How Fed Food Assistance Fattens Corporate America

One-third of Americans dependent on aid? Big business approves.

Image: Bloomberg Asks Fed Gov't For Permission To Ban Food Stamp Purchases Of Sugary DrinksOn Tuesday, the U.S. Department of Agriculture (USDA) revealed that a mind-blowing total of 101 million Americans participate in at least one of 15 different nutrition programs made available by the federal government. That surpasses the 97.2 million of Americans who represent the total number working full time in the private sector, according to the Bureau of Labor Statistics (BLS). This is a disgraceful indictment of the Obama administration's big-government policies. Many of those policies are pushed by corporate entities looking to feed at the government trough.

First, a look at the scope of the problem. Since the total population of the United States is approximately 316 million people, nearly one-in-three Americans are receiving some kind of food benefits. The largest individual program is the Supplemental Nutrition Assistance Program (SNAP) more commonly known as food stamps. An average of 46.7 million Americans from 22.5 million households participate in the food stamps program on a monthly basis, at a cost of $7.4 billion per month.

The food stamps program is followed by the National School Lunch program, which is used by a daily average of 32 million students. The School Breakfast Program is used by 10.6 million per day; Women, Infants, and Children (WIC) is used by 8.9 million per month; the Fresh Fruit and Vegetable Program was used by 7,100 schools during the 2011-2012 school year; the Child and Adult Care serves daily meals and snacks to 3.3 million children, along with 120,000 adults receiving care in nonresidential adult day care centers; the Senior Farmers’ Market is used by 864,000 low-income seniors. Other programs include the Commodity Supplemental Food Program for infants, children and the elderly; the Special Milk Program; the Summer Food Service Program for needy children during summer or when schools are closed; and the Disaster Food Assistance program, which provides people with food following any number of emergencies.

Four more programs round out the list, including the Commodity Program (Schools-Child Nutrition), costing $1.1 billion in FY 2012; the Emergency Food Assistance Program at $483 million in FY 2011; the Food Distribution Program on Indian Reservations used by 276 tribes; and the WIC Farmers' Market Nutrition Program, which provides coupons to 1.9 million women infants and children.

In a remarkable understatement, the USDA notes that the Food and Nutrition Service’s (FNS) nutrition programs "may be duplicating its efforts by providing total benefits that exceed 100 percent of daily nutritional needs to program participants when households and/or individuals participate in more than one of FNS’ nutrition programs simultaneously."

This kind of massive dependency is a boon to corporate America. In 2011, YUM! Brands, the parent company of Pizza Hut, Taco Bell, KFC, Long John Silver's and A&W lobbied government officials in Ohio Pennsylvania, Florida and Kentucky to allow its restaurants to participate in the SNAP program. “Everybody wants to get a piece of that action,” Marion Nestle, a New York University professor of nutrition and public health said at the time. “Right now it’s going to grocery stores; restaurants think that’s not fair.” According to the USDA, which was against the effort, "prepared foods" are not generally available under the SNAP program. However, the 1977 Food Stamp Act allows states to grant restaurants permission to accept food stamps from the homeless, disabled or elderly.

As of 2012, California, Arizona and Michigan were allowing restaurant participation in SNAP on a large scale, with Florida and Rhode Island committed to pilot programs. The USDA, which voiced opposition to YUM! Brands' efforts in 2011, is seemingly of two minds on the subject. Here is a website dedicated to promoting the Restaurant Meals Program, a federally approved effort implemented at a state and county level. In 2011, the Milwaukee-Wisconsin Journal Sentinel characterized it as a "win-win for the recipients, the restaurants, the community and the economy."

Between 2005-2010, the number of businesses approved by the USDA to accept food stamps grew by 33 percent, from about 156,000 to nearly 209,000, according to USDA data. They included convenience stores, dollar discount stores, pharmacies and gas stations. When YUM! wanted a piece of the action, they were supported by the National Restaurant Association. They were opposed by the Association of Conveniences Stores, whose spokesman, Jeff Lenard, was refreshingly honest in explaining why. "If the pie's only so big, nobody's going to want to see the pie sliced thinner," he said. "I'm not sure that's in the best interest of public health."

In 2012, that "pie," which is the largest part of a farm bill Congress enacts every five years, cost American taxpayers a record-setting $80 billion -- double the $40 billion it cost only four years earlier in 2008.

