So How Are the Netherlands in an Austerity Trap?

In response to Standard and Poor's decreased credit rating of the Netherlands, an Oxford professor wrote a blog entry about how the Netherlands was suffering from what is labeled as an austerity trap. The idea behind the austerity trap is that the government imposes [steadily] deeper spending cuts via pro-cyclical fiscal policy in response to large budget deficits. According to Keynesian economic theory, spending cuts during a recession beget an even higher debt-to-GDP ratio, in which the country can neither meet its deficit targets nor crawl out of its debt-ridden state. Much like with the case in Britain, I have to wonder if there was actually austerity or not. Looking at Eurostat data, I compiled government expenditure data:

If this theory is to be tested, there need to be spending cuts in the first place. Instead, what we have here is an overall upward trend both in expenditures in absolute euros and expenditures as a percent of GDP.  There is a bigger definitional issue here. For some, the definition of austerity is a combination of spending cuts and tax increases. If we do decide to include tax increases as part of the definition of austerity (as opposed as the definition solely including spending cuts), then yes, the Dutch government has increased taxes (Eurostat), which would make the fiscal-adjustment packages very much on the tax side.

If austerity is defined solely by spending cuts, then the austerity is non-existent. If tax increases are included in the definition of austerity (which they theoretically are), then yes, there is austerity because the taxes have a slight upward trend. For me personally, I prefer that the definition encompasses both spending cuts and tax increases because it better reflects the full extent of what government attempts to do to remedy debt-to-GDP ratios during a recession. I also prefer it because when there is a discussion about austerity with the tax increases, the austerity that has been taking place in European nations over the past few years usually do not entail actual spending cuts, but even when they do, the spending cuts are significantly smaller than the tax increases. For those who have read my blog, one can surmise that I am hardly an aficionado of tax increases, which is to say that with this definition of austerity, I would not be 100% for it as a remedy for mitigating an increased debt-to-GDP ratio.  

Economic theory and the usage of political buzzwords are two separate notions. For those who prefer the tax-and-spend method, which is popular for those on the Left, when the word "austerity" is used by economists like Krugman, it is code for "spending cuts," which are anathema to proponents of advancing stimulus packages to boost aggregate demand. Since the definition of "austerity" in political discourse typically refers to only spending cuts, it makes me wonder where the austerity trap is.

Do the Netherlands need to make some improvements? Fitch and Moody's seem to think so. Given that it's part of the Euro zone and the Euro zone has its issues, so do I. However, let's not blame the credit rating downgrade on non-existent spending cuts.

Chanukah and Thanksgiving: Double the Holidays, Double the Gratitude

This year, Chanukah comes so early on the Gregorian calendar that we will experience a rare phenomenon that has been dubbed as Thanksgivukkah, which is the intersection of Thanksgiving and Chanukah. This convergence is literally a once-in-a-lifetime opportunity. Since Thanksgivukkah will not happen again for another 78,000 years, and since many people do not believe in coincidences, it should give us time to pause and reflect on the relationship between Chanukah and Thanksgiving. What commonalities can we find between the two holidays?

Let's briefly take a look at the history behind the two holidays. Chanukah is an eight-day celebration commemorating the Maccabean revolt during the 2nd century BCE against the Hellenistic Greeks occupying Judea. Practicing Judaism was de facto banned under this regime, for which the Maccabees fought for and won their freedom of religion. The Thanksgiving story is traced back to a 1621 harvest commemorated by Puritans who emigrated from England to America in order to avoid religious persecution.

Aside from the motif of religious persecution, these two holidays have something in common: gratitude. For Thanksgiving, the gratitude is self-evident. The word "thanks" is in the holiday name. Although people celebrate Thanksgiving differently (e.g., watching football, eating turkey, praising G-d), the most common practice is expressing gratitude in some shape or form. For Chanukah, the theme of gratitude is not so clear, especially when looking at the secular adaptation. People usually associate Chanukah with lighting the menorah or spinning the dreidel. However, the secularized version, which is based on the erroneous assumption of "Chanukah is the Jewish Christmas", misses a major component of Chanukah. The Talmud (Shabbat 21b) provides great insight to the meaning of Chanukah. After discussing the military victory and discussing how the oil was supposed to last only one day but lasted eight days, the Gemara says something that is simply relevant:

לשנה אחרת קבעום ועשאום ימים טובים בהלל והודאה.

