15.1.17

POP IS A LIQUID ASSET.

The New York Times interprets a government report on where the taxpayers' food stamp money goes.
The findings show that the No. 1 purchases by SNAP households are soft drinks, which accounted for 5 percent of the dollars they spent on food. The category of ‘sweetened beverages,’ which includes fruit juices, energy drinks and sweetened teas, accounted for almost 10 percent of the dollars they spent on food. “In this sense, SNAP is a multibillion-dollar taxpayer subsidy of the soda industry,” said Marion Nestle, a professor of nutrition, food studies and public health at New York University. “It’s pretty shocking.”

For years, dozens of cities, states and medical groups have urged changes to SNAP, or the Supplemental Nutrition Assistance Program, to help improve nutrition among the 43 million poorest Americans who receive food stamps. Specifically, they have called for restrictions so that food stamps cannot be used to buy junk food or sugary soft drinks.

But the food and beverage industries have spent millions opposing such measures, and the U.S.D.A. has denied every request, saying that selectively banning certain foods would be unfair to food stamp users and create too much red tape.
Read the entire article, and note the Wise Experts Being Fretful about the People in Their Charge spending their money foolishly on pop rather than on More Nutritious Things.  Ah, the technocratic impulse, and the continued conceit that somehow there is an Order of People Born Booted And Spurred to Ride the Rest of Humanity.  (And it's For Your Own Good, so Do as I Say.)

But there's a simpler explanation.  In Hillbilly Elegy, J. D. Vance notes the presence of a cash economy based on ... the resale of pop.  (That's an en passant observation, most of the attention he gets is for the Broader Lessons about Enabling Dysfunction.)  The cash economy, though, is real.
Deputies said it highlights tax dollar waste and food stamp abuse blatantly in the public eye.

People said it's not unusual for some to come to the grocery store with food stamps in hand, buying case after case of soda and then turning around, driving up the street and selling it to someone else for half the price.

The sheriff's department said just like anything on the black market, stores buy the soda because it's a discount deal and there's an opportunity to make money.

"My opinion is this: is that it's cheap," Witten said.

A closer look at the sheriff's video shows a man rolling a dolly stacked with cases of soda into a store. Seconds later, the video shows him back outside to take two more cases from the trunk of a car.

The Martin County Sheriff told us he witnessed a woman with a West Virginia license plate pull up in the white car.

It was filled with those very cases of pop.

Witten said this is what he and others see when a food stamp recipient pawns soda.

"On a daily basis, if I had to, on a daily basis, I'd say probably two to three," Witten told WSAZ.
As a store of value, it's not as good as cash, but it's more durable than milk, and it probably has a broader resale market than condensed soup.

The public policy challenge, dear reader, is as old as organized charity.  The almoner, whether an eleemosynary institution, or a government agency, can provide assistance in cash, where the risk is that the beneficiary will spend the cash in ways the donor doesn't like, or assistance in kind, where the constraints imposed on the beneficiary can leave him in a worse place than he would be absent the assistance.  Want to read more: check out Aaron and von Furstenberg, "The Inefficiency of Transfers in Kind: The Case of Housing Assistance" or Hoynes and Schanzenbach, "Consumption Responses to In-Kind Transfers: Evidence from the Introduction of the Food Stamp Program" or Smeeding, "The Antipoverty Effectiveness of In-Kind Transfers" (they're relatively inefficient at reducing poverty) or Thurow, "Cash Versus In-Kind Transfers," in which he spells out the interaction of donor and donee.  "From the donee's perspective, unrestricted cash transfers maximize utility."  Economist readers will likely recognize these names as established scholars on Matters Poverty.

But a world in which some parts of the Governing Class have reservations about recipients of transfer payments spending them wrongly whilst other parts have reservations about recipients of tax cuts spending them wrongly, there's going to be some in-kind assistance.  Plus efforts by the recipients thereto to expand their opportunity sets.  Put simply, for some transactions, a person has to have cash.
The problem with the selling of food stamps is that we aren’t sure what the sellers will be buying with their cash. Most of us are sympathetic when we hear about a woman who sells her food stamps to buy diapers, which you can’t buy with food stamps. Even if that activity is illegal, many of us do not find it to be quite so immoral.  But because the sale of food stamps is a contract of adhesion that mother, and many like her, is able to buy a lot fewer diapers than she normally would be able to after selling her food stamps. And we fear that she won’t be using it to buy diapers at all but to buy alcohol or drugs.

This is a legitimate fear. Changing the program to one that is purely cash assistance would allow recipients to use the money on anything they want to. That is both the benefit and the drawback of that change. They may choose to buy diapers or electricity, or they may buy vodka. There would be no way to effectively control their spending if the benefit was pure cash.
Note how that final sentence grants the premise that Wise Experts Know Better how people should be spending their money.  Like everything else in public policy, there are trade-offs.  "The types of needs that the poor have here in America almost require the use of cash rather than food stamps alone. Even so, Americans struggle with how to balance our values: concern for the poor and the promotion of the entrepreneurial spirit."

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