Lax Rules Author Spike In Food Stamp Usage
Last week, the Census Bureau announced American real household income declined in 2011. That’s the second year in a row. Coupled with an unending stream of poor economic data from unemployment to slow economic growth, it’s not surprising that 47 million Americans, more than ever before, are on food stamps.
Fifteen percent of Americans on food stamps, more than one in seven, is a substantial expansion from just a few years ago. At the beginning of the Great Recession, in December 2007, 27 million Americans, fewer than one in 10, received Supplemental Nutrition Assistance Program (SNAP) benefits, previously known as Food Stamps. At the end of the recession, in June 2009, 11 percent of the population was using SNAP.
Have the number of SNAP beneficiaries expanded because our economy is that much weaker than three years ago? Our economy is still weak, which can explain some of the increase. But much of the increase can be explained by another factor: evolving SNAP rules that expand eligibility and increase benefits to ever more Americans.
Food stamp participation has always increased during a recession and in the initial stages of a recovery, but this increase is far higher than in prior recoveries. The three-year period after the recessions of the early 1980s saw decreases in food stamp usage, but the recessions of the early 1990s and in 2001 saw increases between 1 and 2 percent over the same period. In comparison, food stamp usage increased 3.5 percent following the Great Recession.
It’s not just that more people today are on food stamps, but the real value of food stamps has gone up, from $245 per household per month in 1990 to $287 in 2010. At the same time, the average number of people per household receiving food stamps declined, from 2.6 people to 2.2 people.
Of course, our economy is still weak. Our unemployment rate has remained above 8 percent for 43 months, since February 2009, which is longer than in any other period since the Great Depression. Americans experienced unemployment over 8 percent for 27 months from November 1981 to January 1984, but ultimately saw a decrease in food stamp usage during the three years after that recession. The prolonged unemployment effects of the 2007-2009 recession are partly responsible for the growth in current food stamp usage, but cannot fully explain it.
Greater food stamp usage is partly the result of changes in eligibility. Consider the recent history of changes in eligibility standards. The 1996 welfare legislation eliminated Food Stamp eligibility of legal immigrants, placed a three-month limit on Able-Bodied Adults Without Dependents working less than 20 hours a week over 36 month period, reduced the maximum allotment, froze the standard deduction and minimum benefit, and revised provisions for disqualification.
In May 2002, the food stamp program was changed under the Farm Security and Rural Investment Act. It restored eligibility of legal immigrants, indexed the standard deduction to inflation, incentivized state administration outcomes with performance bonuses, simplified eligibility processes for states by aligning them with other means-tested programs, and cut employment and training funds.
The increase in participation in 2008 was caused by a combination of widened benefit eligibility, the recession, and a concerted effort to expand access to benefits. The 2008 Farm Bill changed the name of the program from the Food Stamp Program to SNAP, in an effort to reduce the social stigma associated with receiving benefits.
As of October 1, 2008, the minimum benefit and standard deduction for households were increased. The cap for child care expenses was also eliminated. There were also changes aimed at combating fraud, including disqualification of people who sold benefits or food obtained with SNAP benefits for cash. The bill allowed the USDA more flexibility in setting fines and disqualification periods for retailers who engaged in food stamp fraud.
Able-bodied adults without disabilities between the ages of 18 and 50 are generally limited to three months of SNAP benefits within a three year period if they do not work or participate in workfare or workforce training programs. However, in some areas these requirements can be waived. Employment and training grants are used to assist SNAP participants with attaining, retaining, and training for work opportunities.
The expansion of SNAP nearly coincided with the official end of the Great Recession. But the full effects of the expansion have accumulated over the past few years. The expansion of the program had a predictable effect: use of the program rose. Data from June 2012 show that while nationwide participation was 15 percent, state participation rates vary from 6 percent to 22 percent (with 23 percent of District of Columbia residents on food stamps.) The wide variation in participation can be explained by two main factors: differences in state economies and variation in the eligibility rules adopted by individual states.
Contrary to what might be expected, the unemployment rate and food stamp participation rates do not appear to have a strong relationship. This would suggest that the differences in eligibility and other administrative standards play a large role in varying participation rates. One consistent relationship is that, with the exceptions of California and New Jersey, the percentage of the population on food stamps always exceeded the state’s unemployment rate. (California residents have a low participation rate because in SNAP Social Security disability recipients receive a state Social Security supplement instead of SNAP benefits.)
Perhaps most troubling is that the expansion in the SNAP program means that even when our economy returns to full activity and much lower unemployment, the food stamp benefits will not decline commensurately. Food stamps have become more of a permanent entitlement rather than a temporary stop-gap for the temporarily unemployed.
The increase in food stamp usage following the most recent 2007-2009 recession vis-Ã -vis the smaller increases in other recessions is troubling. Designing and administering a social safety net is a balancing act. Assisting those who are truly in need in order to empower them to help themselves succeed must not lead to the creation of perverse incentives to depend on public assistance for long term sustenance.
This piece originally appeared in RealClearMarkets
This piece originally appeared in RealClearMarkets