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Food Stamp Restrictions

This article in the USA Today discusses efforts to better track the spending of people who receive SNAP benefits (aka "food stamps").  It's not necessarily a bad idea, though I wonder: what is the ultimate purpose of the tracking?  

I would venture to guess that such tracking will reveal that SNAP recipients do not eat as healthily as some would like.  Indeed, the USA Today article quotes Michele Simon as saying

“As currently designed, SNAP is not promoting public health”

My suspicion is that the motivation for tracking SNAP purchases is to provide justification for adding new restrictions on SNAP benefits.  It is an idea that is popular with many on the left and the right.  In a poll I conducted last year, almost 70% of US citizens support a policy that would "prohibit purchases of certain food, like sugared soda, with food stamp benefits." That same survey showed that over 80% of respondents favored a policy that would "provide funding so that food stamps can be used to purchase foods at farmers markets."  There have been real world efforts to subsidize fruit and vegetable purchases when using SNAP (see this study for one analysis of the efficacy of such a proposal). 

So, what we're seeing is a shift from seeing SNAP as a tool to help with food insecurity (or hunger) to one that attempts to promote certain dietary patterns, presumably to promote public health.  Ironically, this comes about as news stories are revealing a doubling in the number of children receiving food assistance in recent years, and research showing that the prevalence of food insecurity in the US remains high.

I have mixed feelings about the efforts to scrutinize SNAP spending.  On the one hand, it is a public program funded with tax dollars, and it seems taxpayers should expect some form of accountability.  On the other hand, we don't know a whole lot about the costs and benefits of SNAP restrictions or whether there will be a trade off between hunger-fighting and healthy-promoting goals.  

One of the things that bugs me is the lack of recognition that  proposed SNAP restrictions are likely to be totally ineffectual.  Take, for example, a policy that would ban using SNAP dollars to purchase soda.  That policy might make us feel good, but it isn't likely to have any effect on the amount of soda people drink.  Why?  Because people can re-allocate their budget to achieve the same bundle of food regardless of whether the restriction is in place.

An example might help illustrate.  Suppose you receive $130 in SNAP benefits each month (this is the about average monthly amount received per recipient person in the US), and you spend another $200 from your own pocket on food each month (for a total of $130 + $200 = $320).  Now, let's suppose you take one big shopping trip  to the grocery store each month, and your cart is piled up with food (including a case of Coke costing $10).  You've put just enough food in the cart to consume your entire budget of $320.  Now, you know that your SNAP benefits can't cover the entire amount.  So, what do you do?  You pull out that little plastic barrier, put it on the convener belt, and put $130 on one side (to be paid for with the SNAP benefits on the EBT card) and put $200 on the other side (to be paid for with your cash).  

Now, let's suppose we have a ban on buying soda with SNAP.  What happens?  You simply pick up the $10 case of Coke that was on the SNAP side of the barrier and move it to the other side of the plastic barrier.  But, now you've got an extra $10 you can spend in SNAP benefits (and now you're also short $10 cash).  All you've got to do is find another item on the cash side of the barrier worth $10, pick it up and move to the SNAP side, and your done.  The end result is the same regardless of whether the SNAP restriction is in place or not: you spend $320 and drink Coke.  The only difference is where the Coke is put on the conveyor belt.  This is an insight that's been known since at least the 1940s (see this paper by Herman Southworth), and yet it is one I rarely see mentioned discussion about attempts to improve health by restricting SNAP purchases.

What about policies that would subsidize fruit and vegetable consumption?  First, we should recognize that this policy is unlikely to reduce prevalence of obesity.  Second, note that this policy is akin to increasing funding for SNAP, but in a restrictive way.  We're giving people more money, but with strings attached.  We're being paternalistic, failing to respect how people want to spend these dollars.  It reminds me of this article from the Onion  with the heading, "Woman a leading authority on what shouldn't be in poor people's grocery carts."  

