Wednesday, January 12, 2011

Food Stamps at Restaurants?

San Diego just joined the LA area in allowing some recipients of food stamps to use their funds at restaurants.

The eligible recipients are the homeless, elderly, and disabled who may lack adequate kitchen facilities or the ability to prepare foods. Not surprisingly the list of restaurants taking food stamps includes famous fast food places like Pizza Hut, Subway, and KFC. The good news is it also includes El Pollo Loco, which I thought was pretty tasty the one time I was in LA.

However, it is unclear if the new program is a good use of resources. From the San Diego article one supporter of the proposal says

"This would be no different than going to the supermarket, which has healthy and not so healthy choices," he said. "I hope people understand that and hope they make healthy choices.

I tend to agree with this statement, my guess is that the nutrition from purchases at supermarket probably isn't that different from the restaurants. In welfare programs like food stamps we limit recipients choices (for example they can't buy alcohol with the funds).

Intermediate micro theory assumes a rational person and shows in short with cash recipients could purchase the same food or something they like better, so cash is the better option. It may be worth realizing though we aren't maximizing the happiness of the recipient, but a combination of the recipient and the tax payer who might have different preferences.

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Bob Gitter said...

An interesting article. Let me add a few thoughts.

First, Food Stamps don't increase food consumption dollar for dollar. The evidence seems to indicate a dollar of Food Stamps increases food expenditures by 20 cents. Essentially, there is an income effect and most of the additional money goes for other goods.

Second, in a transfer program the donors wishes come into play. In part Food Stamps were meant to help farmers. It sounds silly till you remember the program is admistered by the Agricultural Departement. (Food Stamps are actually now called SNAP Supplemental Nutrition Assistance Program ) So you might have Archer Daniels battling McDonalds if there is a proposed change to the law.

Finally, people do (illegally) sell Food Stamps. As I recall growing up in Detroit the price was 50 cents if you sold a merchant a dollars worth of Food Stamps. With more uses, the demand would go up.

I think I will go home and cook dinner now.

Dad/Bob Gitter

Tor Hershman said...

Heinz Field:
The House That Food Stamps Built