Food stamp program profile

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Title:
Food stamp program profile
Physical Description:
2 v. : ill. ; 24 cm.
Language:
English
Creator:
United States -- Congress. -- Senate. -- Select Committee on Nutrition and Human Needs
Publisher:
U.S. Govt. Print. Off.
Place of Publication:
Washington
Publication Date:

Subjects

Subjects / Keywords:
Food stamps -- United States   ( lcsh )
Welfare recipients -- United States   ( lcsh )
Genre:
federal government publication   ( marcgt )
non-fiction   ( marcgt )

Notes

General Note:
At head of title: 94th Congress, 2d session. Committee print.
Statement of Responsibility:
prepared by the staff of the Select Committee on Nutrition and Human Needs, United States Senate.

Record Information

Source Institution:
University of Florida
Rights Management:
All applicable rights reserved by the source institution and holding location.
Resource Identifier:
aleph - 029298646
oclc - 02633441
lccn - 76602763
Classification:
lcc - HV696.F6 U6144 1976a
ddc - 362.5
System ID:
AA00024966:00001

Full Text



94th Congress COMMITTEE PRINT
2d Sssio COMMITTEE PRINT
2d Session





FOOD STAMP PROGRAM PROFILE PART 1




PREPARED BY THE STAFF OF THE
SELECT COMMITTEE ON NUTRITION

AND HUMAN NEEDS

UNITED STATES Senate,,,,,
",,: >....".


'JAN
1978AUGUST 1976





Printed for the use of the Select Committee on Nutrition and Human Needs U.S. GOVERNMENT PRINTING OFFICE 74-887 WASHINGTON : 1976































SELECT COMMITTEE ON NUTRITION AND HUMAN NEEDS

GEORGE McGOVERN, South Dakota, Chairman
HERMAN E. TALMADGE, Georgia CHARLES H. PERCY, Illinois
PHILIP A. HART, Michigan ROBERT DOLE, Kansas
WALTER F. MONDALE, Minnesota HENRY BELLMON, Oklahoma
EDWARD M. KENNEDY, Massachusetts RICHARD S. SCHWEIKER, Pennsylvania GAYLORD NELSON, Wisconsin ROBERT TAFT, JR., Ohio
ALAN CRANSTON, California MARK O. HATFIELD, Oregon
HUBERT H. HUMPHREY, Minnesota
*. ALAN J. STONE, StaffDiredor
MAnaALL L. MATZ, General Counsel
(II)








FOREWORD


USDA REPORT UNDERCUTS FORD PLAN
The food stamp debate has been with us for over 18 months, since December 4, 1974, when President Ford precipitously announced a 30 percent increase in the amount that low income families would have to pay for food stamps. The Congress overwhelmingly blocked the cost increase, but in the process. the Senate passed, on February 5, 1975, S. Re.- 58, calling upon the Executive Branch to make legislative recommendations.
The President took 8Y months before he sent his recommendations to the Cong'ress on October 20, 1975-well after the Senate had already begun hearings on the program. Then, on the weekend before the Senate Agriculture Committee was to begin voting on the bill, the President announced he would be implementing his recommend ations by regulation since the Congress "had not acted."
In pointof fact, the regulations, which have since been enjoined by Federal court order, were written outside the normal channels to justify an arbitrary budgetary cut of $1.2 billion which had already been proposed by the President.
The final' irony now comes in the form of the recently released USDA publication, "Characteristics of Food Stamp Households, September -1975.") It shows that the average gross monthly income of a household participating in the food stamp program is $298.00. 86.4 percent of the food stamnp benefits go to the 77 percent of households with incomes below the poverty line; 95 percent of the benefits go to the 90 percent of households with incomes below 125 percent of the poverty line. Only 1.1 percent of all food stamp households have incomes exceeding $10,000, and most of these are working households with high work-related expenses. The study also reveals that only 1.3 percent of food stamp recipients are students.
The point is that the passage of meaningful legislation to eliminate abuses and improve the administration of the program has been jeopardized by the inaccurate preconception that many hundreds of millions of dollars could be cut from the food stamp program without eliminating those in need. The USDA report shows quite clearly that a true reform bill cannot cut that much because the participants are poorer than was first thought.
Food stamp reform is needed if the integri ty of the program is to be maintained. But "reform" must not become a code word for arbitrarily ellimiating millions of participants. Reform must be an evenhanded attempt to solve the problems in the program, simplify the administration both for the participants and the administrators, and to improve access to the program for those truly needy who do not now utilize the program.
Food stamp reform i's necessary and possible, but only if we are objective' about the nature of the problem and honest about the changes naecessary.