The next year, the Sages instituted those days and made them holidays with recitation of Hallel and of thanksgiving.

On Chanukah, we praise G-d by saying Hallel, which are a series of Psalms (113-118) based on the theme of thanksgiving. The הודאה is in reference to the recitation of Al Hanisim (על הנסים), which is a benediction added both to the Modim blessing of the Amidah, as well as Birkat Hamazon. Both of these additions are added to blessings that express gratitude. There is also the Shecheheyanu, which is yet another blessing of gratitude (this blessing is for new experiences), that is recited on the first evening of candle lighting. To say that Chanukah has nothing to do with gratitude is like saying Yom Kippur has nothing to do with atonement or fasting.

The fact that Al Hanisim or the second blessing over the Chanukah candles emphasize miracles does not take away the motif of gratitude. If anything, it is enhanced. How so? Gratitude is about perception. One of the impediments of feeling a sense of gratitude is having the impression that everything comes by itself, and that it is meant to come to that individual (R. Shlomo Wolbe). This impression creates a self-entitlement mentality. Another impediment is taking things for granted. When we become accustomed to receiving something in our lives, it is all too easy to assume it is a given. Additionally, it is easier to focus on what we do not have, as opposed to what we have. When it comes to gratitude, perspective is key. Not only is gratitude about focusing on what we have or assuming that we should never take things for granted, but it is also about viewing life as a miracle. If we can perceive life as a miracle, rather than a burden or a pain in the toches, our sense of gratitude becomes unprecedentedly amplified.

"But what about when times are rough? How can you be grateful then?" That's a good question. It is not easy to be thankful when you are down on your luck. Even so, my answer is that gratitude is not reserved for when it is convenient. When everything is going great, it is so easy to be grateful. It is during the arduous times when we see just how genuine our sense of gratitude is. No one learned this better than Leah, who the Talmudic Sages (Berachot 7b) said was the first person to express thanks to G-d. Given who preceded her, I find the literal statement of "Leah was the first one to express gratitude to G-d" hard to believe. What the Sages were saying was that Leah was the first one to authentically be thankful because she was able to be thankful amidst the complications and disappointments that her life delivered. The ideal form of gratitude is to be thankful, regardless of what is going on in life. The protagonists of the Thanksgiving and Chanukah stories knew that best. Both the Maccabees and the Pilgrims took on arduous tasks, faced incredible odds, and celebrated their successes, even in spite of the hardships. Much like the Pilgrims or Maccabees, we face challenges in life. But it is during those challenges that we are to be most thankful.

Whether we are currently experiencing calamity in life or not, we should seize the moment of these two holidays and fully express our thanks for the miracles we have in life. Keeping the day doubly focused on gratitude is, without fail, the best way to celebrate this rare convergence.

Sierra Leone Doesn't Have a Credit Rating, So Why Don't I Provide One?

Lately, I have become more interested in the world of credit ratings. Although it might seem like a bunch of financial jargon, how it reflects and impacts macroeconomic stability is quite intriguing. I was reading an International Monetary Fund (IMF) report on Sierra Leone this past weekend. I thought to myself, "What do the credit rating agencies think of Sierra Leone?" Much to my shock, I found that neither Moody's, Standard and Poor's, nor Fitch have credit ratings for Sierra Leone. Maybe it was the years of political instability. Whatever the case may be, I thought that I could take a look at the country's overall macroeconomic trends and devise something myself.

Sierra Leone had been marred by a particularly nasty civil war that lasted from 1991 to 2001. Political stability is an important factor in credit ratings because warfare creates economic inefficiencies. With 2 million people (i.e., about a third of the population) displaced by the war, it takes time to recoup (see World Bank report). Although Sierra Leone is a constitutional republic, as Freedom House points out, there have been periods of political upheaval, which have this subsided. Its improvement in governmental institutions would explain why Freedom House gave it a score of 2.5 (Free). But looking at the score from Transparency Institute, an international organization looking at corruption levels, Sierra Leone ranks 123 out of 176, which is to say it has a while to go.

