The Los Angeles Times has given me a case of déjà vu. It recently (February 6) ran an opinion piece titled "Food stamp fight," by history professors Lisa Levenstein and Jennifer Mittelstadt, that had a distinctly familiar ring to it.
Their justification included several arguments for why "food stamps are essential" to America. They claimed that food stamps are necessary to relieve hunger, which benefits the country because hungry people are not productive. They claimed that "In 2009, they pumped $50 billion into the economy;" and cited a USDA publication’s claims that "Every $5 in new food stamp benefits generates a total of $9.20 in community spending," and that each "$1 billion of retail food demand by food stamp recipients generates 3,300 farm jobs."
While those claims may be new to Times readers, they are actually golden oldie misrepresentations that seem to never die. For example, at a food stamp hearing held in 1975, Senator Hubert Humphrey asserted that:
The food stamp program plays a very critical role in enabling millions of low-income families have a better diet. It plays a very important role in the support of American Agriculture. It also plays a very important role in keeping the economy from sliding into a deeper recession.
Humphrey supported his claims by citing a Department of Agriculture study of the impact of food stamps in Texas 40 years ago, which he described as follows:
The study found that $63.9 million in bonus food stamps provided in Texas that year generated $232 in new business in Texas and appeared to generate at least $89 million in business elsewhere in the United States. In addition, the $63.9 million provided in bonus food stamps created 5031 jobs. Translated nationwide, this could mean that the food stamp program is now responsible for $27 billion in business in the United States each year and 425,000 jobs…Furthermore, consider how much money we would have to spend to support those 425,000 workers and their dependents if they did not have the jobs that the food stamp program has apparently generated."
Unfortunately, however long the pedigree of repetition such defenses of the food stamp program (now called SNAP, for Supplemental Nutrition Assistance Program) have, they simply reiterate the same basic misunderstandings when it comes to food consumption, nutrition, agriculture, and its effects on income and job creation.
The food stamp defense uses the magnitude of food stamp benefits to dramatically overstate the increase in food consumption. The reason is that food stamps are equivalent to cash for almost all recipients, because virtually everyone would purchase more food than their food stamp allotments, even if they were given cash. So, for the vast majority, food stamps simply replace money that would have been spent on food anyway, freeing that money to spend however they choose.
Other than higher administrative costs, the result is the same as giving them money.
Even for the few families for which food stamps might raise food expenditures compared to cash, their nutrition effects are misrepresented. Studies find little difference between the nutritional adequacy of the diets of low- and high-income families, so that the problem is vastly overstated. Added food spending also often fails to improve nutrition, as less nutritious but more convenient pre-prepared food is substituted for healthier home-prepared food. Further, obesity is a more common problem among low-income families today than lack of food. Therefore, trying to force recipients to consume more food than they would otherwise by giving food aid instead of cash would, to the extent it was successful, do little to improve nutrition, but would worsen obesity problems. That doesn’t seem very "essential" to Americans’ well-being.
The effects on agriculture are similarly overstated. Food stamp proponents count the billions in food stamp benefits as equal to the increase in demand for agricultural products. But since food stamps are like cash for almost all recipients, they add no more to food purchases than do cash benefits. Since less than 20 percent of an increase in income goes to added food spending, the effects is less than one-fifth what is claimed. Further, it ignores the fact that those taxed to pay for the benefits will consume less food as a result of their reduced after-tax incomes, which further reduces the effect on the agricultural sector. In addition, after retailing, processing and transportation, less than half of food spending makes it to farmers, and most of that goes to cover the cost of producing the crops. Properly understood, the effects on agriculture go from muscular to minuscule.
In addition, to the extent food stamps increase agricultural production, they do so only at the expense of reducing the demand in other industries. The result is to redistribute output and income from other areas — a transfer rather than a benefit to society. And to the extent food stamps increase food consumption compared to giving recipients money, they do so at the expense of other goods recipients judge to be even more important, or they would use cash to buy added food anyway.
The economic stimulus claims reflect the same problem. What is counted as increased aggregate demand are really just transfers from taxpayers to recipients (and to a smaller extent, from other industries to agriculture). The taxes others must pay reduce their demands for goods and services just as the benefits add to them. But those negative effects are simply ignored, turning an essentially nonexistent benefit into an apparently sizable one.
The misrepresentation of economic stimulus effects is further exaggerated by using multiplier effects. It is true that when one person gets more money, they spend more, increasing demands and income elsewhere. But the same process occurs in the opposite direction as those with reduced after-tax incomes from financing the benefits spend less, decreasing demands and income elsewhere. The same process works in both directions, with little net effect, but the adverse effects are simply ignored. And with such blinders in place, insignificant effects can be presented as major benefits.