IV

Last year I joined Senator Robert Dole (R.-Kans.) in the introduction of the Food Stamp Reform Act of 1975. This legislation would have established a gross income ceiling for the first time, barred colleo e students who are tax, depen'de't,-_bf ineligible families, and eliminated automatic eligibility for welfare recipients.
However, it also eliminated the purchase requirement, allowing recipients to receive the same government subsidy -without a cash transaction. In''aaditio'n to bringing into -the program many eligible Americans living below, the poverty line who cannot afford to buy the Government aid, this procedure would have saved, $50. to $100 million in administrative costs, eliminated vendor.fraud, and cut in half the number of stamps in circulation.
As Senator Dole stated in introducing the 'legislation: "That the program should grow at a rapid pace during a period of substantial economic decline is not, in and of itself, objectionable. For it is programs like food stamps, unemployment compensation, and other public assistance efforts which help cushion the effects of the recession on those unfortunate enough to be temporarily without the means to support themselves and their families."
The food stamp program is unique among social programs in its national uniformity, flexibility, and responsiveness to changes in a household's economic circumstances due to unemployment or other misfortunes. The danger is that in our haste to reform the program we will destroy its best qualities.
USDA estimates that for every 1 percent increase in the unemployment rate, food stamp participation increases between 500,000 and 750 000.
Far from being a drain on the economy, food stamps actually serve as a counter-cyclical force to increase jobs and business receipts at, a time when the economy is slow.
A recent report prepared by the Economic Research Service of USDA, "Economic Effects of the U.S. Food Stamp Program," indicates that since 1971 the food stamp program has made a major contribution to the economic growth of the Nation. It has increased the busine ss receipts in 10 sectors of the economy, with the greatest impact in the agriculture, food processing, and food trade sectors. Each bonus dollar injected into the economy is respect many times creating a "ripple effect."
The May "National Food Situation" reported that the value of food stamps issued during the first quarter of the year was. equivalent to approximately 6 percent of all food-at-home expenditures.
This program is compassionate, sensible, and essential. It feeds the hungry, generates jobs, and stimulates the economy.
It is a shame that the debate over the food stamp program has been polarized by the irresponsible statements of high government officials greedy for political mileage.
It is the food stamp program and its participants that have been abused most during the past 18. months.
I am hopeful that USDA's report, supplemented by the House Agriculture Committee's study, will dispel many misconceptions about the program and facilitate responsible legislation.
GEORGEMcGoVERN,
I I Chairman.









COMMENTS BY SENATOR CHARLES H. PERCY


Few social programs in recent years have spawned as many myths, and misconceptions as the Food Stamp Program. Still fewer programs have created such controversy or drawn such criticism. Rapid growth, overextension of eligibility, and high error rates in eligibility certification and stamp distribution have brought charges of fraud and pressure for reform. Today, program proponents and opponents alike agTee that reform is needed. Carrying out reform without knowing the facts, however, is irresponsible.
This staff report, therefore, is a welcome compilation and analysis of useful data about the Food Stamp Program. Food Stamp facts are sorely needed to sort out real and alleged abuses and lay the groundwork for reform based on the merits of the case.
This report allows the data from the U.S. Department of Agriculture and the House Agriculture Committee Food Stamp studies to speak for themselves. The figures clearly debunk the myth that the Food Stamp Program is a rip-off haven for students, strikers, the nonpoor and cheats. The overwhelming majority of Food Stamp recipients have incomes below the poverty line. Of all food stamp households 1.1 percent earn more than $10,000 a year. Students are 1.3 percent of all food stamp beneficiaries.
,Most important, program, complexity rather than fraud is the culprit behind high certification and stamp distribution error rate:4. The complicated formula of itemized deductions that determine net income and Food Stamp eligibility is an administrative nightmare. The bulk of the errors result from caseworker carelessness or lack of knowledge and unintentional misrepresentation on the part of recipients. USDA estimates actual recipient fraud at no more than 1 percent.
The facts clearly call for Food Stamp reform that will make the program more manageable, less complex and less prone to error. The facts do not lend themselves to draconian program cuts. A small investment
o
now in adequate nutrition for needy children, mothers and the elderlywill save billions of dollars in future medical expenses.
I hope the facts as presented by this report will contribute to it more, rational perception an(i a more responsible reform of the Food Stamp Program.
(V)


























CONTENTS

Page
Foreword --------------------------------------------------------- III
Comments by Senator Percy ---------------------------------------- V
About the food stamp studies --------------------------------------- 1
L Distribution of benefits ---------------------------------------- 3
II. Characteristics of participants --------------------------------- 4
A. Income --------------------------------------------------- 4
B. Assets ---------------------------------------------------- 6
C. Special households ----------------------------------------- 7
1. Students ------------------------------------------------ 7
2. Strikers ------------------------------------------------- 7
3. Working households -------------------------------------- 8
4. Elderly households --------------------------------------- 11
D. Prices paid for food stamps by participating households ---------- 12
III. Economics of food stamps -------------------------------------- 13
A. Effect on the general economy ------------------------------- 13
B. Relationship between unemployment and food stamp participation ---------------------------------------------------- 16
C. Relationship between the poverty line and food stamp participation --------------------------------------------------- is
(Vir)




















Digitized by the Internet Archive
in 2013














http://archive.org/detaiIs/foodprogram00unit



















ABOUT THE FOOD STAMP STUDIES


The data for this report is derived from two primary sources.
Most of the information is from an analysis of 11,327 randomly selected households done by the U.S. Department of Agriculture. The study was conducted in September of 1975 and represents the most comprehensive and authoritative analysis done to date on the food stamp program.
The second source is a study by tbe U.S. House of Representatives Agriculture Committee. This study examined slightly more than half of the food stamp caseload (56.1 percent); it includes all food stamp households other than welfare households. The House study is based on lengthy and comprehensive investigations done in April 1975 of 6,045 randomly selected food stamp households. The reviews were conducted by state quality control reviewers checking, the accuracy of the food stamp certification process.
The complete U.S. Department of Agriculture survey has been reprinted as an appendix to this print. The report of the U.S. House of Representatives Agriculture Committee may be obtained from that Committee.
















