enrollment might sound like a good thing. I don't think that making more individuals dependent on Big Government is a good thing, but let's set that one aside for the moment. The issue is that it perverts incentives for states because it makes their primary priority to acquire more applicants to the point where they expand their programs beyond helping the truly needy. If any sort of reinforcement should be used, it should be the negative reinforcement of penalizing states who have high rates of making erroneous payments, especially since erroneous payments cost $2.5B, which was 3% of outlays, back in the 2010 fiscal year (CBO [2012], The Supplemental Nutrition Assistance Program, p. 11).  
3. Fortify work requirements. You might tell yourself that SNAP has nice work requirements on paper, but they don't do much if they're not being enforced. As the CBO states (p. 6), "for most households, there is no limit on how long they may participate in SNAP and effectively no work requirement." At best, SNAP should be a temporary safety net. It should not discourage people from working, and it should not increase medium-term or long-term dependency on Big Government. Unconditional aid leaves very little incentive to ameliorate one's economic situation. Much like with Temporary Assistance for Needy Families (TANF), there was a strong incentive to find work. Any able-bodied adult receiving benefits should do so under conditionality, e.g., employment training or finding gainful employment. Those who implement SNAP need to make this a higher priority.  
4. Eliminate broad-based categorical eligibility and return to traditional assets and income testing. A sizable amount of the SNAP participation rate increase can be attributed to more lax eligibility requirements. In 2010, one half of SNAP recipients qualified for SNAP through broad-based categorical eligibility, which means that their qualification for TANF automatically triggered eligibility for SNAP. According to the Congressional Research Service (CRS), legislation under the Obama administration allowed applicants to bypass the assets and income test, as well as raised dollar limits for eligibility (p. 4). Although there is the worry of greater administrative costs and more errors under this reform, subjecting those under to broad-based categorical eligibility to traditional assets and income testing would focus on those who truly need assistance, as well as save $10.3B in the next ten years (CBO, 2013, Options for Reducing the Deficit, 2014-2023; p. 30). 
5. Modifying the gross income limit. As of now (CBO, 2012, p. 9), a qualifying household needs to have gross income less than or equal to 130 percent of the federal poverty guideline. The proposal would be to reduce that amount to 100 percent of the federal poverty guideline. Much like #4, this policy would also focus on those who truly need assistance. It would also save $1.7B over the next ten years (CBO, 2013, p. 30). The savings in this policy are not as large because those who would not receive benefits have a higher income, which means they have been receiving less benefits to begin with. One could also argue that the adverse effects of lowering the gross limit harm those who "still need the help."
6. Eliminate the LIHEAP loophole. LIHEAP stands for Low-Income Home Energy Assistance Program, which is designed to assist low-income households with winter energy services. Some states send token utility allowances to SNAP participants, which can be several hundred dollars a month. Removing the link between LIHEAP and SNAP would produce a savings of $10.3B over the next ten years (CBO, 2013, ibid).   
7. Enact caps on future spending. Are food stamps the primary drivers of federal debt? No. Those would be Social Security, Medicare, and Medicaid. Even so, if we're going to avoid as much longer-term pain involved with debt as possible, we need to consider spending cuts in all programming, especially when discussing SNAP expenditures in the larger context of welfare spending and entitlements. Food stamp spending doubled during the Bush administration, and it did so again during the Obama administration. SNAP expenditures are currently projected to not decrease greatly. If the primary driver of the increase in participation rate is due to the recession (let's not forget the USDA's drive to recruit participants or more liberalized eligibility requirements are additional factors that drove up the participation rate), then we need to reduce spending back to pre-recessionary levels within the next couple of years, especially since we are technically not in a recession anymore (stagnant recovery, yes, but it's not a recession). Once spending has returned to pre-recessionary levels, make sure that any spending growth does not exceed inflation and population growth. Only during times of exceptionally high employment should this cap be temporarily removed.  
8. Turn the in-kind transfer into a direct cash transfer. Matthew Yglesias makes the point that giving low-income households cash is more economically efficient, which is true. Although there are worries about "where will they spend the money," given the lax nature of what one can spend with SNAP benefits, I don't know how well that works. Ultimately, the SNAP program has a paternalistic vibe to it, and turning SNAP into a direct cash transfer would be about as politically infeasible as abruptly eliminating the program.  
9. Increase health standards for food eligibility. Looking at what qualifies as eligible food items under SNAP, one could argue that the program does not put enough emphasis on the "Nutrition" aspect of SNAP. The USDA should put further restrictions on what SNAP beneficiaries could purchase in order to encourage healthier eating, especially since obesity is a problem amongst low-income households. Forget the fact that this proposal is way too paternalistic for my taste. How would the USDA determine what is healthy? With a long list of exemptions and what is eligible, how would recipients know what qualifies under SNAP? As much as the obesity problem amongst the poor needs to be addressed, this is not a remedy.   
10. Return power to the states by using block grants to allocate funds. Centralized government has the problem of applying a one-size-fits-all approach. This is particularly true with the federal poverty line (FPL), which assumes that the average income is the same in all regions of the country. Although block grants would not give the states complete authority to administer the program, the states would still have significant autonomy to set its own eligibility criteria and benefit levels that better reflect the local needs. Block grants would also provide states to design their own programs and experiment more, which would mean more opportunities to discover reforms that can be implemented in other states. The amount saved would depend on the formulae used for the block grants, but the CBO (Options for Reducing the Deficit, 2014-2023; p. 33) estimates that the savings would be $281B over the next ten years. Although those are some good savings, this alternative has a few drawbacks. One is that block grants are not as responsive to economic conditions as federal spending is. With block grants, funding is contingent upon whether the federal government increases spending during an economic downturn. If not, states that cannot increase their own revenues will have to cut back on the number of recipients. Basing the outlays on inflation versus countercyclical demand is probably not the intent of SNAP. This problem of limited funding during economic decline is reflective of what happens when the states are too dependent on federal government largesse. Also, as the Cato Institute points out in its recent study on SNAP, this leads the states to interpret block grants as "free money," which leads to further waste and inefficiencies, as opposed to genuine experimentation. Even so, some of those inefficiencies can be mitigated by not having the federal government take money from the states only to give it back, which makes for inefficient allocation of funds. Returning complete control over to the states would be most efficient.    

