The Effects of Cashing-out Food Stamps on Household Food Use and the Cost of Issuing Benefits

The recent report produced by Vice President Gore's committee on government efficiency highlights the importance of streamlining government operations. But often there are trade-offs between administrative streamlining and accomplishing substantive program objectives. This article examines these trade-offs in the context of the Food Stamp Program, an important component of the United States' safety net for providing low-income assistance. We estimate impacts on both administrative costs and substantive outcomes (participant food expenditures) resulting from issuing program benefits in the form of checks rather than the usual food coupons. The findings, which are based on experimental tests of the cashout approach in parts of Alabama and California, suggest that significant cost savings can be attained through cashout but that these savings may be achieved at the cost of weakening the program's ability to achieve its substantive objective of encouraging food use.