Incentivizing Work in SNAP with Vegetables

Louise Putnam | Missouri State Archives

Against the backdrop of the foolish pearl clutching that has greeted the CBO report that shows Obamacare will give people the freedom to choose to work less, I stumbled across a piece by Reihan Salam on Representatives Nikki Tsongas (D-MA) and Tom Petri’s (R-WI) push for a commission to improve co-coordination between federal and state anti-poverty programs. Petri is particularly interested in dealing with the disincentives to work that are built into many programs, sometimes in the aggregate.

For instance, consider the scenario of a single mother with two children making $17,000 a year living in Wisconsin in 2009 who claims all available deductions and participated in all eligible benefit programs. If this single mother were to work extra hours or receive a raise so that her earnings increase to $21,000, she would only see $540 of that $4,000 in new earnings—she would have lost $3,460 in benefits. That amounts to almost an 88 percent effective tax rate, leaving the hard-working parent and her children little to show for the extra effort. Even more shocking is that if this mother received a raise or worked more to raise her earnings another $1,000 to $22,000, she would actually have less in disposable income than she had when earning $21,000.

How can this be?

It all comes back to benefit phaseout schedules. For instance, SNAP benefits for a single mother in some states gradually diminish as income rise and eventually stop when earnings reach $23,000 annually, leading to over 100 percent in effective taxation at some point—meaning that you lose more than you bring in.

Reihan points to Oren Cass’ Flex Fund idea as one way of dealing with the issue. There is a lot for liberals and conservatives to like in Cass’ ideas. The biggest obstacle the idea faces is that it is a broad omnibus reform. Those are really, really hard to do. I’d like to suggest a small bore solution to a program that I’ve thought a lot about and have some experience with.

I’m going to lay the case for a tiered phase out of SNAP benefits as participants income rises. The three tiers would be the current basket of goods covered by SNAP, the WIC basket of goods or perhaps the WIC basket and finally fresh produce as covered in the new Food Insecurity Nutrition Incentive program. But first, let’s look at the case for whitelisting SNAP benefits in the first place.

I’ve long thought that the basket of goods covered by SNAP (Supplemental Nutrition Assistance Program, formerly known as food stamps) should whitelisted. That is, SNAP should pay for foods that provide sustenance. It should not pay for things like soda and cookies. Another reform would be to forgo the whitelist for recipients but require a mandatory basket of goods for participating retailers must carry and keep in inventory. Using the already existing WIC package would be a simple way to do this.  Another popular idea would be to simply exclude sugary beverages.

Whitelisting SNAP would accomplish a number of important things:

• It would end a large indirect federal subsidy to junk food manufacturers
• It would increase the indirect federal subsidy to non-junk food producers
• It would improve the eating habits of a substantial number of Americans by increasing fruit and vegetable consumption that is too low and decreasing sugar consumption that far to high. There is a reasonable expectation that this would lower medical costs. Those are medical costs which are most likely being picked up by the taxpayer.
• It would serve as a strong public health message that diet matters and that junk food is not just empty calories
• It would nearly end the problem of food deserts over night. If corner stores needed to carrying a certain basket of goods to certify for SNAP, store in low income neighborhoods would start stocking fresh produce and whole grain bread and cereal over night. Problem solved. I’ve worked with corner stores to achieve WIC status. They respond to incentives and WIC participation changes their product mix for the better.
• It would insulate SNAP politically. A program that only pays for nutritious food is much harder to attack politically and would be less vulnerable to budget cuts.

The idea faces a few obstacles. First, anti-hunger groups won’t lobby for a change like this. They argue that it is demeaning to recipients that they couldn’t shop like everyone else.That it is stigmatizing to have pay for some items with their EBT card and for other by other means. They point out that SNAP participants eat about as well as everyone else. They argue that cheaper foods provide cheaper calories.

These arguments are easily dealt with.

There are lots of everyday necessities that you can’t pay for with your EBT card: aspirin, dish soap, tooth paste, sandwich bags. Shifting soda and potato chips into that category doesn’t make the check out any more demeaning than buying tuna and cold medicine in the same transaction. I’ve been on SNAP and I found room for a little ice cream here and there, but I would have traded that in a second for dish soap, tooth paste or double coupons for fresh produce. SNAP is by nature paternalistic. If we want a less paternalistic program, we would do a straight cash transfer. Given our cognitive biases against budgeting and the fact that a lot of SNAP spending is intended for kids, compartmentalizing an in kind transfer for food makes more sense. Now with the federal government on the hook for a lot more low income health care spending, it makes even more sense to exclude junk food. In fact, given what we’ve learned about behavioral psychology, done right, a SNAP whitelist could have a significant positive effect on participant’s food choices. That’s a topic for another day.