 

Crop Insurance in the WSJ

Somehow I missed this editorial by two agricultural economists, Bruce Babcock and Vincent Smith, that appeared in the Wall Street Journal on Christmas Eve.  They write:

“Farmers have a sweet deal with crop insurance: Taxpayers currently cover all the administrative costs associated with marketing and managing the program and fund more than 60% of the premiums to cover anticipated crop-insurance payouts, according to annual data from the Agriculture Department’s Risk Management Agency. Farmers pay only about one-third of the real costs of their crop-insurance coverage. From 2003 to 2012, crop-insurance subsidies cost U.S. taxpayers $55.4 billion—66% of the cost of the program.”

and

“Bipartisan congressional support should go to programs that spend federal dollars to serve the public’s interest and cannot be provided by the private sector. Subsidies that induce farmers to buy gold-plated harvest-price-option crop insurance fail on both counts. Eliminating these costly subsidies would save taxpayers $40 billion over 10 years while posing no threat to the nation’s food supply. Come January, the new Congress should do just that.”

Not surprisingly, various commodity groups and the insurance industry didn't care for the editorial (and had a number of responses unpublished by the WSJ).

Food Labels - Environmental Edition

I had a recent request on Twitter asking for my thoughts on environmental labels for food.  The question seems to be motivated by recent discussions about the USDA and the Dept of Health and Human Services possibly incorporating environmental considerations into the federal dietary guidelines.  As I've previously noted, this move makes me a bit nervous because it entails non-scientific value judgments about how to integrate disparate issues (health and environment) into a single overall recommendation.  But, even as I said there: 

“It isn’t necessarily a bad idea for the government to convey the scientific evidence on the environmental impacts of producing different foods.”

Of course, that still leaves many unanswered questions.  What do we mean by environment?  Just C02, or is it water quality, or deforestation, or what?  Is the label voluntary or mandatory?  How will food companies respond to the label?  What do consumers understand about the label?  And so on.

In principle, it is possible to imagine something like a nutrition facts panel for environmental issues.  However, the two are not as analogous as might first appear.  First, scientists have a pretty good idea how to measure the fat, carb, and protein contents of food, whereas measuring C02 or deforestation impacts is tricky business with a lot of uncertainty.  Moreover, the nutritional content of a processed food is relatively stable regardless of where the raw ingredients came from, which plant or facility was used to manufacture it, how it got to the store, or how you transported and cooked it.  None of this would be true for an environmental label, which would require more more extensive (and more costly) monitoring and tracing, and if it is at all accurate, one could have two Wheaties boxes that are nutritionally equivalent but with very different environmental impacts.  That may be all the more reason to inform consumers, but the point I'm trying to emphasize here is the much higher cost and greater uncertainty in informing about nutrition vs the environment.  

Finally, an perhaps most importantly, nutritional outcomes are, by and large, what we economists would call "private goods."  The nutrient contents of the foods I eat affect me personally and not others (let's put aside Medicare/Medicare, which is another issue I've touched on here, here, here, and here).  In these cases, the effects of a label on my choices, and ultimate welfare consequences are more straightforward.  Let's compare that to environmental labels, which signal attributes associated with public goods and possible externalities, where we suspect there are likely to be problems with coordination, free riding, etc.  I suspect most economists would tend to look toward getting the property rights or the prices right as the "solutions" in these cases rather than looking toward labels (here's a paper I wrote on that issue).

Finally, I'll note there is a long literature in agricultural economics on food labels - focusing on when and under what conditions labels enhance social welfare.  The results of this literature are hard to summarize (meaning the effects are complex).  Here are a few good places to start if you're interested in the topic.

My answer to the question: should food products contain environmental labels?  I don't know.  There are far too many unanswered questions to say anything more precise than that.

Do farm subsidies prop up rural communities?

A new paper in the journal Applied Economic Perspectives & Policy by Jeremy Weber, Conor Wall, Jason Brown, and Tom Hertz asks whether farm subsidies boost the rural economy.  The abstract:

“Policy makers in the United States often justify agricultural subsidies by stressing that agriculture is the engine of the rural economy. We use the increase in crop prices in the late 2000s to estimate the marginal effect of increased agricultural revenues on local economies in the U.S. Heartland. We find that $1 more in crop revenue generated 64¢ in personal income, with most going to farm proprietors and workers (59%) or nonfarmers who own farm assets (36%). The evidence suggests a weak link between revenues and nonfarm income or employment, or on population. Cuts to agricultural subsidies are therefore likely to have little effect on the broader rural economy in regions like the Heartland.”