Ed Glaeser Argues Against Food Stamps

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Over at Bloomberg View, Ed Glaeser argues that the shift in government aid from cash payments to in-kind transfers like food stamps is a mistake:

We should ask for two things from any redistribution system. It should do as much as possible for society, especially the poor. It should do as little as possible to encourage permanent poverty. And, whenever possible, it should help poor Americans find a path toward self-sustaining prosperity.

The conventional economic logic is that cash transfers are more effective at helping the poor than in-kind gifts, such as food stamps and housing vouchers. I am grateful for the freedom I enjoy when spending my earnings; surely, aid recipients also like autonomy. They can choose the spending that best fits their needs if they are given unrestricted income. 

Glaeser traces the shift to concerns over the misuse of cash transfers, but laments the perverse incentives produced by in-kind transfers.  ”The proliferation of in-kind programs leads aid recipients to spend on things that they value less and creates perverse incentives to earn less and save little,” he writes. “The problem with food stamps isn’t that we are giving too much to the poor.”

(HT: Marginal Revolution)

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  1. alex in chicago says:

    No, the problem with food stamps is that they dry up when you get any income at all. Marginal disposable income hardly rises from $0/year to $40k/year because of our perverse safety net.

    Well-loved. Like or Dislike: Thumb up 29 Thumb down 2
  2. Brian says:

    People have to buy food to survive. Giving people food stamps allows them to use more cash from their incomes on other items. The net effect of giving food stamps or cash transfers should be the same in most cases.

    The only differences could be that consumers change their behavior based on the types of aid. Do parents buy more nutritious food for their kids when receiving food stamps?

    I agree that it would be better if that aid programs changed their incentive structure to encourage people to work and save more, but it would require more money to fund since more people will be eligible for the programs. The added costs will make it a tough sell for politicians.

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  3. Enter your name... says:

    The problem with cash transfers is that they can be spent on anything, and the recipient might value things that we taxpayers don’t, like street drugs. So we say “Let’s get rid of actual hunger among children”, hand the poor parent $100 to buy food for the kids, and the poor parent says “Great, I’m going to buy something else with this money, and the kids can eat whatever the food bank offers, or go hungry.”

    We use food stamps and housing vouchers because we want to make sure that the money we spend to reduce hunger and homelessness actually reduces hunger and homelessness.

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    • Enter your name... says:

      To give an example of why housing vouchers are preferable to cash: In my local area, we have a problem with homeless people “camping” on the river. Their trash and excrement is a major source of pollution, and when it rains, the banks flood and they’re at risk for injuries.

      Many of them (most of the long-term homeless) are disabled or elderly and receive Social Security checks. Their small checks aren’t big enough to buy both housing (even subsidized housing) and alcohol, drugs, cigarettes, etc. You have to choose between the options.

      I’d like to see them placed in permanent, subsidized housing, with their fair share of the rent automatically deducted from their Social Security checks whether they like it or not. But they don’t see it the same way: they don’t mind the harm they spread to other people (e.g., by not using a toilet), but they do mind having their “freedom” reduced.

      A few years ago, I spoke with a mentally ill homeless man who wanted to sue his legal guardian for arranging to automatically buy him a $40 bus pass each month. He couldn’t drive, so the bus system and walking were his only transportation options, but he wanted to spend the money on other things. He kept telling me that the only thing that really disabled him was being poor, and if he had more money, then he wouldn’t be disabled. I’m thinking that the cash wouldn’t change his disability status, but a home to live in would at least help the rest of us, by giving him an alternative to pooping in the river.

      Well-loved. Like or Dislike: Thumb up 22 Thumb down 3
      • Griff says:

        In the UK we do not have long term homeless elderly and disabled people – we do not have tent camps full of such people. They’re housed.

        I think the issue is not money vs food stamps, but that there is something much more seriously and fundamentally wrong in the way the US provides for its citizens.

        Hot debate. What do you think? Thumb up 11 Thumb down 11
  4. Kenneth says:

    I recently applied and qualified for food stamps & medicaid, not because I was in dire need of food and medical assistance, but because was a legal way of boosting my (tax free) income by 24k/year (~1k for food stamps and ~1k for health insurance / month). I get 793/month in food stamps (for a family of 5), but will increase to 952 when baby#4 is born.

    The behavioral problems with food stamps are atrocious. My pre-food stamp food budget is ~350/month because I shop intelligently at Costco, but food stamps now allow me to spend twice what I normally do. For the first time in my life, my first food stamps purchase last week enabled me to buy items without regard to price because I’m essentially given a blank check.

    The other behavioral problem is that there are few incentives to get off of food stamps once you are on them. There is no limit to the amount of years that you can be on the program. They are handed out without any strings attached…no “must actively be pursuing work” clause, etc. Mankiw has blogged about this before here: http://gregmankiw.blogspot.com/2009/11/poverty-trap.html.

    With medicaid, the incentives are to go to the ER every time you catch a cold because not a penny of expenses are incurred by the individual. My good friend is doing his residency in the hospital and says the great majority of patients he sees are medicaid patients with colds who should have been treated in a low-cost primary care facility.

    The majority of food stamps recipients, like myself, have money for food. As a result, the food stamp ends up subsidizing non-food transactions. For most recipients, this is cell-phone bills, cable TV subscriptions, and cigarettes. For me, my wife and I are maxing out our Roth IRA contributions on the gov’ts dime.

