All the treasure in the world…

6

November 14, 2012 by afrazzini

… is worthless unless you have someone to share it with.

Every argument in favor of SNAP (aka food stamps) is, at least in part, an argument in favor of the redistribution of wealth. The blog entries that have already been posted about the farm bill have done a good job of outlining the importance of SNAP to its recipients; I’d like to step back and examine SNAP’s role in the context of US income inequality.

Documentation of US income inequality

It is no secret that incomes among US workers have become increasingly unequal over the course of several decades; the slogan of the Occupy Wall Street movement – “We are the 99%” – referred to the concentration of wealth in the top 1% of US earners. Data from the Congressional Budget Office shows that income inequality increased steadily from the 1970s to 2007 (latest available figures).

Effects of income inequality on national economic well-being

The effects of income inequality on long-term economic growth have been a matter of debate amongst economists since the 1970s; studies on the topic have different results depending on the methods used and indicators and regions examined (1). However, our current economic recession, which was triggered by the sub-prime mortgage crisis, seems to serve as evidence that economic inequality creates instability. This is totally consistent with models created by IMF economists showing that income inequality can lead to financial crisis because of how it affects consumer spending as well as financial legislation (2,3) .In other words, greater income equality provides economic benefits not only those who would otherwise be at the bottom, but to all ranks of society.

No one is arguing for a classless society; the ability to climb the income ladder is an important incentive for innovation and progress. But it seems obvious that people need to be able to meet their most basic needs – food, housing, health – before they can become entrepreneurs.

Effects of income inequality on health and happiness

Low-income individuals have poorer health, including higher rates of chronic disease, than higher-earning individuals (4,5). This is unsurprising, given that poorer people have less absolute income to spend on preventive care. What is more interesting, however, is research showing that relative wealth also affects overall national health; increases in income inequality lead to higher mortality rates (6), as well as worse physical function among people below the 50th percentile of family income level (7). Income inequality also affects happiness: it is positively associated with higher rates of depression (8), and surveys show that Americans are happier in years where there is less income inequality (9).

How SNAP abates income inequality

In 2011, the Census Bureau reported that SNAP kept 3.9 million people above the poverty line, at a time when the total number of people below the poverty line was 46.2 million (10). That’s more than an 8% reduction in poverty! Additionally, SNAP benefits contribute to a geographic re-distribution of wealth because SNAP recipients use their benefits immediately to buy foods in their local areas, stimulating their local economies. In fact, the USDA estimates that every 1$ spent in SNAP benefits generates nearly double that same amount in local economic activity (11). Because SNAP recipients use the money right away, rather than let it sit in a bank as wealthier taxpayers might, its use has immediate positive effects.

Conclusion

I didn’t join Wall Street Occupiers, mostly because I never did figure out exactly what specific changes they were protesting for. But I do believe that cuts to our social safety nets would increase sickness, distress, and economic instability in America. Maintenance of SNAP funding is one important method for preventing the desperate heights of protest and promoting wellness and opportunity for our most disadvantaged citizens. It appears most other Americans agree: approval ratings for SNAP are consistently well-above 50% (12) – therefore, politicians would do well to find a different program to cut.

1)    Boushey H, Hersh A. The American Middle Class, Income Inequality, and the Strength of Our Economy: New Evidence in Economics. Center for American Progress, May 2012. http://www.americanprogress.org/issues/economy/report/2012/05/17/11628/the-american-middle-class-income-inequality-and-the-strength-of-our-economy/

2)    Kumhof M, Ranciere R. Inequality, leverage and crises. IMF Working Paper, November 2010.

3)    Bertrand M, Morse A. Trickle-down consumption. Working Paper, February 2012.

4)    Braveman P, Cubbin C, Egerter S,  Williams D, Pamuk E. Socioeconomic Disparities in Health in the United States: What the Patterns Tell Us. American Journal of Public Health (2010) 100:S186-S196.

5)    Schmeiser MD. Expanding Waistlines and Wallets: The Impact of Family Income on the BMI of Women and Men Eligible for the Earned Income Tax Credit. Health Economics (2009). 18:1277–94.

6)    Zheng H. Do people die from income inequality of a decade ago? Social Science & Medicine (2012). 75:36-45.

7)    Zheng H, George L. Rising U.S. income inequality and the changing gradient of socioeconomic status on physical functioning and activity limitations, 1984–2007. Social Science & Medicine (2012). Available online 24 August 2012, ISSN 0277-9536, 10.1016/j.socscimed.2012.08.014.

8)    Cifuentes M et al. The association of major depressive episodes with income inequality and the human development index. Social Science & Medicine (2008) 67:529-539.

9)    Oishi S. Income Inequality and Happiness. Psychological Science (2011) 22:1095-1100.

10) Statement: Robert Greenstein, President, on Census’ 2010 Poverty, Income, and Health Insurance Data. Center on Budget and Policy Priorities, September 2011.

11) Hanson K, Golan E. Effects of Changes in Food Stamp Expenditures Across the U.S. Economy. Washington, DC: U.S. Department of Agriculture, Economic Research Service (2002). Available at www.ers.usda.gov/ publications/fanrr26/fanrr26-6/fanrr26-6.pdf.

12) Nischan N. “The Economic Case for Food Stamps,” The Atlantic. July 18 2012.

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6 thoughts on “All the treasure in the world…

  1. brooksy says:

    Ali,
    I love your unique perspective on how SNAP affects the distribution of wealth. You found some really awesome statistics and resources to support both economic and social reasons to continue funding SNAP. I agree that it’s a very important program in helping diminish the economic disparity that exists for more than just monetary reasons. I would be really interest to hear your thoughts on the rest of the farm bill proposed allotments. How do you feel about subsidizing certain crops? How do you feel about the entanglement of a lot of different programs into the bill (i.e. Bioenergy and international food supplement programs as well as environmental conservation all in the same bill as farm subsidies and SNAP?)