Political factors are important, but so are economic factors (see World Bank fact sheet). There are two main economic indexes measuring economic freedom. The Fraser Institute (p. 147) shows enough improvement where it is ranked 115 out of 152. The Heritage Foundation, on the other hand, shows a decrease in its scoring, as well as a score that is below the regional average. The World Bank's Doing Business Index shows that it is a tad more difficult to do business in Sierra Leone that it was the previous year (Sierra Leone is ranked as the median in regional ease of doing business). Overall tax revenue as a percent of GDP is small, which is good because it signals that the government does not have to tax the citizenry to death to fund its expenditures. Conversely, top tax rates are around 30 percent, which is not exactly optimal. Recent iron ore production (see IMF report, p. 4) has caused a great boost in GDP. As nice as it is to see the boost in GDP, it is a bit disconcerting to rely on one industry because it signals a weak resource base, and without diversification, the economy of Sierra Leone becomes heavily dependent on iron ore. At least external public debt has decreased dramatically. And although poverty has decreased in Sierra Leone since the civil war, the poverty rate is over 50 percent (see IMF report; World Bank report). Even with the tapering inflation, it is still a concern because it exceeds GDP growth, which means lack of growth in real dollars. Debt distress is only moderate because compared to where it was a decade ago, the debt-to-GDP ratio is much lower. Being able to service debt is a plus in Sierra Leone's favor.

Conclusion: There are a plethora of factors to consider, and the hyperlinked documents cover the factors in much detail. If I were working at Standard and Poor's right now (credit rating system here), I would give Sierra Leone a CCC rating. Sierra Leone has shown remarkable improvement in the past decade, but it has a while to go. As long as the political situation can remain stable, I would consider reevaluating its credit rating within the next year or two. Both the World Bank and the Heritage Foundation show economic instability within their indexes. If there is a continued downward trend in economic progress, then I would consider a downgrade. Relying on one industry is suspect. The iron ore industry would have to prove medium-term growth to be substantive, and not just a short-term blip that would send Sierra Leone to more political upheaval once the resource has been extracted to its maximum potential. However, if inflation decreases, GDP growth increases, and Sierra Leone can maintain political stability, then I very well would consider an upgrade in the near future.

Scanning for the TSA's Ineffectiveness and Why We Need to Privatize Airport Security

Nothing says "fun at the airport" like a good-old fashioned, unsubstantiated pat-down from a TSA employee. Sarcasm about my recent travels set aside, I have to wonder if the Transportation Security Administration (TSA) does a good job in providing airport security, thereby preventing another 9/11, or if its unproductive "grope or scan" policy is a waste of taxpayer dollars and a violation of the Fourth Amendment.

One of the complaints lodged against the TSA is due to their mismanagement and abuse of power. I'm sure we can all find TSA abuse stories, like the 400 TSA employees fired for theft, the pat-down of a six-year old, having a the TSA use pliers to remove the nipple ring of a passenger, or cases of inappropriate groping. As illustrative as anecdotal evidence can be, it suffers from selection bias and does not reflect overall trends. That is why studies are more effective, like the 2013 GAO report showing a 26% increase in misconduct from 2010 to 2012. The graph below shows a breakdown of abuses (p. 11), including the 949 cases of inappropriate comments or conduct:

In addition to TSA abuse, one has to question the effectiveness of the TSA's methods (See recent Cato Institute study).  One of the methods used by the TSA is a program known as SPOT (Screening of Passengers by Observation Technique), which is supposed to prevent terrorist attacks by observing behaviors. This is another example of the government throwing lots of money at a project without researching the effects. Accordingly to a GAO report published this month, the SPOT program has been a waste of $1 billion in taxpayer dollars because the program doesn't work. Then there is the matter of the full-body scanners. For one, there are safety issues with the radiation from the scanners. Also, there is the matter of whether they work (GAO, 2010) and if it's possible to bypass the machines. Pat-downs are security theatre. You would think that with an annual budget of over $7 billion, they could at least foil a terrorist plot, but they have not.

