A primer on USDA food assistance programs

With the help of my colleagues and the leadership of Maria Marshall and Kami Goodwin, the Department of Agricultural Economics at Purdue has a new effort to educate and provide analysis around food and farm policy issues.  We are calling it: Policy Briefs by the Purdue Agricultural Economics Department. Here's a short summary from the new website:

“We are pleased to launch Policy Briefs by the Purdue Agricultural Economics Department. We aim to provide short insights, readable for the general public, on policy issues that are national in scope with an Indiana flare. We were initially motivated by the need to provide timely analysis in the lead up to 2018 Farm Bill discussions. However, the breadth of expertise in our department and the ongoing policy discussions related to farm, food, environment, trade, and development issues warrants a longer view and broader scope. The plan is to add new briefs on a monthly basis, although we may add more frequent contributions when more timely information is needed. We hope to enrich policy debates by providing data and context, quantifying impacts, and offering alternatives. ”

If you click on the link to the site, you'll see a couple short pieces by Roman Keeney explaining the Farm Bill and providing some background context for upcoming Farm Bill debates.  We also recently added a post by yours truly providing a short primer on USDA food assistance programs.  I provide an overview of programs like SNAP (aka "food stamps"), WIC, and school lunch, provide some history, look at the effects of SNAP, and outline some of the proposals to change SNAP.  All that in only about 1,000 words!

Here are the first two paragraphs from the piece:

“Looking just at spending, the U.S. Department of Agriculture (USDA) and the Farm Bill might be more aptly described as the U.S. Department of Food Assistance and the Food Assistance bill. In 2017, the USDA is estimated to spend about 77% of its $133 billion in outlays on food assistance programs.

USDA food assistance programs are administered by the Food and Nutrition Service (FNS), and the largest program administered by FNS is the Supplemental Nutrition Assistance Program (SNAP), historically known as “food stamps.” About 70% of the FNS budget authority is allocated to SNAP. The next largest programs, representing about 21% and 6% of FNS budget authority, are Child Nutrition Programs (CNP) and the Women, Infants, and Children (WIC) programs. The CNP primarily delivers free and reduced-price breakfasts and lunches to school children. In December 2017, about 22 million school children participated in the free or reduced lunch program and about 12.6 million participated in the free or reduced breakfast program. The WIC program primarily targets women who are pregnant or who have infant children by providing coupons for infant formula, milk, cheese, and other staple foods. There were about 6.9 million WIC participants in December 2017. SNAP and CNP are entitlement programs (i.e., every person who meets eligibility criteria is allowed to participate), but WIC is a discretionary program whereby the federal government grants a specific dollar amount to be spent each year.”

Oh SNAP!

Multiple sources today reported an item in the president's budget that would replace a portion of the Supplemental Food and Nutrition Assistance Program (SNAP, aka "food stamps") with physical food deliveries.  Here is Politico: 

“The proposal, buried in the White House’s fiscal 2019 budget, would replace about half of the money most families receive via the Supplemental Nutrition Assistance Program, also known as food stamps, with what the Department of Agriculture is calling “America’s Harvest Box.” That package would be made up of “100 percent U.S. grown and produced food” and would include items like shelf-stable milk, peanut butter, canned fruits and meats, and cereal.”

The proposal is being pitched as a government version of Blue Apron that will save taxpayers hundreds of millions of dollars.  SNAP and consumer advocacy groups have expressed concern with the proposal; I haven't seen any overt advocates of the plan outside the administration.  

Economists have long favored unconditional (e.g., cash) to in-kind (e.g., food) transfers.  The basic idea is that an individual consumer has a better idea of what they'll like than an administrator deciding which foods to put in a box.  In other words, for the same budget, a consumer will be happier with cash than an equivalent dollar amount of food because the former provides more flexibility and freedom than the later.  This value of flexibility could, of course, be offset if the administrator could acquire foods at a substantially reduced price compared to the average food consumer.  But, this presumes the government administrators are more skilled in food acquisition than the Amazons, Walmarts, and Krogers of the world (or that these companies are taking in excess profits that could be passed directly to consumers).

There is another aspect to this issue that doesn't seem to be getting much attention.  In particular, at least for some people, it doesn't matter if you give them food or SNAP.  Here is Southworth writing in 1945 when earlier versions of SNAP were being debated:  

“‘If a family would buy two pounds of beans anyway, giving it up to two pounds of beans as a consumption subsidy merely relieves it of the necessity of that much expenditure on its own behalf. In effect, its income is increased by the value of two pounds of beans, and it may spend some or none of this increased income on additional beans”

In short, if a household already plans to buy beans, it doesn’t matter whether the household is given beans or an equivalent amount of cash – the final outcome is the same.

