Oh Dear, the Feds Want to Replace Food Stamps With a 'Harvest Box'
The Soviet Union was the first country to try to centralize the distribution of goods through government. That system lasted all of 75 years, failing miserably in its attempt to match free market economies in the creation of wealth. Now the White House seems to think it can learn something from the Soviets.
Buried in the White House’s 2019 budget is an idea so naïve and poorly argued that it can only have been thought of by a harried USDA bureaucrat under pressure by the Office of Management and Budget (OMB) to come up with something – anything – that could be used to justify claims of savings.
The idea is to save “billions” by giving low-income families a box of government-selected, non-perishable foods every month instead of food stamps. Every month under the scheme, needy Americans would receive about half of their food stamp allotment in the form of “America’s Harvest Box”, to be made up of peanut butter, canned fruits and meats, cereal, and other durable items.
OMB Director Mick Mulvaney hailed the idea as one that kept up with the modern era, calling it a "Blue Apron-type program" — a nod to the high-end meal kit delivery company. Some bad news on that front; Blue Apron had one of the worst stock debuts in 2017, and it has struggled to hold onto customers. Even worse news: Government is not the private sector, nor can it, or should it, be expected to be. When private-sector companies fail to meet cost expectations, the street knows about it, and shareholders react. When government fails to meet cost expectations, the fact is buried in a long dense document years later, the politician who promoted the idea is retired, and the reaction too often is muted. That is one of the principal reasons that command-and-control economies fail to either command or control.
Another piece of bad news: When government estimates the cost of programs, it usually leaves some out. Example: The projected cost of the “America Harvest Box” program does not include one nickel for distribution. As a USDA spokesman acknowledged: “The projected savings does not include shipping door-to-door for all recipients.” How expensive could that be? Let’s put it this way: This proposal may make sense if you could simply grow the food in Iowa and Kansas and magically transport it at no cost to the over 16 million households across the United States that receive food stamps. Otherwise, better get out the calculator and add in distribution costs.
As much as a third of the Blue Apron price per box, for example, goes toward shipping and logistics, which remain daunting, industry analysts told The Washington Post last June. Does anyone seriously believe that government food commissars could do better at keeping down costs than entrepreneurs whose financial future depends on it? A government trying to distribute food to over 16 million households would face even greater logistical problems than Blue Apron. Would USDA, for example, allot the same foods to, say, an elderly diabetic and a family with young children? How would the food boxes be customized for, say, a family that has a child with nut allergies — or for those who don't eat certain types of meat out of religious or personal reasons? How about the last mile problem – what would be the delivery costs to households in rural or remote areas?
The proposal is based on the Marxist notion that private-sector profitability drives up costs. In fact, it drives them down, by enlisting expertise, encouraging entrepreneurship and innovation, identifying potential pitfalls, incentivizing solutions, and fostering competition. The reason the private sector has been producing food for the food stamp program since it came into being is simple: The private sector is better at it. Just like it is better at building roads, subway systems, and schools. Just like it is better at producing the paper that this budget was printed on. If government was better than the private sector at distributing and marketing food, consumers would be doing their weekly shopping at the local USDA store instead of Safeway.
The private sector does not extract surplus value, despite what Karl Marx thought and Mick Mulvaney seems to believe. It produces value, and government would be unwise to try to write that value off as an unnecessary cost.
The notion that government would be able to save money by providing food directly to recipients is based on the fact it would be buying the food at wholesale, rather than retail prices. In fact, there are three broad price categories: Wholesale, retail and government. Anyone who has looked at what the Pentagon has paid for a wrench knows which of the three is most expensive.
When faced with a budget that will add trillions to the debt over the next 10 years, it is easy to succumb to the temptation to grasp at any idea that sounds like it would save money. Trying to turn America into one big soup line should not be one of them.
