Rethinking the Welfare State: The prospects for ... - e-Library

Food stamps 53
Specifically, the program’s requirement that the food stamps need to be redeemed at the
time of purchase in the grocery store is the source of this stigma.
More significantly, a 1979 study showed that information problems were the largest
barrier to participation rates. Forty percent of non-participants, who were otherwise
eligible for the FSP, thought that they were not eligible. 61 To combat this problem, the
government has tried to eliminate misconceptions—such as, for example, the idea that
working individuals or individuals without dependants are ineligible—which act as
impediments to the effectiveness of the FSP Early in the FSP’s existence, outreach
programs were implemented to counteract the lack of information. Congress had required
states to encourage participation and actively seek out non-participants. As an incentive,
Congress provided matching funds to support such services. 62 This mandatory program
came to an end in 1981 as part of the Reagan administration’s public welfare cost cutting,
and today the implementation of outreach programs is at the discretion of the states. If the
states do offer such services then they can apply for federal supplements. At present,
outreach programs exist in only half of the states. 63 Thus, as Eisinger argues, a lack of
information combined with application procedures are major impediments to achieving
higher participation rates. 64 These barriers become even more formidable because many
of the participants are non-English speakers, disabled, elderly, or illiterate. The
government is often criticized for not pursuing the goal of alleviating food inadequacy
more aggressively. Although this has the effect of reducing program costs, the lack of
information provided by the government undermines the FSP’s goal of targeting all those
in need.
Qualified suppliers
In the design of a food stamp scheme, it would seem that only limited emphasis should be
placed on where the stamps can be redeemed. The stamps are coupons after all and thus
any retail grocer ought to be able to accept the vouchers in lieu of payment and then be
reimbursed by the government. Competition among retail outlets should ensure that
collusion will not occur 65 and limited regulation should benefit consumers by increasing
the number of destinations where stamps can be cashed in for food. Also, there is
typically no scope for supplier price discrimination between subsidized and nonsubsidized
consumers.
The United States has, however, taken a different course. Retail outlets must gain
authorization from the USDA before they are legally entitled to redeem stamps. Two
underlying rationales exist for instituting such a policy. First, supplier authorization
enables the government to ensure that only certain basic food products are accessible to
voucher recipients. For example, restaurants are not eligible for authorization nor are
retail stores whose stocks predominantly consist of ready-to-eat prepared foods. 66
Second, the authorization process provides a means of limiting food stamp trafficking.
Trafficking typically occurs in two forms. 67 In one, the recipient sells the stamps directly
to the retail outlet for cash (usually 50 to 70 cents per dollar face value). The retail outlet
redeems the stamps for full value without having sold the corresponding food. In the
other, stamps are sold to a “middle-man” at less than face value. Once the middle-man
has the stamps, he can either redeem the stamps for food or conduct a similar transaction
with the retail outlet. The willingness-to-trade is essentially based on the preferences of