Friday, November 16, 2012

SNAP is out of control

The Food Stamp program (officially know as the Supplemental Nutrition Assistance Program, or SNAP) was created in 1969. That year there were only 2.88 million people enrolled (1.4% of the population), and their monthly benefits were $6.63. Today the number of people receiving Food Stamps has exploded to over 47 million (15% of the population), and the monthly benefit is $134. In 43 years, the size of the program has increased 1,450% (an annualized growth rate of 6.6%, more than double the rate of growth of the economy), and the cost has increased by 315,000% (an annualized growth rate of over 14% per year). If this is not an example of a government program begun with good intentions but now out of control, I don't know what is.

There is plenty of blame to spread around here, but the worst of the outsized growth of this program started about 10 years ago.


The above chart shows the number of people receiving food stamps since the program's inception. Note that there were two periods of exceptionally fast growth since then: 1970-75, and 2002-2012. From 1975 through 2001 the number of people receiving food stamps did not go up at all. I'm willing to ignore the rapid growth in the first six years of the program, since it likely has a lot to do with getting the program up and running and spreading the word about its availability. From the late 1970s through the late 1990s, the program functioned pretty much as one would expect: adding people during recessions, when times are toughest and unemployment rises, and shedding people during recoveries, as unemployment declines. But over the past 10 years the program has just grown and grown. Since the end of the 2001 recession, the number of people receiving food stamps has increased 173%, or 9.5% per year.


This next chart shows total spending on the SNAP program. Since the end of the 2001 recession, the cost of this program has surged by 345%, or 14.5% per year. That's so far out of line with growth in the economy (1.7% per year annualized) and inflation (2.2% per year annualized) that it simply screams for attention. Monthly benefits have increased at an annualized rate of 5.4% over this same period, more than twice the rate of inflation.

Has the economy deteriorated in the past 10 years by enough to justify the enormous growth in the size and cost of this program? I don't see how it could have. But I can see how the uncontrolled growth of this program has contributed to the generally slow growth of the economy over the past decade. As government grows, and as the number of people who depend on government grows, the private sector gets squeezed and the percentage of people of working age who want to work declines. Federal government spending relative to GDP has grown from 18.3% at the end of 2001 to 22.8% today; that's a 25% increase in the relative size of the federal government in just 11 years, and the bulk of that increase takes the form of transfer payments, such as food stamps. The percent of the population working or wanting to work has declined from a high of 64.7% in 2000 to 58.8% today.

 Soaring spending on food stamps is just one small part of an expanding entitlement state in which each person working ends up supporting more and more people who are not working.

Needless to say, this is not a formula for a strong economy.


This chart shows monthly data (which is not available prior to late 2008) for the past four years. The number of people receiving food stamps has jumped by 53%! If there is any silver lining in this otherwise very dark cloud, it is that the growth in the number of people receiving food stamps has slowed significantly in the past year or so.


In April 2009, a 17% increase in monthly benefits (from $114.67 to $132.21) gave a significant boost to the overall cost of the program, which has increased 70% in just the last four years (14% per year).

It's time to blow the whistle on SNAP. No government giveaway of this magnitude can happen without significant fraud and corruption, and anecdotal evidence of that abounds. What really needs to happen, however, is a complete re-examination of the underlying premises and objectives of this program. When government hands out food stamps to almost 1 out of every 7 inhabitants of this country, something is very wrong. This was never part of the original intent of the SNAP program, and government was never supposed to become such a huge part of people's everyday lives. If we can't fix this, the economy will only get weaker and weaker with time.

24 comments:

brodero said...

Frankly I am more worried about the dramatic drop in year over year durable consumer goods Industrial Production...

steve said...

classic case of how the dems are virtually bribing the electorate.

Gloeschi said...

Yes, the poor are really ruining our economy. Instead of food, they should be forced to read "Atlas Shrugged". What are they thinking? Daring to 'defraud' our government for $134 dollars a month?!
Please, Scott. I want to see you feed your family for $134 a month.
If someone feels entitled, it is the people on Wall Street who think they do so much good they "deserve" multi-million dollar bonuses. In terms of damage to the economy I would lay the blame there, not with those who are struggling to survive.

Public Library said...

What is inlfation-adjusted growth rate of their monthly allowance???

Unknown said...

Sweet deal going on between corporate America and our government.

Hey - Wal-Mart...pay your workers minimum wage with part time hours thus maximizing your profits and we'll provide SNAP, Obamacare and the like. Outsource your wages and benefits to us.
We will in turn tax the middle class to pay for it all.

~ Uncle Sam

What do we get? Record corporate profits, record debt, record taxes and declining income and living standards for most! But of course not all...

Dr William J McKibbin said...

Going off the fiscal cliff is the best deal for Main Street USA...

Jake said...

A significant portion of OUR population is so poor they need food stamps to feed themselves. My first thought was how can a society as wealthy as ours (on average) solve the issue of poverty, not people are lazy and/or committing fraud. Wow. You are in a bubble.

Scott Grannis said...

I should have mentioned the one thing that has most likely contributed to the dramatic growth in food stamps. It's not that more and more are slipping below the poverty line, it's that the eligibility requirements for food stamps have been dramatically loosened. In effect, the poverty line has been raised.

Jeff said...