74-S87-7 6-2













1. DISTRIBUTION OF BENEFITS


An examination of the data in the U.S. Department of Agriculture study reveals that food stamp benefits do not go to high-income families. A Congressional Budget Office analysis of the USDA data shows that 86.4 percent of the total bonus dollars go to households whose total gross income is less than the poverty level.' Households with income between the poverty line and 125 percent of the poverty line receive 8.7 percent of the total bonus dollars. Only 4.8 p reent of all food stamp benefits go to households which have gross incomes greater than 125 percent of the poverty line.
Table I
Percent of bonus
Income: dollars received
Less than poverty 86.4
Poverty line to 125 percent of poverty 8.7
Greater -than 125 percent of poverty line- 4.8
The vast Majority of food stamp households with income exceeding 125 percent of the poverty line axe working poor families, who have 12 to 15 percent of their monthly gross income withheld in taxes. These families are able to qualify for benefits by deducting their taxes and other work-related expenses needed to maintain the strong work incentives of the program.
Other interesting observations can be made from the USDA survey: working. Some of these expenses, Eke taxes, are not even under the
Eleven ainin an
percent of the total bonus goes to households cont
elderly member; 19 percent goes to working households; and 57 percent to households getting some' form of public assistance paymentseither AFDC, SSI, or general assistance.
At the time the USDA survey was conducted, the poverty line for a family of four was $5,050; 125 percent of the poverty line was $6,313. Recently, the official poverty line was updated to $5 500 for a family of four but this increase should not affect the percentage of participants with incomes below t e poverty line.










II. CHARACTERISTICS OF PARTICIPANTS


A. INCOME
The USDA report shows that most food stamp benefits are directed toward the poorest households. The 77 percent of all food stamp households with incomes below the poverty line receive 86.4 percent of the benefits; the 13 percent of the households with incomes between the poverty line and 125 percent of the poverty line receive 8.7 percent of the benefits; and the 9 percent of the households with incomes above 125 percent of the poverty line receive only 4.8 percent of the benefits.2
TABLE 2
Percent of Percent of
Income households benefits
Less'than poverty line --------------------------------------------------- 77 86.4
Poverty line to 125 percent of poverty line -------------------------------------- 13 8.7
Greater than 125 percent of poverty line ------------------------------ ----------- 9 4.8

In addition, the 9 percent of the households with incomes above 125 percent of the poverty level are predominantly working poor households with high work-related expenses.
Very few households have income exceeding 150 percent of the poverty line. In fact, only 1.1 percent of the food stamp households have income,, exceeding $10,000 per year, and the majority of these households have six or more members.
The average monthly income of all food stamp households is $298, as reported by the USDA study. The House Agriculture Committee found the, average income of non-public assistance households to be $267.63 a month.
By far the largest number of food stamp recipients have gross monthly incomes in the ranges between $100-$199 and $200-$299 (Figure 1).
2 The information contained in the House Agriculture Committee report shows an even higher percentage of food stamp households in poverty. For non-public assistance households only, the data indicates that 81.3 percent of all households getting food stamps live in poverty; 11.2 percent of the households have incomes between the poverty line and 125 percent of the poverty line. Only 7.5 percent have incomes over 125 percent of the poverty line.
(4)







m"Nstribution by Monthly

Gross, Income




Percent
30









20









10










Under 100- 200- 300- 400- 500- 600- 750- 1000
100 199 299 399 499 599, 749 999 and Over
Dollars
FIGURE 1

,Nloreover, a majority of food ,,.Aamp households have gross incomes below $285 a month, or $3,420 per year.

TABLE 3

Percent of households
(cumulative)
House
Agriculture
Gross monthly income USDA Committee

0 ------------------------------------------------------------------------------ 3.0 5.6
$1 to $99 ----------------------------------------------------------------------- 7.1 11.8
$100 to $215 -------------------------------------------------------------------- 37.9 47.5
$216 to $284 -------------------------------------------------------------------- 55.4 63.9
$285 to $359 -------------------------------------------------------------------- 70.7 75.2
$360 to $419 -------------------------------------------------------------------- 80.3 i2. 3
$420 to $489 -------------------------------------------------------------------- 86.9 88.0
$490 to $559 -------------------------------------------------------------------- 91.5 91.9
$560 to $624 -------------------------------------------------------------------- 94.5 94.9
$625 to $694 -------------------------------------------------------------------- 96.9 97.1
$695 to $849 -------------------------------------------------------------------- 99.0 99.2
$850 to $999 -------------------------------------------------------------------- 99.7 99.7
$1,000 up ---------------------------------------------------------------------- 100.0 100.0






