Amazon – Food Stamp Junkie (2017 Jul)

by Barry A. Liebling

I have commented previously on how recipients of food stamps (officially the Supplemental Nutrition Assistance Program – abbreviated SNAP) are like junkies. Once someone gets used to receiving government prizes on a regular basis he is likely to become hooked. He does not want the flow of goodies to stop, and he will take active measures to insure its continuance and expansion. Government administrators are delighted with this arrangement. Their jobs become increasingly secure because their “clients” need them, and the number of “clients” steadily grows.

Furthermore, I have remarked that the biggest food stamp junkies are not low income people. Instead, retail establishments are the major addicts. A business that accepts food stamps becomes at least partially dependent on government handouts. And the more a business relies on income from food stamps, the more it becomes a junior partner in the leftist mission of growing the welfare state in perpetuity.

Recently Amazon announced that it intends to become a dominant player in the food stamp game. Its biggest rival, Walmart, obtains a sizable percentage of its revenue from shoppers who use SNAP cards. Amazon views these customers as a tempting target. As of this writing SNAP cards cannot be used for purchasing online at Amazon. But the online giant is collaborating with the government to make SNAP purchases easy. The interesting new development is that Amazon plans to offer people who can document they are on government assistance Amazon Prime Membership for $5.99 per month – as contrasted with the $10.99 per month (or $99 a year) that regular customers pay.

Here are some implications of Amazon’s new plans.

Some existing Amazon Prime customers will be resentful. They will complain that they are Amazon’s core customers and should be offered the best price for their Prime membership. Many will regard Amazon with suspicion and wonder whether their fees are justified. The Prime renewal rate may decline.

Amazon already has more than one million customers who participate in the food stamp program. However, these consumers have not been using their SNAP cards to pay. With the new policy they will be pleased to learn that their food stamp benefit has increased in value. Even if the dollar amount of their government benefit remains the same, they will notice that their privileges have been enhanced. If food stamp recipients were loath to leave the program before, the new Amazon initiative will make them even more reluctant to get off welfare.

Amazon management will fastidiously track the profitability of their food stamp initiative. From a cash flow perspective it could turn out to be a winner. It may be that SNAP cards will be used to buy high margin merchandise – as opposed to items that are discounted. While I am not aware of any scientific surveys, I have noticed that in New York City where I live retail establishments hang “We Accept SNAP” signs near expensive items, and not near comestibles that are on sale.

To the extent that the Amazon food stamp putsch leads to higher revenues, Amazon will use its political muscle to preserve and expand welfare. You can bet that there will be Amazon lobbyists arguing that low income people need even more generous benefits – especially for obtaining Amazon products – from the government. And this political activism cuts both ways. Even as Amazon will be a cheerleader for the bloated welfare state, much of its prosperity will be at the pleasure of welfare state officials. What is the chance that Amazon will speak out against any government meddling if a sizable chunk of its income is dependent on government prizes?

Note that Amazon will not be the only online retailer to get into the act. Many other establishments will jump at the chance of feasting at the food stamp trough. And the more that SNAP money is available to online businesses, the more these firms will be dependent on the bloated welfare state.

It does not have to be this way. Amazon management could decide to court low income customers in a manner that does not fuel the size and scope of an intrusive government. Amazon could shun food stamps. The company could offer a prime membership category selling for $5.99 a month (probably with fewer benefits) that is open to all potential customers. People with limited incomes might be persuaded to buy a membership. In this scenario they would not have to demonstrate they are on welfare, and would not be incentivized by the program to either seek or stay on the government dole. Regular Amazon Prime members would have the option of trading down to a lower tier and would have less reason to resent the retail giant. Government bureaucrats would not have increasing leverage over Amazon policies. Of course, this better action will only happen if Amazon management appreciates the importance of a free society and recognizes that government-sponsored food stamps taints everything. Kicking a malignant addiction is a difficult challenge.

*** See other entries at in “Monthly Columns.” ***

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