Effects of the U.S. Food Stamp and National School Lunch Programs, Fiscal Year 1974

Abstract

The depressed thirties brought forth side by side the paradox of food surpluses and obvious need. Federally sponsored food programs simultaneously were aimed at raising farm income and improving diets (Gold, Hoffman, and Waugh, p. 1; Southworth and Klayman, p. 1). These pre-World War II objectives are embodied in current legislation, although emphasis has shifted from farm income support toward improved diets. From their beginning, economists have recognized that an injection of funds by means of food assistance programs yields a different pattern of resource allocation than an equal injection by other means. For example, an injection to provide food assistance results in a different allocation of resources than an equal injection to support national defense. In 1961 federal assistance to the food stamp, food distribution, and school lunch programs amounted to $466.5 million.' For 1975 the preliminary estimate is $6,139.1 million (USDA 1976). The 1975 figure is a 13.2 multiple of the 1961 statistic. Programs of such magnitude deserve quantitative as well as philosophic analysis. The focus of this paper is on the quantitative. Its purpose is to measure the economic effects of these programs in terms of net changes in business receipts, household income, jobs, and gross national product (GNP). The analysis is based upon the assumption that the funding for food bonus stamps and the cash contribution to the schools is paid for by a tax increase.2 The taxpayers' disposable income and, hence, expenditures were reduced prior to making the income transfers to the recipients. The results of the analysis of food stamps, assuming a transfer from taxpayers to food stamp households in the form of bonus stamps, are reported in net terms because both the output increases associated with the income transfer to the participant household s ctor and the decreases in output linked to the increased personal income taxation of the nonparticipant household sector have been taken into account. The results of the analysis of school lunches, when the transfer is assumed to be in the form of a cash contribution, are also in net terms; however, the increases in output are linked to the federal cash transfer to the schools and not to the participant household sector. Business receipt changes are reported on a sector-by-sector basis. As anticipated, some sectors were better off with than without the programs. Conversely, others would have The reactors for this session were Loren Geistfeld of Purdue University, Stephen J. Hiemstra of the Food and Nutrition Service, U.S. Department of Agriculture, and Wendell Primas of Georgetown University. Paul E. Nelson, Jr., is an agricultural economist with the Economic Research Service, U.S. Department of Agric lture, and John Perrin was with the Division of Coordination Planning, Office of the Governor, Austin, Texas. The following colleagues made constructive suggestions at various stages of manuscript development: Tom Carlin, Clark Edwards, Gar Forsht, Alden C. Manchester, Masao Matsumoto, Bob Reese, Gerald Schluter, and Abner Womack. Herbert Grubb of the Water Development Board, Texas, and A. C. Hoffman in Bull Shoals, Alabama, were also very helpful. These figures exclude special supplements to women, infants, and children (WIC), institutional distribution, and school milk activities. 2 Alternative assumptions that could have been adopted include (a) all federal contributions were funded by deficit financing or (b) the 1967 data already included the needed funds.