Instead of feeling slighted by reforms like removing soda from SNAP, a majority of food stamp participants favor removing sugary drinks from the program. That number goes up significantly when the reform is paired with greater benefits like the new program for fruit and vegetable vouchers in the recently passed farm bill.

While some past research showed the diets of SNAP participants to be on par with the average America, that’s not saying much. It also isn’t accurate. According to two recent studies which show a distressing gap in the quality of SNAP recipients. In the age of Obamacare, it makes little sense to be subsidizing a healthcare and an unhealthy diet simultaneously.

On the other hand, studies have shown the diets of SNAP participants to respond measurably to better incentives and more generous benefits. The Food Insecurity Nutrition Incentive program is meant to do exactly that and I’ll talk about that in a minute. As far as cheaper foods providing cheaper calories goes, there are plenty of cheap, nutritious calories that help you stretch your budget. Oats, barley, yams, potatoes, onions, carrots, frozen vegetables, canned tomatoes, dried beans are all dirt cheap. Soda and deserts don’t help you stretch your budget. They eat up your budget. In fact, there is some research that suggests they just make you hungrier. It makes no sense to include soda in the benefits if soda makes them harder to use. In the most desperate situations soda purchased with SNAP benefits is traded for cigarettes, alcohol, etc. That diminishes the value of the benefit and in cases where the benefit was intended for children, takes food out of their mouths.

Despite all this, the anti-hunger lobby is largely opposed  to removing soda from SNAP much less whitelisting the program. If they hold that avoiding stigmatizing SNAP participants is more important than achieving SNAP’s second goal of improving nutrition, I take them at their word. Others believe that stems from an unfortunate alliance with soda and junk food companies who are important donors. No matter. Between opposition from large food and beverage companies and the indifference of the anti-hunger lobby, removing soda and/or moving to a whitelist system isn’t going any where soon.

Which is a shame. While SNAP has been successful at addressing hunger, it has been much less successful at it’s second goal of improving nutrition. It also remains politically vulnerable. Politically resilient programs bind several powerful constituencies together while delivering results that are seen as serving a broad public good. A program that costs taxpayers anywhere from $21 – $76 billion a year should be accomplishing more than just keeping people free from hunger. Let’s look an idea that could deliver on the objectives a whitelisted SNAP could address, sidestepping some of the political pushback, while dealing with disincentives to work that Petri and Tsongas are trying to address.

Currently the value of your SNAP benefit decreases as your income increases by 24 to 36 cents for each additional dollar of income. As Rep. Petri showed, when combined with other benefits this can create income notches where it works against your interest to increase your income. What if, rather than decreasing the benefit, you transitioned to a different basket of goods of the same value. That is when your income rose to a certain threshold you would move from the current SNAP package to the WIC (Women, Infants and Children) package but at the same benefit value. The WIC package pays for fruits and vegetables; milk and juice; whole grain breads; tofu, cheese and eggs; and a few other staples as well as baby food and infant formula. Here’s the catch. In exchange for maintaining a higher monthly benefit, the funds not spent by the end of the month no longer roll over but are forfeited. When income reaches the next threshold, you move over to a basket that covers the fruits and vegetables covered by the new Food Insecurity Nutrition Incentive program. Again, those benefit not used by the end of the month would be forfeited. A phasing out by reducing the final fruit and vegetable benefit would need to be worked in to avoid that final income ‘notch’. It should be above the point that it is tangling with other benefit phase outs. Ideally at a point where people’s income has reached a liftoff and they aren’t clinging to benefits. Would it be potentially more generous? Possibly, one of big assumptions is that people won’t spend the full benefit of the second two packages. But even if it was, it would be providing fresh fruits and vegetables to working families and providing significant support to specialty (produce) crop growers.

One common criticism of whitelisting SNAP is that it would be an administrative nightmare, both to define the whitelist and for grocers to manage it. This sidesteps that problem by using already existing categories. The Food Insecurity and Nutrition Incentive program has a number of problems in current form. It’s underfunded. It needs to go through the tortuous rule making process. It partners with non-profits and local governments and caps the federal contribution at 50%. It’s not in any shape for what I’m proposing right off the shelf. The WIC package, on the other hand is ready to go. It also gives you a simple basic package that could be required inventory for SNAP enrolled retailers. If every gas station and corner store enrolled in SNAP was required to carry the WIC package, the food desert problem would be largely solved.

