Food Stamps and Failed Economic Policies

In the 2012 presidential campaign, Mitt Romney pointed to the rise in food stamp usage as evidence of failed economic policies. As he put it: “The numbers on food stamps are really revealing. When the president took office, 32 million people were on food stamps. And now that number is 15 million higher, almost 50% higher. Now, 47 million people on food stamps. You’ve got Americans falling into poverty under this president.”

Was Mitt Romney right? Can we blame the Obama Administration for the sharp rise in food stamp usage?

Let’s take a look. The rise in food stamp usage during and after the Great Recession is stunning. From 2006 to 2010, the number of Americans receiving food stamp support increased sharply, and it remained elevated in 2013.

houseofdebt_20140509_1

Why exactly has there been such a sharp rise in food stamp usage? Is it general economic weakness? Failed economic policies? What do the data say?

The USDA provides state-level information on food stamp usage, so we can see exactly where food stamp program enrollment increased the most. Here is the growth in food stamp usage from 2006 to 2009, with darker red states those that had the largest increase:

 

houseofdebt_20140509_3

The four states with the largest increase in food stamp usage during the Great Recession were Arizona, Florida, Idaho, and Nevada. Those four states also saw steep declines in house prices. Is this a systematic pattern?

The following map shows the decline in house prices across the United States, with states in darker red where house prices crashed the most:

houseofdebt_20140509_2

 

Looking closely at the two maps, you can see that the rise in food stamp usage was largest in states that had experienced the sharpest decline in house prices: Arizona, Nevada, and Florida, for example. How robust is this correlation? Here is the scatter-plot relating these two variables. It plots house price growth from 2006 to 2009 on the x-axis, and the growth in people using food stamps from 2006 to 2009 on the y-axis.

houseofdebt_20140509_4

There is a very strong relation — states with the largest decline in house prices are the states that saw the biggest rise in food stamp usage.

This pattern persisted long after the Great Recession. In fact, food stamp usage in the hardest hit states remains far above those that largely avoided the housing decline. The following chart takes the top and bottom 20% states based on the decline in home values from 2006 to 2009, and plots food stamp usage from 2006 to 2013. The lines are both indexed to be 100 in 2006–you can calculate the percentage change for any year since 2006 by taking the point for that year and subtracting 100:

houseofdebt_20140509_5

The chart shows three important facts: (1) a bigger rise in food stamp usage in hard-hit housing states as early as 2007 and 2008, (2) the rise in food stamp usage increased by substantially more in these states during the heart of the Great Recession in 2009, and (3) even in 2013, food stamp usage is growing more in hard-hit housing states.

So what does this mean about Mitt Romney’s charge that the rise in food stamps represents failed economic policies? The housing collapse certainly was not the fault of the Obama Administration, so it’s difficult to blame them for the sharp rise that occurred from 2006 to 2009. But could policy have done more to help reduce the horrible effects of the housing collapse on the economy? We believe the answer is an unequivocal yes. We explain the exact policies in our book, and we also discuss how we can potentially avoid such a housing-crash-driven calamity in the future.

(Thanks to Phil Izzo of the Wall Street Journal who first made us aware that these data existed.)

Bookmark and Share

One Response to Food Stamps and Failed Economic Policies

  1. Pipo on May 16, 2014 at 2:39 pmi

    Have a look at Ganong-Liebman (2013), who estimate that essentially all of the increase in SNAP enrollment is due to increases in unemployment. This is fully consistent with your explanation, assuming the channel through which falling house prices is correlated with rising SNAP is through rising unemployment.

    http://scholar.harvard.edu/ganong/publications/explaining-trends-snap-enrollment