The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
December 26,1975 Stamps for Christmas If Dickens were writing A Christ mas Carol today, he would proba bly have Scrooge hassling Bob Cratchit over his food-stamp allotment, because food stamps provide most of the Christmas fare for the poorest of the nation's poor. This $6-billion Federal pro gram also provides much food for thought for the nation's lawmakers. Indeed, Congressmen have put about 160 separate reform bills in the Congressional hopper this year in different attempts to re shape this big, complex and expensive program. Over the years, the program has lost much of its earlier constituen cy, with farmers in particular no longer relying on government programs to get rid of their surplus commodities, especially when the world market beckons so invitingly. Yet with the growth of the program to encompass 3 percent of the nation’s total food spend ing, it has gained a wider constitu ency; today, about 60 percent of the U.S. Department of Agricul ture's total budget is allocated to food stamps and related pro grams. To many observers, this method of upgrading nutrition and redistributing income repre sents a backdoor way of achieving what the Nixon Administration hoped to accomplish with the still born Family Assistance Plan of 1971. Stamps for the poor The food-stamp program provides eligible households with monthly allotments of coupons that are redeemable for food. The value1 1 of the monthly coupon allotment varies by household size and is based on the U.S.D.A.'s "economy food plan"—a basic quantity of food designed to provide a certain daily allowance of major nutrients. Participating households with little or no income receive their entire coupon allotment free, while households at the upper end of the eligibility range pay 75 to 85 percent of the value of the cou pons received. The difference be tween the value of coupons issued to households and the amount households pay for them represents the value of "bonus" stamps—that is, the amount of the government subsidy. According to the U.S.D.A., 87 percent of all food-stamp partici pants lived in households with take-home pay below $6,000 a year in late 1973, while 97 percent were below $9,000 a year. (About two-thirds of all participants had incomes of less than $3,000.) Pro gram participants included 58 percent of all four-person house holds with income under $3,000, but only V/2 percent of all fourperson households in the $6,000$10,000 range. About 80,000 participating households had in comes of $12,000 and over, in households which averaged seven persons in size. Administration and Congressional critics have attacked those regu lations which permit middleincome families to qualify for stamps, and a number of bills propose an upper income limit on (continued on page 2) Im :1 Dc a Opinions expressed in this newsletter do not necessarily reflect the views of the management of the Federal Reserve Bank of San Francisco, nor of the Board of Governors of the Federal Reserve System, participation in the program. Other points of criticism concern the distribution of stamps to striking workers and to middleincome college students. Criti cisms of mismanagement appear less valid; according to a U.S.D.A. quality-control survey, 4.3 per cent of all participating house holds have been wrongly de clared eligible, mostly because of clerical errors. (Fraud was found in about 0.08 percent of all cases studied in the survey.) Indeed, errors are bound to arise in view of the program's immensely com plicated eligibility rules, some 144 pages of single-spaced type. The program's increasing complexi ty reflects the way it has ex panded and shifted focus over the years. It was designed first as a means of disposing of farm sur pluses, and then as a means of fighting malnutrition among the destitute—and now it has become also an income-supplement pro gram for the working poor. A l though welfare families are en rolled automatically in the pro gram, working families recently have outnumbered welfare fami lies among stamp recipients. In the 1974-75 recession, the foodstamp program—along with un employment compensation and social security—played a major role as an automatic stabilizer, cush ioning the recession's impact on family incomes. Why it grew Federal programs to feed the poor began in the 1930's and usually involved the distribution 2 of farm surpluses. (A minor-scale food-stamp program existed during the 1939-43 period.) The present program started as a modest pilot project in 1961, but in recent years it has grown to cover the nation, replacing other programs in the process. One such program, involving distribution of surplus commodities, supported about 7V2 million people as late as 1962. The food-stamp program has grown very rapidly in the present decade, with Congress rewriting the legislation to guarantee a “ nutri tionally adequate diet" to all possible needy applicants—and with Congress attaching a price escalator to offset the impact of the dramatic escalation in food prices. By the end of 1970, 4 million persons were on the rolls, but that figure doubled