Postscript: This is what I was able to come up with that was directly related to the program. This blog entry does not even consider other reforms that could increase one's income (which would decrease the demand for food stamps) or delve into the causes of poverty. Although these reforms are not anywhere near what I would consider "a libertarian ideal," at least they lead us in the right direction.

Why Poverty Hasn't Taken a Good Licking From Food Stamps....Oh, Snap!

Poverty is no fun. Neither is food insecurity. Not knowing where your next meal is coming from must be a real drag, especially given the issues with food security since the recession. With the House's recent passing of Nutrition Reform and Work Opportunity Act of 2013 (H.R. 3102), which will provide $39 billion in food stamp spending cuts over the next ten years, I had to wonder whether food stamps are a viable solution to the nation's culinary woes or not.

First, let's delve into how food stamps work. Food stamps are a form of financial assistance provided to low-income families for the purposes of purchasing food, and economically speaking, they function as a social in-kind transfer. What makes an in-kind transfer different from a cash transfer is that the individual does not receive direct cash, but rather a good or service [at a reduced rate]. Historically, this sort of in-kind transfer has been in the form of stamps, although recently, there has been increased usage of providing the subsidy in form of an Electronic Benefit Transfer (EBT). Not only does an EBT reduce the rate of fraud, but it also removes the stigma of using the in-kind transfer in the first place, although given that over 47 million citizens (15% of the population) derive benefit from SNAP , the social stigma seems to be dissipating.

So do food stamps make for good public policy? Let's ask ourselves what is good about this policy. As the Left will argue, the money goes to people in need, and it increases the wealth of low-income families. At least right now, SNAP-related fraud is at a near-historic low (1.2%), which is exceptionally low for a government program. The program is popular. The program also compensates for undesirable consumer preferences, e.g., alcohol, smoking, which proponents use to justify the paternalistic intervention (Currie and Gahvari, 2007). According to the USDA (because we all know that they would never have a vested interest in this outcome), the multiplier effect is 1.84.