Furthermore, the machinations of food providers with regard to the SNAP program is only half the story. A report by the Government Accountability Institute (GAI) reveals that “only three corporations have cornered the market for providing SNAP services to the needy and destitute." Those companies are J.P. Morgan EFS, Affiliated Computer Services, and eFunds, and they provide "EBT services for 49 states and 3 US territories." The largest player is JP Morgan, which says EBT is “a very important business to JP Morgan. It’s an important business in terms of its size and scale...Right now volumes have gone through the roof in the past couple of years or so. The good news from JP Morgan’s perspective is the infrastructure that we built has been able to cope with that increase in volume.”

The GAI report further illuminates the symbiotic relationship between such companies and the USDA, noting that since 2009 -- when the recession officially ended and the so-called recovery began -- 32 states have followed their suggestion to use Broad Based Categorical Eligibility to "increase SNAP participation and reduce State workloads." The Broad Based Categorical Eligibility policy was implemented by the Clinton administration and heavily promoted by the Obama Administration. It allows states more "flexibility" with regard to asset and income limits, enabling more people to enroll in the program. The GAI estimates that such changes have increased food stamp participation by 70 percent from 2007 to 2011.

In 2009, as part of the "stimulus package," the Obama administration also suspended the the food stamp program's work requirements for able-bodied adults. Welfare reform enacted 1996 mandated that after three months of food stamp participation, able-bodied recipients had to be engaged in some kind of work activity for at least 20 hours a week. In 2010 and 2011, Obama requested the suspension be extended. Yet as is often the case with this president, Obama did not wait for Congress to act. The USDA issued waivers, and the number of able-bodied SNAP recipients went from 1.7 million people in 2009 to 3.9 million in 2010. Moreover, the administration has allowed the waivers to continue, despite the reality that they were only supposed to be temporary.

The trio of companies mentioned above certainly don't mind. The lion's share of their revenues come from the total number of people enrolled in the SNAP program on a monthly basis. This "Cost Per Case Month (CPCM)" is a fee for each individual enrolled in the program. It ranges from $0.65 to $1.45 depending on the state, with higher fees for the contracting company if the state combines multiple welfare services, such as SNAP and Temporary Assistance for Needy Families (TANF), on a single EBT card. The corporations also make money on monthly fees garnered from Point of Sale (POS) machines that are used to make EBT purchases and transmit purchase information to the government, ATM machines that take EBT cards for cash withdrawals, card replacement fees for lost or stolen cards, and customer service charges for calls made by EBT users.

In other words, a combination of Americans' dependency and sense of entitlement is quite profitable. So much so that JP Morgan's donations to members of Congressional Agriculture Committees have more than doubled, from the time they entered the EBT services market, through the 2010 election cycle. And for those who invariably associate Wall Street banks with the Republican party, it should be noted that JP Morgan contributed $345,505 to John McCain during the 2008 election cycle. Obama received $807,000 from the bank.

Several members of Congress and the Executive Branch have substantial holdings at JP Morgan. This might explain why legislation known as the Healthy, Hunger-Free Kids Act was passed by Congress in December 2010 and signed by the president. The law requires every state to add the USDA's WIC program to their EBT cards by October 1, 2020. Since WIC services 8.9 women and children, a host of new "customers" will be added to the corporate bottom line.

Yet that addition comes with a heavy price. In the same way EBT cards removed the stigma that actual food stamps carried, the "stigma" of dignity itself is being removed from a large swath of the American population. And lest anyone think that all of the increased usage in food programs directly correlates to increased levels of poverty, think again. In 2002, nearly 12 percent of Americans lived below the official poverty line. In 2012, it was 15 percent. Thus, in ten years poverty increased by 25 percent, while as spending on food assistance grew by 400 percent. Economist Diana Furchtgott-Roth of the Manhattan Institute, who analyzed the disconnect in 2012, saw an ominous future. "Perhaps most troubling is that the expansion in the SNAP program means that even when our economy returns to full activity and much lower unemployment, the food stamp benefits will not decline commensurately,” she wrote. “Food stamps have become more of a permanent entitlement rather than a temporary stop-gap for the temporarily unemployed.”

No doubt the executives at J.P. Morgan, Affiliated Computer Services, and eFunds are thrilled.

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