Thursday, August 29, 2013

Behind the Big Increase in Food Stamps

Copyright, The New York Times Company

Something unusual has been happening with the food-stamp program, now known as SNAP, for Supplemental Nutrition Assistance Program. Between 2007 and 2012, spending on SNAP more than doubled, adjusting for inflation and population growth.

Paul Krugman and others attribute essentially all of the SNAP spending growth to the depressed economy. They have the general direction right – a more depressed economy will cause unemployment and antipoverty programs to spend more – but have missed the single largest factor increasing program budgets: program rules that are more generous now than they were in 2007.

Veterans benefits, Supplemental Security Income, Medicaid and Temporary Assistance for Needy Families all experienced a depressed economy, too, but they somehow managed through it without doubling their spending. Veterans benefits increased the most among these – 49 percent beyond inflation and population growth – compared with 110 percent for SNAP. (These data, which exclude administrative costs, can be found in the Bureau of Economic Analysis’ National Accounts Table 3.12.) Even state unemployment benefit spending, which is directly linked to layoffs in the economy, increased “only” 24 percent beyond inflation and population growth.

Peter Ganong and Jeffrey Liebman of Harvard have recently found (see Table 2 in their paper) that seven or eight changes in SNAP eligibility have spread across the states in recent years. They have examined county-level data on SNAP participation and other variables in order to estimate quantitative importance of some these rules. They find that between 2007 and 2011, new eligibility rules by themselves added 3.4 million people to SNAP enrollment and naturally tended to increase SNAP spending.

Perhaps 3.4 million seems small for a program that enrolled 26 million people before the recession. However, at the same time, SNAP began to pay more generous benefits to people who enrolled. Although changing benefit formulas is not part of Mr. Ganong’s and Professor Liebman’s paper, the new formulas would have increased SNAP spending more than 25 percent even without any new enrollment. Combined, the spending impact of enrollment and benefit rules is remarkable.

The chart below reports two estimates of the sources of SNAP spending growth: the one on the right, which builds on the Ganong-Liebman enrollment findings, and the one on the left, based on enrollment results I obtained earlier using somewhat different methods. (The Ganong-Liebman paper does not attempt to measure the combined effect of new benefit and eligibility rules between 2007 and 2011). The vertical axis measures the increase in SNAP program spending between 2007 and 2011, measured in 2007 dollars per American per year. All Americans are in the denominator – not just those who participate in SNAP – so that more participation in SNAP increases spending measured this way.

The total increase is $112 per person per year. Part, but not all, of the $112 can be attributed to more generous benefit formulas and more inclusive eligibility rules. That part is shown in red. My estimates say that, without a depressed economy, inflation-adjusted SNAP spending per capita would have increased $77 because SNAP rules changed. Using the enrollment estimates of Mr. Ganong and Professor Liebman together with the changes in benefit formulas suggests the increase would have been $53.

The remaining or unexplained spending increase is potentially attributable to the depressed economy, although it could be attributable to changes in the conduct of the SNAP that have not yet been quantified. For example, the Department of Agriculture has perennially attributed some of the increase in program participation to its outreach efforts – that is, advertising, promotional and other activities that encourage eligible people to join the SNAP program. Mr. Ganong and Professor Liebman note that enrollment itself may react to more generous benefits, as high benefits are likely to have encouraged more households to participate. These are effects that should be included in the red area in the chart but have been left as part of the blue “unexplained” area because of the lack of quantitative estimates.

The United States had a food stamp program before the recession that automatically included more households as circumstances put their incomes near or below the poverty line. The newest estimates suggest that going back to the 2007 SNAP program rules would annually save taxpayers at least $53 per American – that’s $212 for every family of four – and put SNAP spending back in line with spending on other antipoverty programs.


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