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

Food stamps 55
seems to discriminate against households with multiple members—there is a rational
basis for this apparent “discrimination.” That is, the average food cost per person
decreases as the number of members in a household increases because of economies of
scale in the purchasing and preparation of food. The focus on the household thus enables
the government to adjust for the decreasing marginal cost of feeding additional household
members. A significant drawback of this household unit analysis, however, is its inability
to adjust to specific demographics within the household. All things being equal, a
household with two teenage boys will receive the same amount of food stamps as a
family with two infants.
Political considerations
Notwithstanding its critics, the FSP design has survived numerous presidential
administrations, both Democratic and Republican. Nevertheless, two reform proposals,
“cost-shifting” and “cashing-out,” have been at the centre of debates throughout the
1990s.
Fundamental to a thorough appreciation of the cost-shifting debate is an understanding
of the current financing of the FSP. The FSP is a federal program such that 100 percent of
benefits are paid for by the federal government out of general tax revenues. However, the
program is administered locally by the states, each of which pay approximately 50
percent of local administrative costs. Given that the program has been mandatory since
1973, there have been efforts to shift the responsibility (and a higher burden of costs) on
to the states. As such, the federal government would only be responsible for providing set
block grants to the states—which by nature do not adjust to economic fluctuations—
instead of having to pay the face value of the vouchers.
Not only have social advocacy groups resisted the cost-shifting proposal, but so has
the powerful agriculture lobby (both the farming and retail sectors). This latter group
stands to lose out in any cost-shifting arrangement for if the states assume greater control
of the program, it is likely that they will redesign the program to cut costs. The fear of
these interest groups is that the future aggregate expenditure by the states will be less
than the current national expenditure on the FSP. This fear may be well grounded; as
mentioned earlier, a USDA report in 1995 indicated that a reduction in funding of the
FSP by one billion dollars would eliminate 25,000 jobs. It is in part because of the
strength of this interest group that the FSP remains one of the last welfare programs
wholly financed by the federal government.
The second debated option, “cashing-out,” would also involve the provision of block
grants by the federal government to the states. Under this scheme, however, the states
would not be obliged to continue the FSP. Instead, the state could “cash-out” the program
by replacing the stamps with general income assistance. The arguments favouring this
option are, of course, lower administrative costs and reduction in stigma.
The political concern with the “cashing-out” option is that it would severely hurt the
interests of those in need. Cashing-out the program leaves the states just one step away
from amalgamating the food stamp benefits with other state-financed programs such as
TANF. In creating one welfare payment, critics argue that the state will be inclined to cut
the total benefits allotted. The aggregate benefits to a low-income earner under a lumpsum
regime would thus place individuals in more vulnerable positions than they are in