It would be better to focus on intelligence and investigation than taking a "reactive approach to security" (House, p. 3) and trying to prevent a method of attack that has hundreds of tactics and hundreds of potential targets. The House of Representatives recommends making a leaner TSA, but I would get rid of the agency and privatize airport security. Airport screening needs to be separate from regulation of airport security if there is to be any notable success. Relegating security hiring to the airports would allow for market competition in airport security, which is preferable to a government monopoly that is very unresponsive to adapting to change. Through Catapult Consultants, the GAO found that private security performs just as well, if not better than the TSA. We should follow Canada and Europe's example and privatize airport security. It would certainly be an improvement to save taxpayer dollars and increase the quality of airport security.

5-17-2016 Addendum: The Left-leaning Vox put out a piece that shows not only that the TSA is ineffective, but they put lives at risk. 

Pirke Avot 2:16: The Evil Eye and Keeping an Eye on Our Own Jealousy

Rabbi Yehoshua (Pirke Avot 2:16) said that three things removed an individual from this world: an evil eye, an evil inclination, and baseless hatred of others. The latter two are relatively self-explanatory, but what is an evil eye (עין הרע)? Evidently, it's not some gigantic eyeball with supernatural powers that causes the world's problems. Although given the superstition surrounding the evil eye, that is a pretty good metaphorical representation. The notion of an evil eye is one of the most universal superstitions out there, and the Jewish people were not exempt from this superstitious belief. The evil eye was the supposed power that a malevolent stare can bewitch or harm another. To try to ward of the evil eye, certain Jews took on the practice of amulets, whether that was in the form of blue beads, the red string, or the chamsa (חמסה). Aside from my issue of using objects as amulets, the superstition misses the point of עין הרע.

The commentators have various opinions of what עין הרע is. R. Yonah opines that עין הרע refers to jealousy. One who is constantly envious is spiritually destitute because one can hardly appreciate what he has. As Ben Yoma points out (Pirke Avot 4:1), "Who is happy? He who is satisfied with his own lot." Not only is there a lack of appreciation for one's lot, but there is also a propensity to undermine another's wealth and prestige in hopes that they can be nefariously acquired. The insatiable desire to go after another's wealth damages both oneself and those around the individual. It is so powerful that it ended up being the last of the Ten Commandments (Exodus 20:14). Avot de Rabbi Natan viewed this jealousy in more spiritual terms. One with the עין הרע will not want his friends to be successful in Torah study. Maimonides viewed the עין הרע from the standpoint of stinginess. If one is stingy, one is constantly obsessed with material wealth. With this worry, one can never really enjoy life since they are in constant fear of being in poverty. Additionally, Hillel said in Pirke Avot 2:8 that "the more flesh, the more worms," i.e., overindulgence in materialism is detrimental to spirituality.

Although there are some variations of opinion, the general consensus is that עין הרע is an issue of jealousy. The underlying point of עין הרע is that עין הרע is an internal phenomenon, not an external one. It's easier to blame some external force for our shortcomings because it means that we don't have to confront them. The Sages were wise enough to realize that having an עין הרע was a detriment, which is why having a good eye (עין טובה) was praiseworthy (Pirke Avot 2:13). How do we go about developing this good eye?

One response is gratitude. There is a huge correlation, and dare I say causation, between gratitude and happiness. If you do not have a sense of gratitude for what you have, your eye wanders towards what others have. R. Yonah (commentary to Pirke Avot 2:13) said that a good eye was someone with a charitable and benevolent attitude towards others. Benevolence is more than a feeling; it needs to be acted upon in order to matter. Whether it is צדקה ("charity") or גמילות חסדים (acts of loving-kindness), it is a matter of externalizing the sentiment in order for it to come to full fruition, much like with happiness. If I am to be so bold as to add my own commentary, I would opine that a change in perspective would help. What I refer to is the idea that we are not in competition with one another; it's not zero-sum. Certainly when it comes to spirituality, G-d does not derive any pleasure from oneupmanship. There is no point in oneupmanship because we are all created in His Image, and G-d expects us all to act ethically. G-d does not want us to knock others down. G-d wants us to wish other people the best in life, and to be able to help others in whatever capacity possible. Being able to help and give to others, not to mention realizing the good in our lives, is the best antidote to eradicating the evil eye from our midst.