6

Over 80 percent of food stamp households have incomes of less than .$420 a month, or $5,040 per year. (The USDA study found 80.3 percent of the households to have incomes below this level; the House report found 82.3 percent of the households below this level.)
Nearly 95 percent of food stamp households have incomes below $625 a month, or $7,500 a year (94.5 percent in the USDA study; 94.9 percent in the House report).
The USDA food stamp study also provides valuable information on the sources of food stamp households' income. The most common source is public assistance, but the second most common source is earnings. Table 4 Percent of h&ouseholds
-Source: receiving income
from source
Aid to families with dependent children---------------------------41. 7
Earnings--------------------------------------------------22. 4
Social security ------------------------------------__-----------21. 4
Supplemental security income ----------------------------------- 17. 1
General assistance-------------------------------------- -------- 8. 2
Veterans benefits------------------------------ ----------------- 3. 4
Payments from roomers and boarders----------------------- ------- 2. 2
Self-employment -----------------------------------------------1. 2
Railroad retirement and pensions --------------------------------- 0. 9
Student aid --------------------------------------------------- 0.8
Other,1------------------------------------------------------18.7
'Includes unemployment compensation, alimony and child support, contributions from relatives, etc.
More food stamp households--41.7 percent-have income from AFDC than from any other single source. Twenty-two percent of the households have earned income:, 21.4 percent receive Social Security, and 17.1 percent get SSJ.
If the households receiving AFDC, SSI, and general assistance are combined, we find that 64 percent of a food stamp households receive some form of cash assistance. Of these public assistance households, 12 percent also receive income from earnings, and 19 percent get Social Security. B s]T

Two-thirds of the households who are not automatically eligible for food stamps (households who do not receive AFDC or SSI) have no liquid assets, according to the USDA survey. The majority of the remainder have liquid assets (bank accounts, savings bonds, and stocks and bonds) valued at $100 or less.3
Table 5 Percent of
Amount of assets: houeholds
$0 ---------------------------------------------------------- 67.3
$1-$s0 --------------------------------------------------- 16.7
$101-$500 ------------------------------------------------- 9. 1
$5014$11000 ------------------------------------------------3. 8
$11001-$1,500 ---------------------------------------------- 2.4
$1)501-$3;O00---------------------------------------------- 0.6
3 This Includes assets countable under current regulations. The regulations do not count the family's house, one car, personal effects, life insurance policies, and incomeproducing property.





7

C. SPECIALHoUSEHOLDS
STUDENTS

Contrary to the popular belief that the food stamp program contains large numbers of students, the USDA study found that only 1.3 percent of the food stamp caseload were students at institutions of postsecondary qqucation in September 1975. The number of student food stamp recipients, according to the USDA study, is 2027000. The House study also contains information on this matter; the study found that 204,700 students in non-welfare households participated in the program in April 1975. (Most. student food stamp participants do five in non-public assistance households, since public assistance households consist largely of welfare mothers and their children.)
The House study also found that many student food stamp recipients work as well as attend school. Over half of all student-headed households have earned income.
TABLE
House
Aicmu"u e
USDA om ittee
survey Study I
Number of college 202,000 204,700
Percent of total participating households --------------------------------------- 1.3 -----------------Average gross monthly income- 2$238.42
Average deductions ------------------------------------------------------------------------ 2$150.46
Percent working ------------------------------------------------------------------------ 251.4
I Based on nonpublic-assistance households only. Includes Puerto Rico, 's For households headed by a student onl ; The House study found that 75 percent of all students live in households headed by a student, y
According to the House study, the average student-headed household receives substantially larger deductions than the average nonstudent household. Student-headed households receive an average of $150 per month in deductions, compared to $82 per month for the average non-welfare household. This is primarily due to large deductions for tuition and fees (76 percent of these households claimed tuition deductions which averaged $52.30 per month), and shelter (86 percent claimed a shelter deduction averaging $60.26).
2. STRIKERS
The USDA survey did not obtain any information on strikers. However, the House Agriculture Committee did deter nine that the percentage of households containmg a striker was approximately 0.2 percent, or 5,500 households. This figure was confirmed by the August 1975 Current Population Survey conducted by the Bureau of the Census, which also found 0.2 percent of the food stamp households contained a striker.





WORKING HOUSEHOLDS
The USDA study shows that most of the families at the higher end of the food stamp income scale are families who work and who qualify for food stamps because they deduct taxes and other work-related expenses from their gross income.
Working households constitute only 23 percent of the total food stamp caseloads, according to USDA. But working households make up about 80 percent of that portion of the caseload that has gross income above 125 percent of the poverty line.
Currently, working households may deduct from their gross income their taxes, and other expenses such as child care costs necessary to allow a household member to work. Such expenses go along with working. Some of these expenses, like taxes, are not even under the, family's control; part of the earned income must go to meet these costs. Failure to allow for such deductions would result in a work disincentive, and would penalize working families by giving them lower benefits than non-working families with the same disposable income.
One work-related deduction in particular-the child care deduetion-is key to maintaining strong work incentives. Child care costs are claimed by a small percentage of food stamp households (less than 3 percent of all households), but they average $82 a month for the food stamp households that incur such costs. If these households could not claim this deduction, their food stamp benefits would be drastically reduced.
It has often been observed that food stamp families with higher incomes receive larger average food stamp deductions than families with lower incomes. This is largely because a much bigger percentage ,of the families at higher income levels are working families and receive the work-related deductions, and because work-related deductions such as taxes rise dramatically as earned income rises. The USDA data shows that households with gross incomes in the $490-$599.99 per month range average $120 a month in total deductions, while households in the $285-$359.99 range receive an average deduction of $73$47 less. Of this $47 differential, however, $38 is due to higher work-




9


related deductions for families in the $490-$599.99 ranve. There is only a $9 difference for all other deduction areas combined.
Similarly, households in the $360-$419.99 income range average $93 a month in deductions, compared to an average deduction of $159 a month for households in the $625-$694.99 range. Yet $61 of this $66 difference in deductions is due to work-related items. In all other deduction areas, the difference is only $5 (see table 7).
The House Committee study confirms the USDA findings. For example, the House study shows that while households with income in the $560-$624 a month range receive $22 a month more in deductions than households in the $490-$559 income range, the entire $22 difference is due to higher work -deductions. (See table 8).
The USDA study provides much additional information on working households. These households have a number of other characteristics that distinguish them from the food stamp caseload in general (table 9).

