The Independent Investor: Food Stamps & the Farm Bill

The decision by Congress to pass a version of the new farm bill that excludes the food stamp program caused a fair amount of concern throughout America last week. Unless a compromise is reached with the Senate by September, it will mean that a lot of people, especially children, are going to go hungry in the months ahead.

Food stamps, officially called the Supplemental Nutrition Assistance Program (SNAP), have been around in some form or another since the Great Depression. Its basic purpose is to help distribute food to the needy amid calamitous times such as widespread unemployment and economic dislocation. It became part of the farm bill back in the 1970s through political expediency. Every five years since then, the legislation has been renewed, usually with some new tidbits of pork for both sides. Both Democrats and Republicans grew to like this deal because urban liberals could advance their ambitions to provide nutritional help to the poor and needy while rural lawmakers could guarantee continued price supports for their farming constituencies.

Over the following decades this bi-partisan back-scratching resulted in a farm bill loaded with abuses, Soviet-style central planning and governmental outlays that expanded exponentially went hand-in-hand with hand-outs for all regardless of real need. Over the past 10 years, as an example, the farm bill has cost taxpayers close to a trillion dollars.

Today almost 80 percent of those outlays are spent on SNAP and other food stamp-type programs, which cost taxpayers $78.4 billion in 2012, compared to $20.6 billion in 2002. Last year, 46 million Americans received an average of just over $130 in benefits, which amounts to about 73 percent of their monthly grocery bill.

Households must earn less than 130 percent of federal poverty guidelines and have assets of less than $2,000. For a family of four, this would mean an annual income of less than $32,000. The number of Americans that took advantage of the SNAP program last year increased by nearly 3 percent and given the economy and unemployment, that number is predicted to increase again this year.

In addition to food stamps, the Emergency Food Assistance Program, as well as other nutrition programs aimed at children, seniors and Native Americans, were also discarded as part of this latest congressional farm bill overhaul. What, you might ask, could possibly justify this wholesale gutting of one of this country's most important social safety net?

Democrats blame the Republican Party, led by the austerity-at-any-cost tea party faction, for the fiasco. On the surface that may be true, but I have to give the GOP a point or two for at least trying to overhaul this unwieldy and unworkable bill. Separating the two issues was a good way to start.

House Speaker John Boehner (R-Oh) said that although they dropped food stamps from the farm bill, the Republican Congress would address that issue in the future. I believe that many moderate Republicans see the worth in food stamps but that does not mean that they won't try to rein in the amount the government is spending on the program.

Critics argue that these food stamp programs have become too easy to access under the Obama administration and are costing the country far too much. The Wall Street Journal in its editorial, "A Healthy Farm Rebellion," applauded the GOP's actions and labeled food stamps "the symbol of the runaway welfare state with 47 million Americans receiving taxpayer funded meals as of this March."

There are also growing complaints that the quality of the foods and drinks that recipients are buying with their food stamps ($5 billion alone was spent on soda) cannot be termed "nutritional" by today's standards. The cheap processed food choices, critics insist, are simply adding to the obesity problem and do little to provide a well-rounded supplemental diet for America's poor and low-income families.

Some of those arguments do ring true to me. I also agree that the farm bill has become an unholy alliance of bipartisan pork barreling. It needs to be re-invented but I do take issue with how the Republicans have tackled the problem. You don't throw the baby out with the bath water. This is literally true since 72 percent of SNAP participants are in families with children and fully one-quarter are in households with seniors or people with disabilities.

The time to reduce these kinds of benefits is when they are no longer needed. In the meantime, with 12 million Americans out of work, food stamps are doing the job that they were intended to do. In my next column, I will be looking at the other side of the equation, the GOP "farm only" version of the bill. Stay tuned.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.