    The time has come to stop these silly distortion inducing wealth transfer programs, and for people to reap the consequences of their own hard work and frugality. My prediction: destitute families will learn to survive without TV, cell phones, and cigarettes and find ways to seek shelter and food. Some of them may actually have incentives to get off of the couch and get a job. Financial literacy would help this transition, but I don’t know how you effectively combat the brainwashing of legions of marketers and a society which believes that happiness comes from the accumulation of material things.

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    • Kenneth says:

      Given that most of us want to live in a society where nobody goes hungry, I’ve wondered what mechanisms should be in place for people to voluntarily get off of food stamps. My solution: make dry beans, dry lentils, and rice the only items available for purchase with food stamps. Throw some Kale if there is an uproar about malnutrition.

      My proposal would fulfill it’s intent: to keep people from starving in an inefficient manner, while providing them the needed nutrition. It would incentivize people to get off of it as soon as possible while minimizing the bill footed to taxpayers.

      If people uproar about the poor not being able to afford the time to cook these meals, that’s hogwash. A $30 rice cooker with a timer, a $70 electric pressure cooker, or a $40 slow-cooker would provide hot and healthy meals for the poor when they come back from a hard day of work. If the rest of the world can healthily live off of beans, rice, and vegetables, why should the US poor demand an alternative diet?

      Well-loved. Like or Dislike: Thumb up 27 Thumb down 6
      • Enter your name... says:

        Actually, it’s been done, and somewhat more thoroughly than you suggest here. The program’s name is WIC. It provides money only to buy healthful food, mostly vegetables, basic staples, and milk. Junk food (which you can buy with food stamps) is not permitted under WIC. If WIC recipients want junk (sugar cereal, candy bars, soda, etc), then they have to cough up their own cash for it.

        Thumb up 4 Thumb down 0
    • Rick says:

      Kenneth, I’m somewhat skeptical of your story. To begin with if you have enough money to max out an IRA you will not be eligible for food stamps in my state (Texas). Benefits are limited to 3 years in most cases. http://www.hhsc.state.tx.us/help/food/foodstamps/index.html

      Medicaid eligibility is a little more complicated but basically with 4 children you might qualify for CHIP if your income is below 36000 per year. This would not cover you or your wife unless she is pregnant. Again the money you are putting into your IRA would disqualify you.

      I can agree with you that most people would get more satisfaction out of earning their own living. I certainly do after spending 10 months looking after being part of a cutback a few years ago. Fortunately I did not have to apply for help as I had enough savings.

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      • Mike B says:

        Good call, Kenneth sounds like a straw man to me with a finely crafted life story designed to vilify such safety net programmes.

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      • Kenneth says:

        I have 3 children. My wife is pregnant with our fourth. My gross income is currently 24k/year. I obviously pay no taxes. I live in the midwest. I claim the earned income tax credit for $5,700/year. I actually receive fairly generous health insurance benefits, but I dropped them because they were not as generous as “free.”

        To be candid, I embellished a little. Since I don’t spend all of the food stamp budget, it would be incorrect to claim that my real income rose by 12k/year, though I essentially can spend that much in food if I chose.

        Also, my portion of health care expenses was much less than 1k/year, but the quoted 1k/year is the fair market value for bulletproof “free” healthcare. Speaking of “free”, baby #4 will be free to us.

        I’m in my 3rd year of graduate school of 8. When I graduate, I plan to make 200k/year, so I expect to be a net contributor to the system, which is how I justify my ways.

        Pre-government-assistance (for food and health insurance), and ignoring my previous health care expense, my family of 5 lives on about 1250/month, largely because we live in a small apartment in an affordable midwestern town. Rent is 750/month. Food (was) 350/month. Utilities are 100/month. Car expenses are 50/month. Luxuries are 0/month. Yet the government views us as destitute. Destitute people spend more than they make. Intelligent people live well on less than they make.

        I didn’t embellish the fact that government transfer will allow my wife and I to max out our Roth IRAs this year. The EITC gets us 60% of the way there alone!

        My point is that intelligent people can live well on less. The fact that the government views me as destitute strikes me as silly. The fact that these government wealth transfers exist continues to appall me.

        Yet we keep throwing money at the problem as if to think that more money would help the destitute increase their standard of living. I can’t believe more people don’t intentionally work less and exploit this. I just stumbled across it as a student, but it wouldn’t take a very high IQ to realize that “free” money is in many ways preferable to money that you earn, which is then taxed to subsidize freeloaders.

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  5. Caleb b says:

    Back in the day, when foodstamps were actual currency, the standard conversion was 2FS per $1. It’d be interesting to see what it is now, with the electronic card.

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  6. awaysaway says:

    Food Stamps were originally conceived as an aid to farmers. They are administered by the USDA – the same people that stamp the beef and the annual budget is secured in the Farm Bill. However TANF cash assistance (“Welfare”) is administered by Health and Human Services.

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  7. John says:

    Something different needs to happen, it just is to easy to make a life off government assistance. It should assistance you until you get back on your feet and encourage you to get back on your feet. Not allow you to sit back and collect checks.

    http://ebtcardbalance.com/

    Thumb up 2 Thumb down 1
  8. tmeier says:

    How many government programs are designed with the means for scientific analysis of their effectiveness? Particularly with respect to poor relief I can’t think of any. If you are really setting out to fix a problem a ration person would only consider methods where effectiveness could be objectively determined. To do otherwise is magical thinking, like banging pots together to cause rain. That government programs are so rarely designed to be objectively judged seems to indicate they are not really intended to fix the problem or their designers are irrational or both. Though perhaps a more cynical explanation is they are designed more to fix the problem of their proponents getting re-elected than those of society.

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