TABLE 7.-AVERAGE DEDUCTION AMOUNTS BY GROSS FOOD STAMP INCOME-50 STATES AND THE DISTRICT OF COLUMBIA

Average

Total workTotal monthly gross Mandatory Work Shelter Medical Child care Total related
i ncome deduction allowance deduction deduction deduction deduction deductions

0 --------------------- 0 0 51 2 0 55 0
$0.01 to $99.99 -------- 0 1 41 2 0 47 1
100 to $214.99 -------- 0 1 40 5 0 47 1
$215 to $284.99 -------- 1 2 52 6 1 65 3
$285 to $359.99 -------- 3 4 57 6 1 73 7
$360 to $419.99 -------- 9' 8 60 10 2 93 17
$420 to $489.99 -------- 19 12 53 12 5 104 31
$490 to $559.99 -------- 29' 16 49 13 7 120 45
$560 to $624.99 -------- 49 20 50 15 11 148 66
$625 to $694.99 -------- 56 22 44 19 12 159 78
$695 to $849.99 -------- 79 25 51 17 16 198 104
$850 to $999.99 -------- 112 28 54 20 25 249 140
$1,000 ---------------- 151 28 57 63 14 349 179
Average -------- 10 5 49 8 2 77 15

Source: Statistics a compilation ofdata gathered from the USDA report, "Characteristics of Food Stamp Households, September 1975."










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TABLE 9

Working Al I househouseholds I holds

Total number I ------------------------------------------ 11,023 502 ------------ 14,403,677 -----------percent total participating households --------------------- fi.2 -------------------------------------Percent total benefits received ----------------------------- 18.8 -------------------------------------Female-headed (Percent) ----------------------------- 516F 430 (50.5) 2,838,399 (64.5
Male-headed (Percent) ---------------------------------- 507,072 (44.5) 1,565,278 (35. 5
Average gross monthly income ---------------------------- $450 ------------ $298 -----------Average size of household -------------------------------- 4.2 ------------ 3.2 -----------I Household heads 18-65 years.

Working households axe more likely to be headed by men than axe non-working households. Almost half of the working households in the program axe male-headed, while only 36 percent of all food stamp households are headed by men. A male-headed family is generally one in which both parents are present.
The income of working households is higher than that of households without a working member. The average monthly income of working households is $450, a figure that is much higher than the $298 average for all households.
However, households with at least one working, member are also larger than non-working households. These hou holds averaged
4.2 members, in comparison to 3.2 members in all households.

ELDERLY HOUSEHOLDS

Households containing a member aged 65 or over make up 16.9 percent of all households; households headed by persons aged 61-65 make up 5.5 percent of all households. These households t'e""nd to be smaller than younger households, averagmg 1.7 members each for those 65 or over and 1.9 members for those 61-65. The majority of households in both categories consist of single people living alone: 60.6 percent of those 65 and over, and 55.8 percent of those 61-65.

TABLE 10

Households Households
with head with a member All
61-65 65 or over households

Total number ----------------------------------------------- 285,000 885,000 5,217,000
Percent total partici ing households ------------------------- 5.5 16.9 100
Percent total benefitpsarteceived ------------------------------------ 11.3 100
Average household size -------------------------------------- 1.7 3.2
Distribution of household size:
1 ----------------------------------------------------- 55.8 60.6 24.7
2 ----------------------------------------------------- 25.3 27.8 20.9
3 --------------------------------------------------- 18.9 11.6 54.3
Average gross monthly income ----------------------------------------------- $223 $298
Average deductions/all households -------------------------------------------- $46 $77
Average deductions households with deductions -------------------------------- $62 $93
Percent household eads 4.3 23.2


Elderly households also have less earned income and fewer deductible expenses than other households. Their averacre gross monthly income is $223, compared to $298 for all households. Tiowever, because of the smaller size of elderly households, they have larger average incomes per person.





12

The average deduction in September 1975 for elderly households, was $62 for those. households that claim deductions and $46 for all elderly households (including those that did not claim any deductions). This is much lower than the $93 average deduction for all household claimincr deductions in September 1975 and the $77 overall average for all households. (Due to inflation since September 1975, the average deduction today is likely to be somewhat higher than these levels.)
The reasons that the elderly receive smaller average deductions are that so few of them work and receive the work-related deductions, (only 4.3 percent of the elderly households have earned income), and that the elderly-with their sii-ialler household size-tend to have lower shelter deductions.

