William Galston has an op-ed in the Wall Street Journal that begins as follows:
We are entering a divisive debate on the Supplemental Nutrition Assistance Program (SNAP), popularly known as food stamps. Unless facts drive the debate, it will be destructive as well.
I certainly agree with this statement. Unfortunately, I found the op-ed misleading and vague (a vague op-ed can be somewhat forgiven since word counts are limited).
The basic premise of Galston’s op-ed is that critics of the increased spending on food stamps are misguided in their criticisms. For example, he explains:
The large increase in the program’s cost over the past decade mostly reflects worsening economic conditions rather than looser eligibility standards, increased benefits, or more waste, fraud and abuse.
[…]
The food-stamp program’s costs have soared since 2000, and especially since 2007. Here’s why.
First, there are many more poor people than there were at the end of the Clinton administration. Since 2000, the number of individuals in poverty has risen to 46.5 million from 31.6 million—to 15% of the total population from 11.3%. During the same period, the number of households with annual incomes under $25,000 rose to 30.2 million (24.7% of total households) from 21.9 million (21.2%).
Critics complain that beneficiaries and costs have continued to rise, even though the Great Recession officially ended in 2009. They’re right, but the number of poor people and low-income households has continued to rise as well.
Thus, according to Galston, we can explain much of the increase in food stamp spending on the rise of poverty over the last 13 years (and especially the last 6 years). If Galston is correct, then we could examine the ratio of households who are receiving SNAP benefits to the number of people below the poverty line. Supposing that he is correct, we would expect that this ratio would be constant (or at least roughly so). In other words, as the number of people below the poverty line increased, the number of households receiving SNAP benefits would increase in direct proportion.
Such a comparison, however, casts doubt on Galston’s claim. Casey Mulligan, in his book The Redistribution Recession, has taken great effort to actually calculate such ratios. What Mulligan found is that from 2007 to 2010, the number of families below 125% of the federal poverty level increased by 16%. That is indeed a large increase. However, the number of households receiving SNAP benefits increased by 58%. This means that the SNAP recipiency ratio, or the ratio of households receiving SNAP to that below 125% of the poverty line (a higher threshold that Galston himself uses), rose by 37%.
So what can explain the fact that recipients are rising so much faster than poverty? One possible explanation are eligibility requirements. Since 2008, there have been several changes to eligibility for food stamps. For example, the Farm Bill passed in 2008 increased the maximum benefit that beneficiaries could receive, it excluded some income from the formula used to determine eligibility, and it weakened the evaluation of assets of potential enrollees. In addition, the American Reinvestment and Recovery Act also loosed eligibility requirements by once again increasing the maximum benefit that one could receive, gave states the ability to loosen the work requirement, and further loosened income requirements.
Galston, however, downplays most of these changes and argues that macroeconomic trends explain the vast majority of the rise of SNAP spending. However, the use of this type of explanation is problematic because it is taking the actual increase in recipients and then explaining the increase in spending ex post. To understand why this is misleading, consider the following example. Suppose that there is an individual who lost his job in 2009. Prior to 2007, he would not have been eligible for SNAP whereas after the changes he is now eligible. Thus, after 2007, this increases the number of recipients of SNAP. Galston might claim that this change is the result of macroeconomic trends because this person would not have enrolled in SNAP had he not lost his job. Others might say that this change is due to eligibility requirements becaus if the worker had lost his job two years prior, he would not have been eligible. While I certainly understand Galston’s perspective on this, the relevant comparison is to the counterfactual. In other words we can’t explain the rise in SNAP recipients ex post, we need to consider what actually happened to what would have happened in the absence of a policy change.
So what do the counterfactuals say?
Again, Casey Mulligan has constructed these counterfactuals. What he finds is that between 2007 and 2010, the increase in per capita SNAP spending was 100%, adjusted for inflation. He then constructs two counterfactuals. The first counterfactual takes macroeconomic trends as given and computes the increase in per capita SNAP spending under 2007 eligibility rules. The second counterfactual does the same thing assuming that in addition to maintaining 2007 eligibility rules, the government had maintained constant real benefit rules (i.e. would not have increased the after-inflation maximum benefit).
The first counterfactual suggests that from 2007 to 2010 per capita SNAP spending would have only increased by 60%, adjusted for inflation. The second counterfactual suggests that per capita SNAP spending would have increased only 24%, adjusted for inflation. Had no policy changes been enacted in 2008 and 2009, per capita spending on SNAP would have been 62% of what it actually was in 2010. Put differently, 48% of the per capita 2010 spending is attributable to changes in eligibility. Thus, contrary to the claims of Galston, a very large fraction of the increase in SNAP spending is explained by changes in eligibility.
An entirely separate question is whether or not this increased spending is worth it. Answering that question is certainly beyond the scope of this post. However, it is important to be mindful that such analysis must consider both the costs and the benefits of the expansion. The benefits are obvious. Households receive assistance in purchasing food and feeding their families. The costs, however, are more complex. A significant fraction of the increase in spending can be explained by changes in eligibility. Thus, we need to consider the counterfactual. One big issue is to consider how much of the increased benefits are going to those who would not have qualified under the asset tests. Another issue is to consider is the effect of changes in eligibility on the labor supply of those at or near the new eligibility requirements, especially given the work requirement waiver. And there is the obvious monetary cost to the taxpayer. Too often those on each side of the debate focus on only the benefits or only the costs.
Whether the policy changes are worth it depends on a careful analysis of these questions. I will remain agnostic with regards to that type of analysis. However, to argue that those concerned about the expansion spending due to changes in eligibility are misguided and driven by “anti-government ideology”, as Galston argues, is an unfair criticism to those who have carefully looked at the data.
The Everyday Economist 