Ed Glaeser Argues Against Food Stamps

(Photo: NCReedplayer)

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)


alex in chicago

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.

Brian

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.

Enter your name...

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.

Enter your name...

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.

Read more...

Griff

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.

Kenneth

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.

Read more...

Kenneth

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?

Read more...

Enter your name...

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.

Caleb b

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.

awaysaway

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.

John

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/

tmeier

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.

Robert Rounthwaite

Couldn't help but think of this blog entry when I heard about this story in the Detroit News:
http://www.detroitnews.com/article/20120307/METRO01/203070333/
It leads:
"Part of an $11 million grant intended to provide business attire to 400 low-income job-seekers instead helped only two people, an audit of the city's Department of Human Services has found."

The real scandal comes to light only because of the waste: imagine what 400 low-income job-seekers could do with $27,500 apiece. I'll wager they wouldn't choose to spend it all on clothes.

Desmond

Well it seems Mr. Glaeser is assuming that the impoverished will spend the money on what's best for them. Unfortunately, he falls into the economist's trap of assuming everyone behaves like him -- rationally and maximizing utility. However, if the majority of the impoverished were like him then they probably wouldn't be impoverished.

MMa2ts

My problem with food stamps is that it kills individuals survival instincts. Don't get me wrong I know people who need them personally. People who look for jobs and go to school to better themselves. But then there is this other group of people who don't want anything for themselves except the assistance. The other side to that is the place where the food stamps are spent. How many super market owners want to see less people on food stamps? How many land lords want to see housing vouchers disappear? It's a very fragile topic.

The incentive to get off has to be higher. There needs to be some attrition to benefits for those who don't seek or find employment. If you don't find employment or legitimately show that your searching you should be placed in a homeless shelter and let the check go directly to the the shelter until you can contribute to your own well being. There has to be some down side to staying on food stamps for extended periods of time or the problem will never be fixed

Read more...

Joanne Rusch

With recent conversations, I wonder if the proposed vouchers for Medicare or for schools actually represent a form of compensation that mirrors food stamps but has no requirement of need. Statistics show that Medicare is more effective and efficient than private insurance models - yet there is a proposal to vouchers it.
It seems that we should decide if something warrants a government role or not. If it does, why not let government provide the service. If it does not, why divert any funds.
For food, would it be better for the government to support providing food for all rather than money to transact? New programs like "trees that feed" focus on providing food in a sustainable way. If we don't want to solve for no one having to be hungry (or having to be homeless) why divert any tax funds to help some people? Seems like providing money even targeted for a purpose has inherent breakdowns.

Read more...

gkb

Since food is necessary I would think that food stamps are essentially freeing up cash (otherwise spent on food) to be used on discretionary buying where you can exercise freedom to your hearts content.