Even if the argument is made that the government is borrowing money rather than taxing to raise it, the argument doesn’t change. Deficits represent future taxes, with future negative effects, but looking only at the present disguises an attempt to transfer resources from the future to the present as if it was solely a stimulus.
If the assertion that income is stimulated wasn’t misrepresented enough, more piling on occurs when promoters claim that it also increase jobs. Just as the stimulus and multiplier effects are erroneously counted only on the plus sign, so are the jobs. The net effect is essentially zero. Further, jobs and income are not separate benefits; they are two ways of counting the same thing. It is the income from a steady job that is the benefit, not the job, but counting them as if they were each separate benefits is simply double counting. Worse, jobs, which are actually the burdens people bear in earning their incomes, are counted as if they were actually benefits. (When I ask my students whether they could have the same lifetime income with a job or without, they all choose "without.")
In addition to these massive exaggerations of food stamps’ benefits, there is a substantial negative effect supporters suppress. Food stamp benefits are reduced by 30 cents for each dollar of net income a recipient earns. As a result, the program acts as an added income tax rate facing recipients (paid in reduced benefits rather than increased income taxes). That, in turn reduces their incentives to earn, and their consequently reduced earnings (which make recipients look poorer in official statistics, because the food stamp benefits are not counted but the reduced market earnings are), makes recipients more dependent on government as a result (which Levenstein and Mittelstadt dismiss, in a truly impressive display of ignorance of the subject, as reprising "the false charges once leveled at welfare."
For years, food stamps, along with so many other "I’m from the government and I’m here to help" (which, if memory serves, Ronald Reagan called the "the nine most frightening words in the English language") programs, have been systematically promoted by reiterating multiple false claims — claims that have never been true — over and over. But its defenders’ rhetoric, no matter how often it plays in re-runs, remains very far from the reality. And while those who administer the food stamp program occasionally change policies to combat food stamp fraud (like going to electronic debit cards instead of paper food stamps), its systematic misrepresentation to the public is the greatest food stamp fraud.
{ 24 comments }
Excellent article. Mr.Galles proves his points in a very correct and concise manner. The end results of this article proves Goebble’s Law is much in play today. That law being,that if you repeat a lie often enough,that the lie is eventually accepted as truth.
I am the Food Stamp President.
I will not stop until you are all eating food stamps.
Cloward-Piven, eat your hearts out.
Obamunism now, Obamunism Siempre!
If someone is going to try and defend food stamps, using an economic justification (boost economy, jobs, gdp, etc), is a *horrible* approach. Bastiat’s “That which is seen, and that which is not seen” will refute it at every turn. Mises has a great audio reading of the essay (the reader does a fantastic job), and can be found here http://mises.org/media/4059/That-Which-Is-Seen-and-That-Which-Is-Not-Seen. But at over 2 hours long, this article sums it up well and provides nice modern context.
This article ignores one other point: Food stamps are often sold at half-value for cash and drugs. So, if someone has, say $100 in food stamps, they can sell those for $50 cash or $50 worth of drugs. The cash-recipients often use the money to buy alcohol or cigarettes.
This completely misses one of the main points claimed of the article (and repeated twice). That food stamps are already equivalent to money. People won’t need so sell the food stamps to buy drugs and alcohol. Please read more carefully.
I can’t help what I’ve seen with my own eyes in real life. My post was from what I’ve actually seen people do with them.
The most evil aspect of food stamps and other forms of cash equivalent welfare that now comes on a debit card is that it hides the visual effects of unemployment and poverty. No more soup lines and people standing in lines to get their benefits.
I’m not sure I would call that “evil” as it is fundamentally something that’s intended to relieve human suffering (in this case, the shame felt by some of being on relief), but it certainly does nothing to disincentivize dependency.
Sooner or later, if the current trend continues, we will not only have food stamps, but food lines – like the bread lines in the USSR.
Then the government can do what Six Flags does – sell you a ticket so that you can go to the front of the line.
In fact, paying to go to the front of the line, and cut in in front of everyone else, is a good metaphor for lobbying.
Welfare’s bad enough* given the disincentive to work it creates by making unemployment more attractive.
It [welfare] used to be thought of as a burden on your neighbours and that kind of mentality helped restrict it somewhat.
Nowadays it is, in people’s minds, a right, and one that should be forcefully defended and proudly accepted. Hiding the other “symptoms” only helps it be even more acceptable.
* in my judgement
I have seen people use EBT (food stamp) cards to buy candy bars and “Slim Jim.”
You can buy a pack of gum with them. In the Chicago city limits (so far as I know) you can use them at McDonald’s.
As a unemployment benefit recipient in the UK, there are a couple of points I’d like to make.
1. For any given level of spending on welfare, you might as well give the recipients cash rather than vouchers or food stamps. Recipients who are determined to spend their money on booze, cigarettes or what-have-you will do so. Usually by paying some form of commission under the table.
