Would Outlawing Food Stamps for Soda Pop Reduce Obesity?

That’s what scholars at Stanford University and University of California, San Francisco, concluded in an article in Health Affairs. The authors compare two policies: Banning the use of food stamps for the purchase of soda pop, or giving an extra subsidy of thirty cents on the dollar for the purchase of fruits and vegetables. They conclude that the ban on soda pop would have a greater impact on obesity:

Open Aluminum CanA ban on sugar-sweetened beverage purchases would be expected to reduce kilocalorie intake from these beverages by a net average of 24.2 kcal per person per day among SNAP participants (95% CI: 22.8, 25.5) — a 15.4 percent decline in calorie consumption from sugar-sweetened beverages, according to our model.

Given this decline in net kilocalorie intake, overall obesity rates declined over the simulated period.

When accounting for baseline type 2 diabetes rate differences among cohorts, our model estimated that the largest type 2 diabetes incidence decline would be expected among adults ages 18–65…

Here is where the ivory tower falls: The authors assume that food stamps are used only to buy food, and that if the government changes the relative prices of food available, consumption will change. However, in the real world, some share of food stamps are not used to buy food. Instead, they are converted into other currency, at very high exchange rates.

Back in the 1980s, when food stamps really were stamps, a friend of mine took a chartered bus from New York to Atlantic City. All the passengers were going to the casinos, and a significant proportion of them were low-income people with cash. During the bus ride, my friend learned from them that the cash had been earned by trading away their food stamps. Bundlers bought them at a discount and traded them through a few more layers of middle-men to grocery stores, which redeemed them at par.

Today, food stamps are actually debit cards, which cannot be so easily traded. So, recipients need to convert them to an unusual currency: They buy cases of soda. As reported by Kevin Williamson, stores in the Appalachian region are cleaned out of soda pop when recipients get their cards loaded up. Individuals buy thirty cases at a time.

Williamson’s report suggests that the cases of soda are traded for addictive drugs. Whatever the end consumption good is, it is probably not causing obesity. So, the econometric models used by the authors of the Health Affairs paper cannot account for a significant difference between the purchase of soda by food stamp recipients and their consumption of it. Such a difference would not exist in a normal food market.

I don’t know whether banning the purchase of soda pop with food stamps would reduce obesity, but I know that it would significantly increase the friction costs of recipients converting their benefit into fungible currency, which they can spend on goods and services they prefer. Whether that is a good or bad outcome, I leave to readers’ moral calculus.

 

 

 

Comments (19)

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  1. R. Davis says:

    Good! A ban on soda means that it would save taxpayer money as opposed to giving subsidies to buy fruits and vegetables that would likely come from taxpayers! Thanks for posting!

    • Kristen I. says:

      why don’t you just google “food stamp magic”

      that’s the problem b/c people don’t use their food stamps to their benefit, or at least extrapolate on it and harness the power that SNAP has built into it. Rich people use tax loop holes legally, why shouldn’t people who use foodstamps use the loopholes built into the system? your snap caseworker fails to tell you these methods.

  2. mitch says:

    im okay with the ban, no obesity or no drugs? win. win.
    right?

  3. Thomas says:

    “Would Outlawing Food Stamps for Soda Pop Reduce Obesity?”

    Why are sodas eligible to be bought with food stamps? That is complete nonsense!

  4. Linda Gorman says:

    The notion that soda causes obesity is silly and there is little evidence to support it. Might as well ban food stamps for carbohydrates.

    The cost of differentiating between foods would be high. Defining soda pop will lead to complexity that will make your eyes cross. Why bother?

    Why didn’t the look at raising the cost of calories in general by outlawing food stamps?

    • John R. Graham says:

      I agree. Once they decide that soda pop is no longer eligible, they will be tempted to go beyond the simple, binary decision.

      Different foods will have different costs within the program. So, the price on the shelf will not be what’s paid. Instead, a surtax or discount will be attached, relative to the perceived value of the food.

      Another great government-sponsored opportunity for IT vendors!

  5. Devon Herrick says:

    In economics and finance classes, invariably the professor conveys the story of the Island of Yap. The Pacific Island is famous for its huge coins made of stone, that are cited as an oddly-sophisticated form of fiat money (sophisticated because they cannot be transported and stored in banks). The coins are far too large to transport, but transferring ownership is more efficient that bartering with commodities. In the case of Appalachia, cases of soda are not only bartered commodities, but also serve as a form of hard currency. I wonder how the various flavors, prices and so on effect the value of the currency?

  6. James M. says:

    If a ban on sodas takes away an alternative to use food stamps to trade for money or drugs, then hopefully it will be spent on food. Food stamps should only be eligible for fresh and natural foods, not processed garbage.

    • Walter Q. says:

      Food stamps can be used to purchase many kinds of food that are unnatural. Food stamps cannot be used at pizza chains like Pizza Hut, but they can be used at the chain Papa Murphy’s. The reason: Papa Murphy’s pizza is sold before it is cooked. Cooked pizza is not food stamp eligible, but uncooked pizza is eligible.

      • Jay says:

        If sodas are banned, maybe Papa Murphy pizzas will be the next currency for drugs.

      • John R. Graham says:

        That makes me think of another unintended consequence. If food is sold “raw” that must be cooked before eaten, he recipient needs a kitchen.

        If he doesn’t have a kitchen, he will be more likely to buy convenience food that does not have to be cooked.

        Perhaps if they were allowed to use SNAP cards to buy cooked food, including pizza, they would eat healthier?

  7. Steve says:

    To me, the bigger picture here is the moral hazard created by taxpayer-funded handouts. Incentives change behavior, and giving people food stamps creates incentives for the soda-for gambling/drugs/other unproductive activities described in the article. Personally, I care much more about creating an economy that encourages work and decreases dependency on handouts.

    People are responsible for their own dietary habits, and their consequences.

  8. Chris says:

    Taxpayers are getting screwed in both ends here because we’re subsidizing the growing of the sugar that goes into the pop in the first place. Then we’re subsidizing the purchasing of it. Honestly, the eligibility requirements for food stamps should be cut in half. So many people on them do not need them.

  9. Daniel says:

    What do these middlemen do with this soda? So guy on foodstamps buys cases of soda, cash in exchange, uses it to buy drugs. But where does the soda go? What is this market for cases of soda?

    • John R. Graham says:

      They likely get banked in the root cellar.

      • Devon Herrick says:

        I can just imagine it…

        “Bill, do you think we’re saving enough for our retirement?”

        “Sure Betty. Just go count the cases of Coke in the root cellar!”

        • John R. Graham says:

          Actually, I doubt there is much long-term saving via cans of soda pop. A change in the way SNAP benefits are distributed could change the currency value of the item too much.

          I appreciate your comparison to the Yap islanders. It think that is more likely what is going on.

  10. rick says:

    i disagree your going to tell me a disabled iraqi combat vet who has done so much and given so much for this country i can even buy a soda and then look me in the eye and say thank you sometimes i wonder what i was fighting for last i checked i lost a leg for freedom but im ashamed to say im american anymore cuz we arnt free people cuz people like you keep trying to control everything so next war instead of you can do this or that pick up a rifle

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