Politics. Economics. Morality. Religion. And Everything In Between.

Thursday, June 9, 2011

Unconventional Wisdom 2: Why Food Stamps Pay for Air Jordans

This summer, I am working at a summer school program for poor kids in public housing projects. It's a nice thing to do, and Americorps is giving me a decent amount of money for doing it. While watching the parents drop their children off, I noticed something interesting about both the parents and the kids.

I have heard advocates for the poor talk at length about how people in poverty suffer truly crushing amounts of hardship and deprivation, so when I started working with "the poor" on a daily basis, I expected to see them walk in looking like homeless people. Instead, the parents and kids I saw looked well-groomed and well-dressed. A few more of them were overweight than would be in a more affluent population, and there was only one white kid in the entire group, but other than that, I would have a hard time identifying them as "poor" based on appearance alone. In fact, I thought they looked a good deal more normal than the white suburban "emo" types who come from much wealthier families.

I wondered why this was the case. Lots of people I know complain about how poor people "spend all their money on cell phones, TVs, and basketball shoes because they're just plain stupid," or something like that, but I wondered if there was more to it. Interestingly, there is. Here's the deal: government welfare programs like Medicaid, food stamps, and public housing are designed to help people with low incomes afford the necessities of life. The thing is that the poor, while they have low incomes, don't often have no income, so they do have some cash on hand. When given benefits with strings attached, they use the benefits to obtain the "necessities" and spend the cash on things the benefits don't cover.

In most cases, poor people can only use their government benefits on the lowest-end and least expensive version of whatever necessity the benefits are designed to help them purchase. Food stamps don't buy organic, free-range chicken breast, and local housing administrations won't subsidize the rent on a penthouse apartment. To most people, this makes sense. If state, federal and local governments paid for anything but the bare minimum necessary to survive, they would be wasting taxpayers' money on frivolities.

The problem with this idea, though, is that it locks people into buying patterns that keep them in poverty and prevent them from investing in themselves. To get an idea of what I mean, look at the WIC-approved foods guide, the third entry on this page. It's full of American cheese, sugary cereals, peanut butter, and "juice" that has the nutritional profile of soda pop. Starting kids off on this diet sets them on the road towards type-2 diabetes. Similarly, since public and subsidized housing is designed to provide the minimum humane amount of living space and amenities at the lowest possible cost to the taxpayer, most of it is areas with low property values and therefore bad schools and shady neighbors.

Why don't poor people spend more money on healthy food and housing in better school districts? Simply put, the way their benefits are structured often precludes them from doing so. Food stamps, if not spent on the specific foods they pay for, simply go to waste. If a renter's choice is between public housing and unsubsidized housing, he will choose public housing every time. Similarly, even if someone eligible for Medicaid could buy some form of health insurance with his own money, he will usually take the benefits available to him and spend the money on something else. The result? Since the poor have the option to let the government take care of most of their needs at low cost, a greater fraction of what income they do earn is available for discretionary spending. Their cash either goes to buy clothes, cell phones, and TVs, or it sits in the bank, unused.

Some newer programs like Section 8 housing vouchers allow people to use government money to pay some of their rent at a place of their own choosing, which is a notable improvement over public housing, but there are still restrictions on which kinds of landlords can accept housing vouchers or rent subsidies that limit people's housing choices. I personally favor replacing all conditional benefits with straight cash payments to give the people receiving them the opportunity to allocate every single dollar in the way that's best for them. Sure, they could take that money and use it to buy drugs, but $50 of food stamps means that some hypothetical druggie can spend $50 less on food and $50 more on drugs. The government cannot protect people from themselves no matter how hard it tries, so it should instead focus on giving people the opportunity to succeed on their own terms.

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