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:

A 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 middlemen, 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.