within a year and tripled within three years' time. In 1974 the rolls jumped to 14V2 million people as Congress made the food stamp program manda tory nationwide, replacing the surplus-food program altogether. The advent of Puerto Rico into the program added almost 2 mil lion people, or roughly 80 per cent of the island's population. Despite these changes, the com bined enrollment in all Federal food programs changed hardly at all from late 1971 to late 1974. Then came the recession; as unem ployment soared by 70 percent, food-stamp participation jumped 30 percent to 191 million people. /2 However, in the early months of recovery, participation fell by about 700,000, indicating the strong cyclical nature of the program. Will it grow? Will the food-stamp program continue to grow at its recent pace? A U.S.D.A. analysis, relying on the disappearance of the recessioncreated bulge, argues that par ticipation could decline 10 percent by 1980. At the same time, the escalator provision would insure that any future rise in food prices is reflected in the overall cost of the program. On the other hand, several forces could expand participation even above 1975 levels. Given the way the regulations are written, there may be just as many eligible people not enrolled in the program as there are recipients, even though nationwide coverage has already been achieved. In fact, the U.S.D.A. is under two court orders to recruit some 20 million “ missing” participants. This feature reflects the open-ended nature of the pro gram, since unlike other publicassistance programs, it has no arbitrary upper limit on income eligibility. Under present regula tions, a complicated series of income-tax-style deductions make it possible for people with rela tively high incomes to qualify for food stamps. However, most major reform bills now before 3 Congress would end this feature by imposing a ceiling on the total income permitted for eligibility. Program costs could also soar because of the legal language which says that the food-stamp allotment must provide “ a nutri tionally adequate diet.” The pres ent coupon allotment is based on the U.S.D.A.'s “ economy food plan,” which costs 20 to 25 percent less than the U.S.D.A/s “ lowcost” food budget. But according to the Department's nutrition survey, less than half of all families spending at the economy cost level can achieve even two-thirds of their recommended dietary allow ances. Consequently, a U.S. district court last June ordered the U.S.D.A. to issue more adequate allotment schedules—and this decision (if enforced) could as much as double the program cost. The nation's experience with food stamps may influence its future actions with other types of income supplements. Housing allowance experiments are now going on in 13 locations through out the country. Educational vouchers are being tested in a demonstration program in Califor nia. Some groups also have pro posed energy or gasoline stamps, and others have proposed clothing stamps. As the Washington Post recently noted, “ The trump will be played if and when the U.S. Treasury proposes the stamp stamp—they might call it money.” In that case, the Family Assistance Plan will have become reality after all. William Burke uoj8umse/v\ • qeif) • M GMEH • uo S o jo B I U J O p |B 3 . • epBAON • ogepi BUOZUy • •1IIE3 '03SI3UEJ-I UPC Z£Z ON HWH3d aivd 3D VISO d s n 1IVW SSV1D IS d IJ BANKING DATA—TWELFTH FEDERAL RESERVE DISTRICT (Dollar amounts in millions) Selected Assets and Liabilities Large Commercial Banks Amount Outstanding 12/10/75 Loans (gross, adjusted) and investments* Loans (gross, adjusted)—total Security loans Commercial and industrial Real estate Consumer instalment U.S. Treasury securities O ther securities Deposits (less cash items)—total* Demand deposits (adjusted) U.S. Governm ent deposits Time deposits—total* States and political subdivisions Savings deposits O ther time deposits! Large negotiable C D ’s 88,511 65,785 1,856 23,287 19,630 10,114 10,015 12,711 88,887 24,723 415 61,821 6,110 21,794 30,297 16,441 Weekly Averages of Daily Figures W eek ended 12/10/75 Member Bank Reserve Position Excess Reserves Borrowings Net free (+) / Net borrowed (-) Federal Funds—Seven Large Banks Interbank Federal fund transactions Net purchases (+) / Net sales (-) Transactions of U.S. security dealers Net loans (+) / Net borrowings (-) Change from 12/03/75 + + + + + + + + + + + + + + 1,136 328 254 27 1 7 766 42 994 590 76 481 154 24 226 410 Change from year ago Dollar Percent + + + + + + + + + + - 2,213 1,989 99 1,336 358 291 4,487 285 6,310 1,074 61 4,688 15 3,804 957 69 W eek ended 12/03/75 + + + + + + + + + + - 2.56 2.93 5.63 5.43 1.79 2.96 81.17 2.19 7.64 4.54 17.23 8.21 0.24 21.15 3.26 0.42 Comparable year-ago period 50 26 24 + 72 1 71 + 81 1 80 + 2,351 + 1,767 + 1,761 + 1,154 + 707 + 879 - *lncludes items not shown separately. ^Individuals, partnerships and corporations. Information on this and other publications can be obtained by calling or writing the Public Information Section, Federal Reserve Bank of San Francisco, P.O. Box 7702, San Francisco 94120. Phone (415) 397-1137. B>)SE|V
@FedFRASER