The congressional “Super Committee” is currently looking at ways for the federal government to save money. One option it should consider is food-stamp reform: Loopholes in federal law allow states to abuse the program — which is now called the Supplemental Nutrition Assistance Program, or SNAP — and reforms could save billions of dollars. The savings are a drop in the bucket of the U.S. deficit, but reform would end a massive fraud against federal taxpayers, and it would not come at the expense of the people whom food stamps are intended to help.
The problem with the food-stamp program is that while the federal government pays for all of the benefits and half the administrative costs, state governments have a fair amount of leeway in setting eligibility requirements. In other words, states can increase spending without bearing the cost of doing so. Unsurprisingly, SNAP spending has quadrupled in the last ten years, and was rising at a rapid clip well before the recession took hold.
This has created some truly ridiculous situations — such as the case of a Michigan man who won $2 million in the lottery, tied it up in investments, and received so little income from them that he was still eligible for food stamps. Until a recent policy change, food-stamp eligibility in the state was based solely on income, with no consideration of savings accounts, investments, or other assets. Though the policy was set at the state level, federal taxpayers picked up the tab.
There are two major reforms that are floating around Republican circles in D.C. One concerns “categorical eligibility,” the other “Heat and Eat.” Both of these are loopholes in federal law that states exploit to make more people eligible for food stamps.
“With categorical eligibility, the idea is that if someone receives TANF [Temporary Assistance for Needy Families, or cash welfare benefits], they shouldn’t have to go through a separate process for food stamps,” says Neil Bradley, deputy chief of staff to House Majority Leader Eric Cantor. “Fine. But this has been taken to mean that if someone receives any TANF-funded benefit — anything all the way down to a free brochure — they are categorically eligible for food stamps.”
This way, so long as a household is below 185 percent of the federal poverty level, states can bypass the income and asset requirements set by the federal government — 130 percent of poverty and $2,000, respectively — and give food stamps to people who are not poor enough to qualify. Such as a lottery winner.
Bradley’s brochure isn’t a hypothetical example, or even an unusual anecdote. It’s standard procedure in many states — the USDA even has a list of states that give out TANF brochures or 1-800 numbers to anyone who needs categorical eligibility in order to qualify for SNAP. With the federal requirements gone, it’s easy enough to get food stamps that some colleges cheerily encourage students with part-time jobs to apply.
Ending this would entail merely adjusting federal law to clarify that only cash welfare benefits, not other benefits provided with TANF dollars, confer categorical eligibility. Those who received other benefits would still have to go through the normal qualification process before receiving food stamps.
Meanwhile, Heat and Eat (which is often spelled, quite obnoxiously, H-EAT or H/EAT) is a scam that states use to give out more SNAP benefits at federal expense. When state officials calculate a household’s income for the purpose of food stamps, there are some deductions — including one for utility bills. Not everyone qualifies for the full amount, but states have found a loophole to fix that: If someone receives state assistance to pay their utilities, they are automatically eligible for the maximum utility deduction. And it doesn’t matter how much or how little state assistance they receive.
So, states have taken to sending out $1 checks — making low-income residents eligible for the full deduction, and thus higher federally funded benefits. In New York alone, 115,000 households receive, on average, $118 extra in food stamps thanks to $1 utility checks from the state. Pro-welfare groups are not bashful about advocating this strategy.
Initial estimates are that closing these two loopholes could save $20 billion over ten years, according to a House Republican aide. Alternatively, the “Path to Prosperity” put forward by Rep. Paul Ryan (R., Wis.) suggests giving food-stamp money to the states in the form of a block grant, rather than letting states spend whatever amount they want at federal expense. Setting the grants at Ryan’s recommended levels, coupled with other reforms such as work requirements, would save significantly more, roughly $127 billion over a decade.
If states sincerely believe that the federal eligibility requirements for food stamps are too strict, they are free to set up complementary programs with their own money. They could also encourage a debate in Congress about changing the requirements. Instead, they have chosen to exploit loopholes and raid the federal treasury. There is no reason whatsoever to let this continue in the face of a mounting national debt.
— Robert VerBruggen is an associate editor of National Review.