1. Subsidized Food Programs Chapter 13

2. Introduction Government operated food assistance or domestic food programs provide food at no cost or below market prices to targeted groups of consumers These programs originated in the 1930’s and has increased dramatically since 1970. The food stamp and school lunch are the best known programs. However, there are a number of other subsidized food programs. There are many problems that have plagued the implementation of these programs.

3. Brief History The original purpose of subsidized food programs was to facilitate the operation of price-support programs for farm products. A price support is a government action to increase the price of a product. Surplus commodities are used in conjunction with price supports and subsidized food programs to feed the unemployed and their families. By doing this the surplus commodities are used while keeping prices stable if not raising them in most cases.

4. Brief History Legislation Providing for Commodity-Distribution Programs Operation of the FSCC (Federal Surplus Commodities Corporation) was freed by an amendment to the AAA (Agriculture Adjustment Act) of 1933. This is known as section 32. This amendment along with the 1946 National School Lunch Act and the 1949 Agriculture Act provide the basis for commodity-distribution programs today. Under these programs meats, fruits, vegetables, dairy products, and other various price supported products have been purchased and donated to schools and other nonprofit agencies. Cash subsidies for food assistance have increased greatly since the mid 1960’s. Food stamps is the largest of the cash subsidy programs. When all the programs are added up there are many that overlap each other in assistance.

5. Food Stamps

6. What is the largest food assistance program in the United States? Answer: The food stamp program. The food stamp program accounts for two-thirds of all food assistance spending. In 2002 as many as 19 million people received food stamps at a cost of $20.5 billion dollars. That is roughly $56.1 million dollars per day. What determines an individuals food stamp allotment? Answer: Food Cost, Income, and Family Size………

7. School Lunch Program

8. The school lunch program also began with surplus disposal activities of the FSCC. In 2002, child nutrition programs spent $10 billion dollars. This is up from the $100 million dollars in 1947. Basically, the school lunch program provides students with free to greatly reduced prices on breakfast, lunch, and other child nutrition programs. In 2002, the per meal subsidy was $.36 for “paid” lunches, $2.46 for free lunches, and $2.05 for reduced price lunches.

9. School Lunch Program Problems & Issues First, there are producer pressures to use the program as a means of surplus disposal. Second, there are problems related to USDA dietary guidelines and minimum nutrient requirements for school lunches. Third, the federal subsidy in school lunch programs is an important public-policy issue that has received little public attention.

10. School Lunch Program Class Discussion Why should the public at large, including low-income taxpayers, be taxed to provide school lunches at subsidized prices for those who can afford to pay?

11. Other Food Assistance Programs The 1964 permanent food stamp legislation led to a tremendous expansion of subsidized food programs. No precise estimate of the number of people participating can be made. In addition to the school breakfast and lunch programs, there is the summer food service, special milk program, and nutrition program for homeless children. The food program for the elderly has no income eligibility limits.

12. Food Stamp Reform Reform of the food stamp program became a political issue during the Reagan administration of the early 1980s. Food stamp abuse has a long history. The USDA has now implemented “electronic benefit transfer” (EBT). No money and no food coupons change hands when the consumer makes a purchase in this way. It is doubtful that EBT will have a large impact of fraud because of the abuse that occurs when applying for food stamps.

13. Cashing Out Food Stamps Class Discussion What would the effects be if we were to cash out food stamps? Cash is easier to transfer than food stamps, however, a cash transfer system would decrease consumption of food when compared with direct food aid through food stamps.

14. Other Policy Considerations Because taxpayers bear the cost of subsidized food programs, their wishes must be taken into account in determining the preferred type of assistance. “Food Stamps vs. Cashing Out” proposes many problems. Without these programs, the USDA would be reduced to approximately one-third of its current size.

15. Nutrition & Health Policies Prior to 1970, the main message of the nutrition programs was to eat a variety of food from the basic food groups. This was changed after there was a set of dietary goals placed in the mid-1970’s. Many farmers were upset because this caused a decrease in demand for agriculture products such as red meat, eggs, cheese, and sugar. Their criticism did not stop the momentum for change in nutrition policy.

16. Nutrition & Health Policies Continued By the 1980’s the dietary goals and guidelines became the basis for the food pyramid.

17. Nutrition & Health Policies Continued Nutritional planning is subject to all the problems inherent in central planning. Even if individual consumers wish to follow healthy dietary practices, they face obstacles in obtaining the information necessary to do so. Since 1994, legislation regarding nutrition labeling requires food manufacturers to list nutritional data on the product label.

18. Implementation Problems There is an incentive to over provide subsidized food services for the same reasons described in the collective decision-making process. Sometimes the incentives to “not work” are more favorable than the incentives “to work”. Ex. Food stamps are available to those who have quit their jobs thus food stamps are likely to increase unemployment. There is also a severe information problem in discovering whether underreporting such as lying about family income, has occurred.

19. Agricultural Price Supports & Food Assistance A fundamental inconsistency exist between government programs that raise product prices and food assistance programs. It is ironic that billions of dollars are being spent on government programs to raise prices of milk and other commodities, while at the same time billions of dollars are also being spent on programs to lower the price of food to low-income consumers.