D. PRICES PAID FOR FOOD STAAIPS BY PARTICIPATING IIOUSEIIOLDS,
Food stamp households pay an average of $57 a month for their stamps. This is an average of 25.6 percent of recipients' net income (income after deductions), and 19.2 percent of recipients' gross income.
As recipients' income increases, their food stamp purchase price,% also rise. Less poor households pay larger percentages of their net income for stamps than do the poorest households.
In addition, larger households generally pay larger percentages of net incomes for their stamps than do smaller households with the same level of income.
TABLE 11
Household sizes All
Percentage of net income spent for House
food stamps 1 2 3 4 5 6 7 8 holds.
0 -------------------------------- 7.9 5.3 6.3 5.1 3.4 4.4 5.6 2.3 5.7
0 to 10 --------------------------- 1.6 .5 .1 -------------------------------- .5
10 to 20 -------------------------- 62.5 11.4 5.6 3.7 1.2 1.3 .8 .5 19.6
20 to 25 -------------------------- 28.0 50.1 23.6 12.0 5.9 3.3 1.5 1.0 24.0
25 to 27.5 -------------------------------- 32.7 52.1 42.5 29.4 17.0 7.4 2.3 25.9
27.5 to 30 ---------------------------------------- 12.3 36.7 60.1 74.0 84.4 91.9 24.2
30 --------------------------------------------------------------------------------------- 2.1 .1
100.0 100.0 99.9 100.1 100.0 100.0 103.1 100.1 100.0

All one-person households pay less than' 25 percent of net income for their stamps, and over 70 percent of these households, pay less, than 20 percent of net income for stamps. Over two-thirds of all two-person households pay less than 25 percent of net income for their stamps. On the other end of the scale, almost all eight-person households pay at least 27.5 percent of their net income for food stamps.










III. ECONOMICS OF FOOD STAMPS


A. EFFECT ON THE GENERAL ECONOMY
The primary purpose of the food stamp program is to feed people. However, there are important secondary effects to the economy generally, and to the agriculture sector in particular.
A recent report prepared by USDA's Economic Research Service, Economic Effects of the U.S. Food Stamp Program, indicates that since 1971 the food stamp program has had a substantial impact on our economy. It has increased the business receipts in 10 sectors of the economy, with the greatest impact being on the agriculture, food processing, and food trade sectors. It has also generated thousands of new jobs in these business sectors.
In fact, the report found that U.S. business sales, and the U.S. Gross National Product (GNP), are considerably larger than they would be if the food stamp program were terminated and Federal income taxes were reduced by the same amount as the cost of the program.
According to the report, total U.S. business receipts were over $872 million higher in 1972 than they would have been with no food stamp program and with reduced taxes, and nearly $1.2 billion higher in 1974.
If the report's findings are applied to fiscal 1976, the food stamp program is found to have generated $2.33 billion more in business receipts that year than there would have been in the absence of the program.
The Economic Research Service report also states that the gross national. product grew by $311 million in 1972 and $427 million in 1974 because of the food stamp program. Applying these findings to fiscal 1976 indicates that the GNP increased by approximately $830 million during fiscal 1976 due to the food stamp program.
Food stamps are spent like money to buy food in retail stores, and create additional business for the retail food industry. The increase in business for retail stores in turn creates additional business for wholesalers, who in turn buy food and other products from manufacturers and farmers. This additional demand for food creates additional demand in other sectors for goods and services, such as containers, equipment, transportation, and labor. Tables 12-13 show the economic impact caused by the injection of food stamp dollars in each industry sector for 1972 and 1974.
The end product of all this new business activity is new jobs. Table 14 shows the import of the food stamp program in creating new jobs. The Economic Research Study found that due to the added business activity generated by food stamps, 55,000 new jobs were created in 1972 and over 76,00 were created in 1974. Updating the Economic Research Service findings to fiscal year 1976 shows that the food stamp program generated 150,000 new jobs in 1976.
(13)






14

TABLE 12.-Changes in U.S. business receipts and gross national product associa.-Ced
with an income transfer from taxpayers to food stamp households in the form of bonus
stamps, calendar year 1972d 1
Changes in business receipts by industry sector: 2 Amount thousandse)
Agriculture, forestry, and fihre------------+$297, 095
Mining ------------------------------------------------ -6, 127
Contrutio---------------------------------3, 855
Manufacturing:
Food manufacturingMeat and poultry products ------------------------ +209, 505
Dairy products---------------------------------- +74, 797
Grain mill products------------------+65,)231
Bakery products--------------------------------- +43, 120
Canned and preserved foods ----------------------- +125, 218
Other foods and beverages----------------+71, 519
Totl----------------------------+ 589, 390
Nonfood manufacturingClohin-----------------------------31, 879
Other nonfood manufacturing-------------172, 763
Totl-----------------------------204, 632
Total manufacturing--------------------------- +384, 758
Local and suburban transportation------------------------- -2,)591
All other transportation----------------------3,941
Communications----------------------11Y 144
Gas,' electric, water, and sanitary utilities--------------------- -460
Wholesale trade---------------------+181)401
Retail trade------------------------------------------- +335, 987
Finance, insurance, and real ete-------------153, 841
Personal sevcs--------------------33,294
Physicians and dentists-------------------------------- -26, 565
Hospitals and laboratory services------------------10, 923
Education (private) -------------------------------------- -17, 370
Other sectors 3 .................... ...................... -56, 595
Total change in business receipts ------------------------- +872, 535
Change in gross national product:
Participant household sector:
Bonus stamps received-------------- 1, 980, 000
Plus income from new jobs-----------------7, 836
Minus increase in savings and te------------52, 800
Equals change in consumption expenditures-------------+1, 935, 036
Nonparticipant household sector:
Income from new jobs-----------------205, 487
Plus decrease in savings and taxes-------------152, 255
Minus tax to fund stamps---------------1, 980, 000
Equals change in consumption expenditures-------------- -1,622, 258
Net change in combined sector consumption expenditures --------+312, 778 Plus change in school lunch expenditures--------------------- -1, 385
Equals change in gross national product------------+311, 393
1The nonparticipant household sector was taxed $1.980 billion to fund bonus stamps. The expenditure of the bonus stamps was treated as an Increase In final demand of this amount. Meeting this increase in final demand required additional economic activity. This Increase In economic activity resulted In a contribution to gross national product of $311,398,000.
2 As a result of the injection of bonus stamps, the final demand for the products and services of some sectors rose more than It would have without the program. Agriculture, forestry, and fisheries, for Instance, received $297.1 million more in business receipts (output) than It would have without the program. For other sectors, output was less than It would have been without the program. For example, mining, as a result would have received $6.1 million more In business receipts without the program.
$Other sectors, In an aggregate composed of direct and transferred imports; business travel and gifts; office supplies; Federal, State, and local government enterprises; and other services.






