Jumat, 16 November 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.

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