2. The LA Times article is a classic case of the broken window fallacy.
“Every $5 in new food stamp benefits generates a total of $9.20 in community spending”
“$1 billion of retail food demand by food stamp recipients generates 3,300 farm jobs”
To avoid the characterisation as “big meanies” who are kicking poor people for the hell of it, it is essential that free market advocates point out how welfare recipients themselves lose out in an economy that is rigged.
I receive considerable largesse from the UK government. But in the final analysis, I would rather have a job!
It’s not from the government. It is loot stolen from other people by the government and given to you for your loyalty and compliance.
That is correct.
But wagging your finger at me or the millions of other welfare claimants isn’t going to stop me claiming benefits when the alternative is destitution.
Even wagging your finger at politicians, the bureaucracy or central bankers won’t accomplish that.
But if you were to withdraw your co-operation from the state in some way, most likely by evading taxes, conducting business in specie or other forms of counter-economics, you would actually contribute to the downfall of the welfare state.
Hear, hear
Agorists unite
PS: and if forced to vote, like in my country, vote for the greatest evil possible
Does voting really affect policy?
The bureaucracy and the vested interests roll on in much the same way regardless of what party or coalition dominates parliament.
voting for the greatest evil is just messed up; if you even like good things per se, then it doesn’t even make sense to choose the most evil thing as such.
Machiavellian praxis even suggests not to vote for the greatest evil: would you rather be ruled by Douglass or Lincoln? By Pompey or Caesar? By the Federalists or the Republicans? The Communists made the same mistake in electing Hitler and they lived to rue the day.
One cannot reasonably choose, b/t two candidates, the worse one; one cannot choose Big Brother over ronald reagan. Indeed, society is greatly influenced by subjective values and you cannot get people to value what you do, if you constantly choose against your values.
And let me add:
voting for the worse evil is basically making others evil in order to teach them a lesson in virtue (if people become evil enough, then they’ll know from experience why they’re wrong). I don’t think you would like to make yourself worse to better understand evil and thereby avoid it in the future? Then why would you not generalize from this natural feeling and instead seek to impose on others a rule which is per se, repulsive even to you -it’s horrible.
In almost 50 years, I have never met any sane human who preferred being on welfare to having a meaningful job. A meaningful job is were there are higher value flows than outflows (mostly opportunity costs). Now, often those without the ability to find meaningful job do become lazy and depressed.
Indeed.
The question of lower productivity workers looms large.
It would not be economic for most employers to take me on at the current UK minimum wage with all the regulations that they would have to comply with.
As Mises pointed out, involuntary unemployment is not a feature of the free market.
Late on viewing MISES last week.
I spent 30 minutes cleaning up the refuse of a food stamp fueled party on my property. There were empty packs of cigarettes and gin, along with empty cup-a-noodle (soba) trash. How do I know? I assume in their altered state, they left behind a “food stamp” coupon (we still have the paper scrip; and not the debit card). The thought crossed my mind, “Hey, I could trade this $2 scrip for cash.” However, I have a better idea! I will go to the NAP or SNAP office to attempt to find out who the stamps were issued to, and make their life unpleasant. Of course, these parasites–both the bureaucrats and receiptants are probably “entitled” to their privacy. Welcome to America…where it pays to not work, and layabout.
Was at least going along with this article when I hit the brick wall of the following, “That, in turn reduces their incentives to earn, and their consequently reduced earnings…” This sentiment has been pushed and pushed by republicans for years now. Do you really believe someone would give up a dollar’s worth of wages because they would loose thirty cents? Your statement simply boils down a discussion about pay rates, nothing more and nothing less.
am a barista at starbucks, make barely more than minimum wage and because of the cost of living (including taxes and the minimum wage mandate) even if I got full time hours I could not afford to live independent of my family, sad considering I’m 25, but I am in So-Cal and we all know what’s going on there.
Anyway, I say all that to then make my point. I see a decent percentage of my customers paying for their 4.75 frap, or 5.50 or 6.05 beverages plus 2.25 piece of pound cake etc with the food stamp or welfare debit card. my co-wrokers and I (some, not all) are outraged that we work our “A” off day in and day out, can’t get by, for these lazy “A” people. They often have their hair and nails done, nicer cars than I would qualify for a payment of, nicer clothes than I can buy, and a very rude attitude. often it’s the poor looking that pay with cash, and in this area I’m sure some of it’s drug money or some other form of dirty money. I frankly don’t care how they make their money because it is not my business, but when I’m slaving away to serve someone who pays for their stuff with my tax money, and I can’t afford to shop here WITH my 30% discount… that really ticks me off. talk about incentive to not work. I wonder how hard it is to get these cards? maybe I should be given them and maybe I’d be able to afford steaks? that would “add” to the money I spend on groceries…
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