"If a man will not work, he shall not eat."

2 Thessalonians 3:10

Seth said...

You have the cart before the horse. SNAP isn't causing weak economic performance, lack of JOBS is causing growing need for SNAP.

I find lately, that I just scan your graphs -- ie DATA -- long enough to understand the scale/units on the axes, so I can interpret the DATA, and just skip over the 'interpretation'. Far too much of the text is devoted to force fitting a set of political prejudices onto the data.

Benjamin said...

A program exhibiting even more explosive growth than Food Stamps is the VA.

1960 $5.1billion
1970 8.4
1980 20.6
1990 29.8
2000 44.8
2010 112.7
2102 $125.3 billion

As you can see, the VA is larger, in terms of outlays than Food Stamps. In dollar terms, the VA is six times larger than in 1980.

Even in real dollars, VA outlays have more than doubled since 2000.

Believe it or not, there are GIs who receive dishonorable discharge, then claim they had been suffering PTSD and this led to the discharge, and now collect $1,000 or more month from the taxpayers in disability. I guess they will collect that sum for the rest of their lives.


Until America's right-wing takes a gimlet eye to the full range of federal outlays, they will just be pandering. I wonder if Scptt Grannis will ever blog about the VA.

PS I think the food stamp program ought to be eliminated. Barring that, try eliminating it for five years in a large state, and see what happens.

brodero said...

And Obama's lead gets bigger...Obama
50.66%...Romney 47.69% with about 2 million votes left to count....

Dr William J McKibbin said...

The US is running out of economic policy options -- more at:

http://wjmc.blogspot.com/2012/11/americas-fiscal-and-monetary-policy.html

Gil Rodveltz said...

Scott;
Don't know if you seen this?
http://www.nsfwcorp.com/dispatch/milton-friedman
Sorry...I did not know how else to bring you...Was at U of C two weekends ago. ...So if we ever disagree its not because of the University.

Jim said...

"I want to see you feed your family for $134 a month."

That is per person. I have dealt with EBT and Foodstamp recipients for over 13 years, and the majority game the system.

At least the people on Wall Street get up and go to work. The majority I have seen on welfare are more interested in playing Scratchers and sending the government money back to Mexico.

Ever wonder why California is going broke?

Jim said...

I have posted a job for a person to hold a sign for minimum wage for 5 hours a day for one of my businesses.
That is the same business where EBT and welfare recipients cash out their cards. I have hundreds who have seen the sign..HUNDREDS

Guess how many have applied?

Big Fat ZERO.

PD Dennison said...

Gloeschi,

You want to seem me feed my family on $134 taken from someone who worked for the money?

Give me a couch and a bag of potato chips.

The only way to feed a family on $134 taken from someone who works, is to have a "lay-about".

"Lay-abouts" are easy to find and most vote Democrat.

Buddy R Pacifico said...

Scott writes: "It's not that more and more are slipping below the poverty line, it's that the eligibility requirements for food stamps have been dramatically loosened. In effect, the poverty line has been raised."

Scott, It would be helpful to cite a source(s) for this conclusion. I agree that entitlements are soaring in an entitlement generation.

Jim said...

"You want to seem me feed my family on $134 taken from someone who worked for the money?

Give me a couch and a bag of potato chips.

The only way to feed a family on $134 taken from someone who works, is to have a "lay-about".

"Lay-abouts" are easy to find and most vote Democrat."


This is how the illegal immigrants game the system. Let me preface that I have seen more illegal immigrants who can not speak a word of English getting food stamps...how the hell does that happen?

Illegal immigrants have several SS numbers and use one for the welfare and food stamps. They use the other one for their place of work.

Gaming the system is how welfare recipients are doing it, how the union retirees have done it.

You really think these people are going to vote Republican? They will when the money stops.

marmico said...

Maybe you haven't heard. Children are 50%, working poor are 18% and retirees are 11% of SNAP.

Unknown said...

Hello - Scott, you have paid quite a bit of attention to TIPS recently - as an undistorted indicator of future expectations. However, arn't TIPS just as distorted as the Treasury market; no-one wants to go against the Fed and the TIPS are a derivative of Treasuries; there is an arbitrage trade between the two. I think they are both "freak" examples of Fed Reserve actions.

An Old Guy in MD said...

The history of governments is that they grow until they reach limits imposed from outside, or are deposed from the inside. There needs to be a balance between the greed inherent in unfettered capitalism and the nature of human behavior to do the least to get the most.
History is full of governments that collapsed: Rome a prime example. Our's is on the way. With an example as recent as the socialist melt-down in Europe, you'd think we'd open our eyes. "None is so blind as he who will not see."

Paul said...

Scott,

"It's not that more and more are slipping below the poverty line, it's that the eligibility requirements for food stamps have been dramatically loosened. In effect, the poverty line has been raised."

It's even worse than that. Obama's USDA uses tax dollars to create ads in Spanish to convince immigrants to get on food stamps even if they don't need the program.

"We will tax and tax and spend and spend and elect and elect."
~FDR flunkie Harry Hopkins

Scott Grannis said...

Re TIPS: I continue to believe that there is no significant distortion in the Treasury market. TIPS and Treasury yields are extremely low because the Fed, AND the market, believe that economic growth will be dismal in the years ahead.