I’m just spit-balling here, trying to spur discussion of what a progressive farm bill would look like. Hopefully with aspects that conservatives could embrace. Or if not embrace or at least it would politically insulate SNAP from their knives. A ton of details need to be worked out. For starters, we need to have some idea how much of their total benefit the average participant would actually spend on the second two tiers. But wouldn’t it be great to have a SNAP program that didn’t disincentivize work, but encouraged healthy eating and growing fruits and vegetables? Wouldn’t it be great to have produce farmers, public health advocates and anti-hunger activists all rowing in the same direction? Dare to dream.

UPDATE:
Just to be very clear about what I’m advocating for:

The second two tiers kick in when somebody is back to work and has income coming in.

So instead of going from $189 a month to $129 a month when your income increases, you would go from $189 a month with the SNAP basket to $189 with the WIC basket. (No constraints on how you spent it within that basket). Then instead of going from $129 a month to $79 a month with the SNAP basket, you would stay at $189 a month but with the fruit and vegetable basket.

I’m talking about a bigger benefit, when the SNAP participant has more income coming in.

SECOND UPDATE:
If the original House version of Food Stamps had been signed into law in 1964, prohibiting the purchase of soft drinks, luxury foods, and luxury frozen foods AND CocaCola and PepsiCo and Unilever were now lobbying to get their products INCLUDED in SNAP, liberals would be screaming bloody murder to stop the corporate handouts.

As they were quite correctly, a few years back when Yum Brand restaurant chains were trying to weasel into the SNAP program.

Sources
How Obamacare Discourages Work — And Why That Could Be A Good Thing
Josh Barro | Business Insider | 4 February 2014

The Petri-Tsongas Push on Work Incentives.
Reihan Salam | The Agenda | National Review | 22 January 2014

Beating the “Poverty Trap”
Tom Petri, U.S. House of Representatives | Spotlight on Poverty and Opportunity | 21 January 2014

Oren Cass’s New Poverty-Fighting Strategy
Reihan Salam | The Agenda | National Review | 27 September 2013

Federal Nutrition Program Changes and Healthy Food Availability
Erin K. Havens MPA, MPH, Katie S. Martin PhD, Jun Yan PhD,Deborah Dauser-Forrest MPH, Ann M. Ferris, PhD | The American Journal of Preventative Medicine | October 2012

SNAP Participation and Diet Outcomes
Christian Gregory | Amber Waves | USDA | 18 November 2013

Few Changes in Food Security and Dietary Intake From Short-term Participation in the Supplemental Nutrition Assistance Program Among Low-income Massachusetts Adults [pdf] [abstract]
Cindy W. Leung, Sarah Cluggish, Eduardo Villamor, Paul J. Catalano, Walter C. Willett, Eric B. Rimm | Journal of Nutrition Education and Behavior | 18 November 2013

Diets of low-income adults in federal food program SNAP need improvement
Walter Willett | Harvard School of Public Health News | 9 October 2012

The Perfected Self
David Freedman | The Atlantic | 21 May 2012

Access to Affordable and Nutritious Food [pdf]
Measuring and Understanding Food Deserts and Their Consequences
Economic Research Service | USDA | June 2009

New poll shows U.S. public supports continued investment in Federal Nutrition Assistance Program
Marge Dwyer | Press Release | Harvard School of Public Health News | 5 December 2012

Healthy incentives are farm bill bright spot
Oran Hesterman | The Hill | 28 January 2014

The Surprising Policy Solution That Could Encourage Americans To Eat Healthier
Sy Mukherjee | Think Progress | 29 January 2014

How To Encourage Americans On Food Stamps To Choose Healthier Options
Sy Mukherjee | Think Progress | 25 November 2103

The Earned Income Tax Credit and Food Consumption Patterns [pdf]
Leslie McGranahan and Diane W. Schanzenbach | Working Paper | Federal Reserve Bank of Chicago | November 2013

Consumption of high-fructose corn syrup in beverages may play a role in the epidemic of obesity
George A Bray, Samara Joy Nielsen, and Barry M Popkin | The American Journal of Clinical Nutrition | April 2004

A randomized trial of sugar-sweetened beverages and adolescent body weight.
Ebbeling, Feldman, Chomitz, Antonelli, Gortmaker, Osganian, Ludwig | The New England Journal of Medicine | 21 September 2012

The White Ghetto
Kevin Williamson | The National Review | 9 January 2014

The Trouble With Food Stamps
Matthew Yglesias | Moneybox | Slate | 10 January 2014

Banning Soda for Food Stamps’ Recipients Raises Tough Questions
Andy Fisher | Civil Eats | 8 October 2010

Supplemental Nutrition Assistance Program Participation and Costs
USDA | 10 January 2014

WIC Food Packages – Regulatory Requirements for WIC-Eligible Foods
WIC | USDA

Policy Basics: Introduction to the Supplemental Nutrition Assistance Program (SNAP)
Center on Budget Policies and Priorities | 10 January 2014