15

TABLE 13.-Changes in U.S. business receipts and gross national product associated with an income transfer from taxpayers to food -stamp household in the form of bonus stamps, fiscal year 1974 1
Changes in business receipts by industry sector: 2 Amouznt (thousands)
Agriculture, forestry, and fihre--------------$407, 715
Minng------------------------------------8435
Contrutio---------------------------------5317
Manufacturing:
Food manufacturingMeat and poultry products ----------------------- +287, 555
Dairy prdcs----------------+102,)655
Grain mill prdcs+--------------89, 529
Bakery pout----------------+59, 181
Canned and preserved foods---------------------- +171, 873
Other foods and beverages-------------------------+98,)127
Tota-----------------------------+808,920
Nonfood manufacturingClothing---------------------------------43, 803
Other nonfood manufacturing --------------------- -237, 523
Tota------------------------------281326
Total manufacturing--------------------------- +527, 594
Local and suburban transportation--------------------------3, 566
A.llothertrnprain------------------5449
Commnictios------------------------------15, 327
Gas, electric, water, and sanitary utilities--------------------- -707
Wholesale trade ---------------------------------------- +249, 145
Retail trd---------------------+461, 343
Finance, insurance, and real estate------------------------- -211, 480
Personal sevcs--------------------45,728
Physicians and dnit------------------36 498
Hospitals and laboratory srce- ---------- ----15, 037
Education (rvt)-------------------23, 856
Othersetr'---------------------77,850
Total change in business rcit- ----------+1, 196, 547
Change in gross national products:
Participant household sector:
Bonus stamps received------------------------------- 2, 718, 000
Plus income from new ob---------------10, 750
Minus increase in savings and tae-----------72,447
Equals change in consumption expenditures------------+2, 656, 303
Nonparticipant household sector:
Income from new ob----------------281, 683
Plus decrease in savings and txs-----------208, 780
Minus tax to fund stms-------------2,718, 000
Equals change in consumption expenditures-------------2, 227, 537
Net change in combined sector consumption expenditures-------+428, 766 Plus change in school lunch expenditures---------------------1,)905
Equals change in gross national product -------------------- +426, 861
2 The nonparticipant household sector was taxed $2.718 billion to fund bonus stamps. The expenditure of the bonus stamps was treated as an Increase In final demand of this amount. Meeting this Increase In final demand required additional economic activity. This Increase In economic activity resulted in a contribution to gross national product of $426,861,000.
AAs a result of the injection of bonus stamps, the final demand for the products and services of some sectors rose more than it would have without the program. Agriculture, forestry, and fisheries, for Instance, received $407.7 million more in business receipts (output) than It would have without the program. For other sectors, output was less than It would have been without the program. For example, mining, as a result would have received $8.4 million more In business receipts without the program.
8 Other sectors Is an aggregate composed of direct and transferred Imports ; business travel and gifts; office supplies; Federal, State, and local government enterprises; and other services.






16

TABLE 14.-NET CHANGES IN JOB NUMBERS RESULTING FROM THE INCREASE IN BUSINESS RECEIPTS ASSOCIATED
WITH BONUS STAMP EXPENDITURES, CALENDAR 1972 AND FISCAL 1974

Net job changes
Sector 1972 1974

Agriculture, forestry, and fisheries ------------------------------------------------ +23,648 +32,453
Mining ------------------------------------------------------------------------- -132 -182
Construction ------------------------------------------------------- -114 -157
Manufacturing:
Food manufacturing:
Meat and poultry products --------------- +2,955 +4,057
Dairy products ---------------------------------------------------------- +1,368 +1,877
Grain mill products ------------------------------------------------------ +755 +1,036
Bakery products -------------------------------------------------------- +1,652 +2,267
Canned and preserved foods --------------------------------------------- +3,044 +4,178
Other foods and beverages ----------------------------------------------- +1,077 +1,477
Total ---------------------------------------------------------------- +10,'851 +14,892
Nonfood manufacturing:
Clothing --------------------------------------------------------------- -3,236 -4,448
Other nonfood manufacturing --------------------------------------------- -5,576 -7,666
Total ---------------------------------------------------------------- -8,812 -12,114
Total manufacturing ----------------------------------------------------- +2,039 +2,778
Local and suburban -207 -285
All other transportation ---------------------------------------------------------- -128 -177
Communications_ -481 -662
Gas, electric, water, and sanitary utilities ------------------------------------------ 0 0
Wholesale trade ----------------------------------------------------------------- +8,346 +11,463
Retail trade -------------------------------------------------------------------- +35,671 +48,980
Finance, insurance, and real estate ------------------------------------------------ -3,090 -4 248
Personal services --------------------------------------------------------------- -4 974 -6' 832
Physicians and -900 -1 237
Hospitals and laboratory services ------------------------------------------------- -1,387 -1: 910
Education (private) -------------------------------------------------------------- -499 -685
Schoollunch ------------------------------------------------------------------- -15 -21
Other sectors I ------------------------------------------------------------------ -1,975 -2,717
Total number of new jobs -------------------------------------------------- +55,802 +76,561

Other sectors is an aggregate composed of direct and transferred imports; business travel and gifts; office supplies; Federal, State, and local government enterprises; and other services.