    Do you feel that the money allotted to farmers is justified? I think it’s important to support agriculture, but the structure of this bill does nothing to benefit small farmers. It’s hard to put SNAP under the same bill as a program so different from it and try to argue that one is more justified. Nonetheless, I would love to hear your thoughts on the topic .

    • afrazzini says:

      I never responded to this!

      Regarding subsidies: I used to think that policy was 100% stupid, until I heard the explanation (from RAFI, which I believe to be a reputable organization) that a lot of the subsidies evolved in response to a cartel of food processors, who would drive prices down and leave farmers indigent/in debt. A better response would have been to weaken the cartel – that was the goal of the USDA’s anti-trust initiative in 2010 – but that has probably been difficult to achieve for political reasons. So if that’s truly the case, the alternative to subsidies – suffering farmers and probably, in the long-term, an endangered food system – then it’s hard to say they should be abolished.

      Regarding the entanglement of programs – it seems like a pretty obvious case of “you scratch my back, I’ll scratch yours” among politicians. They logroll things into the Farm Bill that might not have gotten passed otherwise. While separation of all the funding streams would probably result in the unfortunate loss of some programs, I think it might be worth it for the increase in transparency. Though I do wonder how legislators have enough time in the day to even think about each issue they are presented with, much less fight for each one separately. Wouldn’t it be cool if we could vote for legislators topically? Like “I want this lady to represent my health interests and this guy to represent my financial interests?” That way we could be sure they were really examining the issues important to us. We’d probably end up with inflation of government officials though :-/

  2. lschoenfeld says:

    I definitely agree that there should be some level of food assistance available for Americans below a certain income level. However, I wonder what your thoughts are on the argument that big businesses are profiting from food stamps? Check out this HuffPost article: http://www.huffingtonpost.com/2012/09/12/companies-benefit-from-food-stamps_n_1878457.html#slide=more250232
    I don’t think its a coincidence that companies like Kraft and Coca-Cola are lobbying against SNAP cuts – they make a lot of profit off government-sponsored food assistance. I’m sure they’d be even more opposed to Bloomberg-style restrictions on what food stamps can purchase. It makes me wonder how much lobbying goes on to prevent any changes from being made to the SNAP program, whether they’d be useful or not.
    Admittedly, regulating what can be bought using food stamps is a slippery slope. However, it’s unfortunate that a lot of our tax money is being used to purchase unhealthy foods by low income families. It seems a bit silly that we spend tax money to provide junky food to poor people, and then spend more tax money on health care and intervention programs to address the health damage caused by the junky food they’re eating. Seems like it would be easier to simply regulate the type of food that can be purchased using SNAP (kind of like WIC but perhaps a bit more lenient?) to prevent the health problems in the first place. Though some experts argue that this wouldn’t actually have any effect on health in the long run. (http://abcnews.go.com/Business/food-stamps-making-food-companies-fat/story?id=17166643#.ULGSi2ipVzQ)
    Truthfully I have no idea what the right answer is. It’s terrible that so many low income people are living off junk food but I also recognize that it’s their choice to do so. It ends up pushing me towards a more libertarian viewpoint where the government doesn’t regulate people’s behavior so strongly but also isn’t providing as wide of a safety net when it comes to healthcare. Though at this point, I wonder if that’s even an option?

    • afrazzini says:

      I forgot to respond to this before I did another post! But thanks for your comments. I’m inclined to think that the target population’s diet wouldn’t change much if SNAP benefits were restricted. We know that most schools have seen a decline in lunch sales since the new lunch regulations were passed; I think a more successful transition to healthier lunches might have occurred if legislators had started with an incentive program (such as, we will increase lunch reimbursement AND provide additional funds for some other school need if your school improves the nutritional quality of its lunches). Similarly, I think the Health Bucks idea – more funds for healthy foods – is a more constructive approach than SNAP restriction.

      In response to your suggestion that the government provide less of a safety net…haven’t we established that emergency visits are the most expensive, and that’s why prevention is so important? It’s not like people are suddenly going to be able to live healthy lifestyles just because the government refuses to pay for their treatment. And if you’re not planning on treating emergency patients…the idea makes me picture a diabetic with a gangrenous leg being rejected from the hospital. Not okay in my book.

      • lschoenfeld says:

        “It’s not like people are suddenly going to be able to live healthy lifestyles just because the government refuses to pay for their treatment.” – I agree with that, hence why I said I wasn’t sure if that was even an option at this point. Theoretically, I wonder what role personal responsibility plays in an economic and healthcare climate like the one we’re in now? I think we’re between a rock and a hard place – we can’t take away healthcare benefits from sick people but we also have to figure out a way to incentivize preventative health behavior. As we saw in D.C., people would rather take a pill than change their lifestyle!

        • afrazzini says:

          Ah, I see, thanks for clarifying 🙂 And to be honest, if I could take a pill and never have to worry about my health, I’d want that too! Of course, I know that’s not possible, but I can understand why some people – who may be in far more difficult situations than myself – want to believe all the “quick fixes” touted in the news and other media. Making behavior change is a challenge for anyone; for low-income folks and marginalized populations, the challenge may be compounded by multiple other life stressors. That’s why I’m so interested in behavioral economics-type ideas, which aim to make behavior change easier. These types of ideas have potential to benefit everybody, but might provide an even greater benefit for marginalized populations, helping to reduce health disparities.

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