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Jul
08

Food Stamps

As the United States continues its decline, individuals need new information to address new issues. This post will try to fill an informational void facing many young urban professionals, who, in the process of attempting to save the hundreds of thousands of dollars needed for a down payment on the typical over-priced single family home in a metropolitan suburb, have uncovered that they are falling immensely short and need to continue slashing their budget to save more in an inflationary, negative real interest rate environment. A common saving strategy for many coupled but childless urban professionals is to cook at home. This is done most effectively by cutting coupons, looking for deals, and maintaining rewards card status with the grocery store. After working a 50 to 60 hour week all errands must be done in the “free time,” that is the weekend, and added work is required that these errands are not too costly. While the journey to the grocery store and dealing with the colorful, courteous and competent people who work there is one joy, a more motivational experience is presented on the occasional happenstance that the couple gets to see an EBT card user in action – generally buying lobster, high quality fillet, an assortment of treats for multiple children, or other things generally out of the consideration for our working, taxpaying, and thus procreation-postponing professionals. Can there be a meeting of economic incentives?

With roughly 48 million Americans on food stamps and 101 million Americans participating in at least 1 of the 15 food programs offered by the US Department of Agriculture, circa mid 2013, it has become clear that working, saving, cost-cutting and postponing consumption is an unpopular strategy. It is unpopular, because it is losing, and arguably has little chance of success even when properly employed. The people who engage in this are literally failing to replace themselves biologically and thus the country has been inherited by the metaphorical profligate grasshopper to the expense of the frugal and efficient ant.

Food stamps are now known as the Supplemental Nutritional Assistance Program (SNAP), and administered by the Department of Agriculture in the form of Electronic Benefits Transfer (EBT) Cards. To qualify for food stamps you have to demonstrate, as arbitrarily defined by the US Census Bureau, a sufficiently low income as an individual or couple. Unlawful possession or use of food stamp benefits in an amount of $100 or more is a felony while less than $100 is a misdemeanor. Attempting to “sell” (ie. transfer the benefits of) food stamps can result in penalties and fines, including being ineligible for the program for seven years.

Legalities aside, one possible strategy that presents itself already is to not be legally married, have the low income (say working part time) child-rearing partner qualify for food stamps while the “dead beat” partner provides a real income. Because food stamp benefits can range to as much as $1,500 a month, roughly $28,500 a year as pre-tax income, some might argue that this is easily a wise move. However, for most people the tax savings to being married in the eyes of Leviathan are positive. Thus, pre-tax food stamp benefit would need to be discounted by the cost of extra taxes due to not getting the married-couple tax deduction as well as income foregone by having one partner not really work and future income foregone for their not developing a career. Though there are variations on this approach and situations where it could conceivably be profitable, it is unlikely the “partner-assisted welfare beneficiary tactic” will generally work.

The welfare state often steals something valuable from one man, only to give something less valuable to another man. In our case, the working couple is robbed of the much valued fruits of their labor (via taxation), and a less valuable product is provided to the foods stamp recipient – we know it is less valuable in this case because she is willing to sell the food stamps at a discount for cash. But due to the fungibility of cash, and the couple’s need to save, this creates a trading opportunity between the taxpayers and the tax-recipients. In order to understand the economic rationale for transactions in the food stamp secondary market we have to know the underlying numbers and specifics.

As a result of EBT card implementation the physical market for food stamps has disappeared. You can’t simply buy food stamps off of someone and then go use them. It is now necessary that the card holder does the actual shopping. According to blackvoicenews.com, here is how the common but illegal food stamp transaction works: “People sell food stamp funds in front of stores, and offer to go into the store and buy groceries for [or with the direction of] an incoming customer. Once purchased, the Electronic Benefits Transaction (EBT) beneficiaries sell the groceries to the customer for cash.” Obviously, there is no reason for the tax-payer to engage in this transaction, unless they get some kind of benefit. Why do something illegal if you are paying the same amount for groceries anyway? Thus a discount is in order such that the savings accrued are offset by the probability-weighted loss involved with state aggression. For example, the EBT card holder will buy the couple $200 of groceries, as long as the couple gives her $100 cash. If the couple does this, they would save $100. But if they got caught, they would have to deal with all sorts of immeasurable legal crap.

Our research team has been able to compile a large set of food stamp trade data. The transaction sample ranges from 2009 to 2013 and captures both rural and urban areas. From this we can understand that the secondary market price of food stamps is about 50% on the dollar with no discernible variation over time or geography. Transactions range from a low of 46% to a high of 60%. Asking prices range to as high as 75% and the typical bid-ask spread almost 9%.

If a couple normally spends $500 a month on groceries they can save $250, assuming the observed 50% on the dollar food stamp secondary market regulatory arbitrage. This adds up to $3,000 a year. On a pre-tax basis, this is the equivalent of earning an extra $4,500 to $5,000 a year. And for the progressive mind – know that the tax recipient makes the same amount in cash through the transaction, as well. Though mutually beneficial, and engaged in under free-will, this is illegal.

One argument for why food stamps should be non-transferrable is that the dead beat will use the excess cash for drugs. Yet by giving them free food, they do not have to pay for food, which frees up money to go elsewhere and thus they already have…. you guessed it….more money for drugs etc. But more importantly, it is a poor assumption that they will only spend the money on vices. It is entirely conceivable that the tax-recipient would do something constructive with it. While it is, of course, unethical to steal from the couple to give to the tax-parasite in the first place, the situation could be made somewhat better by allowing the food stamp holder to engage in free market operations. The government really just wants to give cash to the destitute so they can “stimulate spending,” so why not just let the market put cash in the pocket of the EBT holder?

 In this sense SNAP will amount to a small business program perhaps called “Socialist-National Arbeits Program” or SNAP for short. It will encourage the interactions of groups in society that might otherwise not meet – thereby supporting the central planners’ desire for integration, mixing and homogenization. Food stamp recipients will start out as small proprietorships selling their government-given wares and eventually blossom into whole-sale trading desks that can be manipulated by regulation or the Fed for further central planning purposes. Unemployment will fall as businesses provide secondary market analytics, brokerage and other supporting services to the food stamp market. Universities will prepare America’s children for careers in the booming industry. And America’s retirees could enjoy the safety of food stamp discount backed securities.

And, finally being allowed some savings, the urban professionals will feel like more than just the tax slaves they otherwise are, while the tax-sponges will have the freedom of more highly valued fungible cash as opposed to the limitations of rigid and less desired food credits.