Do We Recycle Too Much? A Look at the Economics of Recycling

Reduce. Reuse. Recycle. This was the common environmental mantra of the last couple of decades of the 20th century. I remember that slogan being hammered in during elementary school. They really put a lot of emphasis on the recycling portion, and it seems to have worked. About nine in ten individuals recycle, and why not? If there are such benefits to recycling, then we feel like we're making a difference in the environment because we are preserving scarce resources. But what do we do if recycling is nothing more than feel-good environmentalism?

Recycling is the process of converting previously used products into new products that would have otherwise been discarded as waste. Even with the economic complexities, the government intervenes in hopes of improving upon the situation. In many areas (e.g., Des Moines; Phoenix; Minneapolis; NYC; Scranton, PA; Australia; United Kingdom), cities enact price floors, which are government-imposed price limits as to how low a good can be valued. If the price floor is set above market price, which it usually is, then the government policy will create a surplus. There are also mandatory collection laws that cause an outward shift of the supply curve, which, all things considered equal, will cause an increase in supply and a decrease in price. The Environmental Protection Agency (EPA) also has enacted procurement policies, as well as the FTC's enactment of mandatory recycling product labeling, to encourage more recycling. These are just some government policies that encourage more recycling.

To justify this level of interventionism, one could argue that the market does not accurately reflect the total benefit of the good because that which would be recycled appears to be trash, not resources. As such, the market underprices recyclable goods based on incomplete information. I'm not making the argument that voluntary recycling is a bad idea. If it is cheaper for an individual to recycle a good because it would save resources, then of course the individual should be allowed to do so! People have voluntarily recycled items for centuries, whether in the form of economic transactions or scavenging. But if it is more mandatory (not the "put a gun to your head" sort of coercion, but even a quasi-enforceable law is still problematic), I still have to wonder whether the government knows best.

One of the arguments used to advance recycling is that we are running out of space to construct more landfills. First, the number of active landfills has decreased from 8,000 in 1988 to 1,908 in 2010. Second, and more importantly, we are not running out of landfill space. In spite of regional disparities, landfill capacity is not an issue (EPA, p. 14) because we have plenty of space. Furthermore, landfills do not have the environmental concerns that existed 20-30 years ago.

There are also environmental costs to consider. Recycling is a manufacturing process, and like all manufacturing processes, it pollutes. The trucks that carry recycled goods still emit exhaust. Contamination is also an issue. If there are toxins in the original good, odds are that it end up in the new product. 

Although the benefits of recycling are lauded to excess, it seems like none of the proponents ever stop and think there could be costs. To name a few: time spent by the consumer to sort trash, water and electricity used to clean household trash, recycling containers, collection costs, transportation costs to and from collection centers, labor costs of sorting at the recycling plant. It is difficult to accurately say whether the costs exceed the benefits because the economic efficiency of recycling is so location-dependent that it's not even funny, although some have tried (e.g., Aadland and Kaplan, 2013).

Ultimately, I do not think the issue is as simple as "should we recycle or not?" Some things are worth recycling. Iron and steel are cheaper to recycle than their virgin forms. Aluminum is considered valuable in the market, so people are more likely to voluntarily recycle aluminum. Cardboard can be recycled into a wide variety of paper products, and they also have low collection costs. Recycling asphalt pavement is also useful. Other materials, not so much. It is difficult to recycle plastic because of the various resins cannot be mixed during reprocessing, which means additional sorting costs, not to mention relatively low costs of producing new plastics. Only 8% of plastics were recyclable in 2011. Recycled newspapers need to be de-inked. Even if the sludge from the de-inking process were not toxic (but it is), the sludge still would still need to be disposed. Also, let's not forget that trees are renewable resources. Converting glass into cullet isn't cheap, either. Glass comes from sand, which is one of the most abundant resources on this planet.

Even with the recycling fervor, we still produce tons of garbage. About 65% of municipal waste is still sent to landfills. Landfills will continue to be a part of waste disposal, and are arguably cheaper than recycling. If you are worried about the amount of waste, ask yourself why there is so much waste produced in the first place and how we can do things like consume less or develop more environmentally friendly processes.

If there is a scarcity in a given resource, that will be reflected in market prices, provided the fact that the government does not intervene and distort those prices. When people recycle voluntarily, they conserve resources and raise overall wealth. When forced to do so, society incurs unforeseen costs. Having the government force people to recycle is a load of rubbish.

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.