If the multiplier effect is that great, why not just continue generating food stamps? Probably because the supposed multiplier effect within a transfer program generates economic effects  is net zero. There is a reason why they call the GDP "Gross Domestic Product." Food stamps do not add to the economy because there is no net production.

Aside from lack of wealth creation, there are other issues with food stamps. The Government Accountability Office (GAO) found that the effects of SNAP on hunger relief are inconclusive (GAO, Domestic Food Assistance, p. 27), which is hardly desirable considering that hunger relief is supposed to be SNAP's primary goal. Availability does not translate into healthier diets (GAO, p. 28), which is unsurprising because the program isn't paternalistic enough to regulate participants' diets. Direct cash transfers have smaller administrative costs than in-kind transfers. In the instance of SNAP, administrative costs are $4.8-5.7 billion per annum, which ends up being nearly 6% of total costs. There is lack of transparency, as well as bureaucratic overlap (GAO, p. 41) that creates redundancies. Another issue with food stamps is that they are economically inefficient because cash transfers typically lead to higher indifference curves, i.e., higher utility, because food stamps create a kinked budget curve.

Much like with unemployment benefits, food stamps cause reduced employment and average working hours (Hoynes and Schanzenbach, 2010), which is foreseeable because that sort of wealth transfer creates a disincentive to work. Body mass index increased for 28% of the participants. There is also the issue of payment error rates, which when combined with the fraud and the administrative costs, exacerbate the inefficiencies.

There is also the matter of the cost of the program. The Congressional Budget Office (CBO) recently published a report that the Supplemental Nutritional Assistance Program (SNAP) will cost $724 billion over the next ten years. The plus side is that the cost of SNAP is a small percentage of the country's overall GDP, although I would argue that the federal budget is too large as it is. Although a lot of the increase in food stamp production is due to the recession, the inefficiencies related to food stamps go well beyond the mere need for food stamp reform. Food stamps are symptomatic of just how much entitlement programs are driving up the nation's debt-to-GDP ratio and causing increased dependency on Big Government. What was initially a temporary safety net turned into a form of subservience (see chart below, which shows that the participation isn't going to decrease all that much, certainly to its pre-recession levels, by 2019). As FDR said back in 1935, "The lessons of history, confirmed by the evidence [immediately before me], show conclusively that continued dependence upon relief induces a spiritual and moral disintegration fundamentally destructive to the national fibre."

Even with all of that to consider, my biggest kvetch would have to be that the rate of poverty has not decreased since the onset of the recession (Census, Poverty Data, Table 5). Food stamps are not pulling people out of poverty; they perpetuate the status quo. There would be better alternatives to food stamps, not mention better topics to focus on in order to alleviate hunger issues.

One could argue that direct cash transfers are more economically efficient than in-kind transfers, which is true, but then there's the who redistributionist mentality of which I am not a huge fan. I'm not saying that poverty is going to be fully eliminated anytime soon, but there was a time when food pantries, feeding centers, and faith-based and other charitable organizations could adequately handle the poverty issue before government largesse began back in the New Deal and continued during LBJ's War on Poverty, but increasing their role would mean that the government would have to stop crowding out the private sector.

Although this can be expounded upon in multiple blog entries in the future, perhaps we should be looking at other factors would make the issue of food security less burdensome. The government could remove [or lower] minimum wage or take it easy on regressive, burdensome regulations so employers would feel more amenable to hiring employees. Alternatively, the government could eliminate agricultural subsidies that distort unhealthy food prices so that healthier foods could be cheaper.  Looking at the expenditures for the lowest quintile, I'd opine that consumers can also look at how they spend money and take more personal responsibility for their expenditures, or even work on their propensity to save because spending more than you have is not a sustainable way of life. The Fed could work on its monetary policy so that the dollar stops devaluing. There are multiple ways to approach the improvement of overall economic wellbeing so that individuals have more purchasing power, and this is by no means an exhaustive list. However, given the economics behind the program, there is no way that SNAP will ever stamp out poverty.

October 16, 2013 Addendum: The Cato Institute just came out with a policy report on reforms for SNAP. Worth the read!