But, what if the household wanted rice and not beans?  Providing them beans means they are a little less happier than they would have been with an amount of cash (or SNAP benefits) equal to the beans that they then could use to buy rice.  

Maybe the idea is that this version of the SNAP program would be more beneficial to U.S. farmers. But, these aid programs are hardly efficient forms of farm support.  As I found in one analysis, for every $1 spent by taxpayers on SNAP, farmers benefit by only $0.01.  If the idea is to support farmers, we'd be better off just sending them the dollar.  

In the end, the purported benefits seem to hinge critically on the government's ability to deliver food at a price low enough that offsets the value of the loss of flexibility for the aid recipient.  

Food Environment or Food Preferences?

“The public health literature has documented that lower income neighborhoods suffer from lower availability of healthy groceries and that lower-income households tend to eat less healthfully. In some circles, this relationship has been taken as causal, with significant policy attention devoted to improving access to healthy groceries in low-income neighborhoods.”

That's from a new paper by Hunt Allcott, Rebecca Diamond, Jean-Pierre Dubé.  This is one of the most rigorous investigations I've seen of the causal impacts of the "food environment" (in this case, the presence of grocery stores and movements of people into "healthier" neighborhoods) on dietary choice. 

What did they find?  From the conclusions:

“Entry of a new supermarket has a tightly estimated zero effect on healthy grocery purchases, and we can conclude that differential local access to supermarkets explains [no more] than about five percent of the difference in healthy eating between high- and low-income households. The data clearly show why this is the case: Americans travel a long way for shopping, so even households who live in “food deserts” with no supermarkets get most of their groceries from supermarkets. Entry of a new supermarket nearby therefore mostly diverts purchases from other supermarkets. This analysis reframes the discussion of food deserts in two ways. First, the entire notion of a “food desert” is misleading if it is based on a market definition that understates consumers’ willingness-to-travel. Second, any benefits of “combating food deserts” derive less from healthy eating and more from reducing travel costs.”

and

“we find that moving to an area where other people eat more or less healthfully does not affect households’ own healthy eating patterns, at least over the several year time horizon that the data allow. ”

The authors end by concluding that policy efforts to alter local food supplies are likely to be ineffective.  Their data strongly supports this conclusion.  They recommend, instead, to use public policy to improve health education.  I'm surprised they make this recommendation because their study provides no indication that more education would be a cost-effective intervention.  If anything, what their study shows is that economic development (turning low-income households into high-income households) is the most effective way to improve the healthiness of dietary choice.  

Hat tip to Alex Tabarrock at the Marginal Revolution blog who is highly skeptical of the food desert concept.  

Double Dipping?

With debates over the farm bill likely to heat up over the next year, it's interesting to see the lines of arguments coming out from different camps.  Today, the Environmental Working Group, an opponent of many farm subsidies, came out with a new publication.  They focus on what they call "double dipping", in which farmers receive payment when a loss occurs both from commodity programs (ARC or PLC) and from subsidized crop insurance programs.  

In their words:

“But farmers can – and hundreds of thousands do – participate in either ARC or PLC and in the crop insurance program. Most of the double dipping in the 2014 and 2015 growing seasons came from duplication of crop insurance and ARC payouts.

You don’t need a degree in agricultural economics to see the result: multiple payments going to the same farmers in the same counties to cover the same “drop” in revenue from crop sales. The interactive map below shows the counties where farmers received duplicate payments from at least two of the three programs.

In 2015, more than 2,300 counties received an ARC or PLC payment for losses incurred in 2014. Crop insurance policies paid out in more than three-fourths of those counties in 2014. The pattern was repeated the following year. ”

They created several maps illustrating where they argue "double-dipping" has most occured.

Over the last few farm bills, there seems to be less emphasis on traditional commodity programs and more focus on crop insurance.  To the extent arguments like this hold sway, I suspect that transition will continue.   

Food Flows

Last week I posted some crude calculations on how much states import and export various foods from other U.S. states.  Sandy Dall'erba from the University of Illinois alerted me to a dataset that gets at this question in a different way through records of interstate shipments (the FAF database from the Bureau of Transportation).  Sandy graciously agreed to let me share this figure he created based on these data.

You can read more about Sandy's work with Zhanglaing Chen here or contact Sandy to get a copy of their working paper "Drought, Interstate Trade and Agricultural Profit: Theory and Evidence" presented this year at the North American Regional Science Conference in Vancouver.