B. RELATIOTSHip BETWEEN UNEMPLOYMENT AND FOOD STAMP PARTICIPATION

The single largest factor responsible for the growth of the food stamp caseload in recent years has been the increase in the unemployment rate. During late 1974 and early 1975, unemployment rose by 70 percent (from 5.3 percent in August 1974 to 9.1 percent in March 1975). During this period, the food stamp caseload rose by approximately 30 percent in the continental United States, reaching a, peak of 18.0 million recipients.'
Over this same period, the total food assistance caseload for both food stamps and commodities inthe United States and its territories, Puerto Rico, Guam, Virgin Islands, and the Trust Territories of the Pacific, rose by 33 percent to a peak of 19.3 million. In the past year, as unemployment 'has declined somewhat food stamp participation has also gone down. Food stamp participation in the continental United States dropped by 1.6 million persons between April 1975 and June 1976, and stood at 16.3 million in June. The total food acsi4ance caseload in the United States and territories also decreased by 1.6 million recipients in the same period, and stood at 17.8 million in June.
USDA estimates that every increase of one percent in the unemployment index results in an increase of between 500,000 and 750,000 food stamp participants. According to this estimate, most of the growth in the food stamp program in 1974 and 1975 was due to rising unemployment.







17

FIGURE 2.-Percent unemployment and food stamp participation in the United States: July 1974 to April 1975


June

0 May
ti f April

o0
4J March
1 rFebruary

1 'Jan. 1976


/1 December
// November


1 October

;September August Q ,July


a June
w May



April

March

February

-Jan. 1975 December

November Na October or, September

0 %August




-1-4 1--44 Mr
-July 1974
00




IAll figures are seasonally adjusted. Food stamp participation does include Puerto Rico.






10.


TABLE 15

Total participation
Tood staTp partic- food stamps and
ipation in commodities in
continental United States and
Date Unemployment United States territories 1
rate (thousands) (thousands)

1974:
J uly ---------------------------------------- ---- 5,6 13,906 4,726
August ------------------------------------- 5.3 4,192 4,935
September ----------------------------------- 5 7 14,327 15 104
October ------------------------------------------- K 5 14,877 15:782
November ---------------------------------------- 6.2 15,628 16,551
6.7 16,293 17,425
1975:
9.0 6,868 8,090
February ----------------------------------------- 9.1 7,415 8,728
March ------------------------------------------- 9.1 7,964 9,332
April -------------------------------------------- 8.6 7,963 9,425
May --------------------------------------------- 8.3 17,849 9,387
7,481 9,118
July --------------------------------------------- 8.7 7,300 890
8.2 7 287 18:685
8.1 17,222 18,614
October ------------------------------------------ 7.8 17,0123 18,682
7.8 16,871 18,532
December ---------------------------------------- 7.8 17,146 18,808
1976:
January ------------------------------------------ 8.8 170197 8,858
February ----------------------------------------- 8.7 7,210 8,870
8.1 17,349 19,000
April -------------------------------------------- 7.4 16,939 18,544
May --------------------------------------------- 6.7 16,520 18,125
June --------------------------------------------- 8.0 16,306 17,812

1 Includes commodities for needy families on Indian reservations, Trust Territories of the Pacific, and 4 counties in the State of Washington during 1974-76; commodities for needy families in Puerto Rico, Guam, and Virgin Islands during part of 1974; and food stamps in Puerto Rico, Guam, and the Virgin Islands since the latter part of 1974.
Note: All figures are unadjusted.

C. RELATIONSHIPBETWEEN THE POVERTY LINE ANDFoOD STAMP
PARTICIPATION

Since 1966 the number of persons with income beneath the poverty
line has decreased slowly while the number of persons receiving food
assistance (food stamps commodities) has increased significantly.
Nevertheless, the number of persons living below the poverty line
still far exceeds the total food assistance caseload (Figure 3).
In 1966, 23.4 million persons below the poverty line were not reached
by a food assistance' program. The gap was only 9 million persons in
1974 after food a assistance programs were implemented in every state,
Puerto Rico, Guam and the Virgin Islands.
As food assistance -caseloads have expanded over the last decade the
disparity between those with incomes below the poverty line and the
number of persons receiving food aid hag, become progressively smaller.
Still, millions of "impoverished Americans received no food assistance
in 1974.









FIGURE 3.-Disparity between the number of people living below the official poverty line and the number of people receiving food assistance.

PEOPLE
(millions) 30






PEOPLE LIVING AT OR BELOW THE POVERTY LINE


20




FOOD, ASSISTANCE CASELOAD (FOOD ="po STAMPS AND
"COMMODITIES
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