October 8, 2015 Addendum: The National Bureau of Economic Research recently released a working paper showing that SNAP doesn't reduce obesity.

Food Stamp Usage Goes Up

The U.S. Department of Agriculture has reported a 17% rise in Americans using food stamps.  This brings the grand total to 14% of all Americans, or over 42 million Americans.  I had commented on this a few months ago, and I stand by my opinion.  The last thing we need is more people on food stamps.  It's no way to solve poverty or the recession.  All it does it makes people more and more dependent on Big Government.  And since we are talking about something as simple and necessary as food, shouldn't that dependency worry any citizen that lives in the "land of the free?"

Food Stamps: A Symptom of Big Government

I was reading a Fox News article this morning regarding how so many are receiving food stamps.  Regardless of how one feels about Fox News, let's just start off with the fact that Obama recently expanded the food stamp program, and that now, 40 million people in this country are receiving food stamps.  To make matters worse, according to a Cato study, food stamps make up two-thirds (p. 2 of budget report) of the USDA's budget, a budget that, as of 2010, is $134 billion.

The reason I am calling this trend disturbing is that back in 2000, only 22 million were on food stamps.  Some might counter the  with the fact that with population growth, one would expect that the number of recipients would grow.  Interesting argument, but when the numbers are calculated, they tell a different story.  When you divide 2010's estimated population (307,006,550) by that of 2000 (282,171,936), you tabulate that America's population has increased 8% in the past decade.  On the other hand, the rate of food stamps recipients has increased 81%.  Therefore, the population of food stamps recipients has grown at a rate of ten times higher than that of the normal population this past decade!

The case study of food stamps is important because it is a microcosmic symptom of the disease of Big Government. Food stamps are but one example of how Americans have become increasingly dependent on government to provide them a livelihood. As a result, we are able to distinguish between the haves and have-nots. I used to view America as exceptional in the fact that socio-economic class did not matter in terms of societal interaction with various individuals and institutions. The rate of governmental aggrandizement is diminishing that “American exceptionalism” to the point at which stratification of socio-economic classes and class warfare are all but inevitable.


Going back to the specific problem of hunger in America, I’m sure that one could counter with “how would you fight hunger if you didn’t have the government helping out?” First of all, government is not helping out—it merely perpetuates one’s poverty because the dependency that an individual has on government creates a disincentive to do things such as find a job and break free from the shackles of government.

The second issue I have is that institution of food stamps is nothing short of legalized theft.  As George Bernard Shaw so eloquently put it, "A government that robs Peter to pay Paul can always count on Paul's vote." If an individual were to rob you at gunpoint to use that money to feed his family, would we consider that a morally righteous act?  Of course not!  If it were, we can infringe on peoples' rights all the time. When you are taking money from a working man's pocket to feed another man, I don't care what your intentions are.  At that point, you have crossed the line between charity and thievery.    

The final issue is that from a historical perspective, America has had a relatively short history of government-based entitlement programs. This “welfare mentality” of the government began with FDR’s installation of Social Security during the Great Depression, continued with the War on Poverty and the creation of Medicare and Medicaid with LBJ, and expands all the way to our current president. There was a time where we had these institutions called private charities. When private charities existed, they were able to adequately provide with the needs of the poor without having an increase in taxation or governmental interference. And to no shock to me, they had more success. The reason why this is so hard to believe is that we are so accustomed to government being the answer. Does anybody forget that the Founding Fathers thought of government as a necessary evil, and did so for a good reason? As Barry Goldwater put it, “Government should only do what it has to do.” The reason for this insight is that the markets (e.g., the invisible hand) sort everything else out. And because of this nanny state mentality, people have given less to charity. In all sincerity, why would people need to give if the government has it taken care of? Although the percentage of one’s income spent on food has dropped from 20% to 10% in the last half-century (you have to love technology for that advancement), it is amazing to see that the need for these government “services” is higher than ever. Man has dealt with poverty issues long before food stamps came into being, and based on the increase of providing these stamps, poverty clearly hasn’t gone away. The “War on Poverty” is continuing, poverty is kicking our you-know-what, and until we stop these entitlement programs that create government dependency and strife between the haves and have-nots, poverty will remain victorious.