That would be my guess too, but I wasn't sure, since I didn't know anything about the WIC program. Actually I had a lot of doubt. How bad can a program be that, as far as I knew, gives money to help poor families buy food for babies? How far can you go wrong with that goal? I expected to find some unremarkable scandals about poor mothers buying vodka or Cheetos with their credits. Nothing too outrageous. I could make some principled statement about how any meddling in the market by government leads to inefficiency and waste. That, by far, the biggest improvement in the lives of the poor is directly creditable to the fantastic and unprecedented creation of wealth in the marketplaces of the developed world. The UN tells us that "The target of reducing extreme poverty rates by half was met five years ahead of the 2015 deadline," largely because of increased participation of Chinese people in the global market. I could whine that public programs are funded by taxes, which are undeniably coercive. That, much as we would like the resources of the wealthy to be used to relieve poverty, and rightly celebrate when the rich help the poor, it is simply not right to take money out of Donald Trump's pocket to aid the downtrodden. I probably wouldn't convince anybody. I could worry that it is an affront to human dignity • to require people to fill out forms to prove that they are needy • to give them benefits via special coupons with special rules, to buy food items from an approved list in approved sizes ("Must buy the least expensive of the type of milk" ... "Not Allowed: ... milk with added calcium ... reduced fat (2%) milk" "You may not buy: cereal with added fruit or formula, organic, added DHA or other extra ingredients") • to nag them that they must be "courteous to store cashiers" • to threaten any enterprising self-starters among them in case they consider taking the fight against poverty into their own hands • to instruct people to "report" on their neighbors I might predict that rational human beings will respond to incentives created by this program by opening "WIC-only" stores, catering to customers who are unusually price-indifferent, and do well despite prices "13 percent to 16 percent higher" than those in competitive stores. I could wonder what it might mean when three companies provide all WIC infant formula • Mead Johnson (Enfamil and Gerber), owned by Bristol-Myers Squibb (NYSE: BMY revenue US$19 billion) • Ross Laboratories (Similac), owned by Abbott Laboratories (NYSE: ABT revenue US$40 billion) • Carnation (Good Start), owned by Nestlé (SIX: NESN revenue US$100 billion) and wonder if their interests might somehow distort this program, bending it toward their own ends. But let's ignore all that. Let's say those things don't happen, or they aren't that bad, or they are offset by the benefits of the program. Let's think of the children! We will judge the Women, Infants and Children program by asking if it does what it was intended to do: safeguard the health and well-being of the Nation’s children This is the language used in the creation document, the Child Nutrition Act of 1966. The alert reader will notice that no time is wasted in getting to the "Special Milk Program Authorization." No doubt Big Dairy was on hand to consult on the practical details of providing "free" milk to school children. For parents of newborns, WIC means free infant formula (not for resale). Apparently not only poor parents; according to an article in International Breastfeeding Journal, "Nearly half (47%) of all infants born annually in the United States participate in the WIC program, and this number continues to grow." Free food for infants may not sound so bad until you recall that breastfeeding is one of the most important factors in infant nutrition. In recent years knowledge of the many advantages of breast milk has become widespread. But free formula seems to be more persuasive than public awareness efforts: "the data show that the breastfeeding rate at six months for WIC participants has consistently been only one third to one half the rate for non-WIC participants." Why is formula such a big deal? "In the mid-1980s, infant formula accounted for nearly 40 percent of total WIC food costs." This is where BMS, Abbott, and Nestlé come in. To help make budget, the WIC masters created a perverse rebate system, with a faintly capitalistic idea of competition, in which the Big Three bid for WIC formula contracts state by state. (Please don't worry that manufacturers, who don't have to impress any finicky parents, only some bureaucrats, will cut corners on quality standards in order to be the low bidder. I am sure WIC thought of that and made sure it wouldn't happen somehow.) The result is a crazy system in which the majority of the price of a can of formula is the rebate, which adds up to a total kickback to the WIC budget of $1.88 billion in 2013. I can't figure out how it all works, maybe it is not as sinister as it looks, but it looks stinkier than a diaperload of meconium. The International Breastfeeding paper quotes an analysis showing that a "minimum of $3.6 billion would be saved if breastfeeding were increased from current levels... to those recommended by the U.S. Surgeon General... This figure is likely an underestimation of the averted health care costs because it represents cost savings from the treatment of only three childhood illnesses." Not all my sources are current. I hope the situation has improved. I acknowledge that WIC generates some benefits, it's not all bad. Breast milk is better than formula, but formula is better than nothing (and nothing is better than vodka). I am sympathetic to anyone who would respond to this analysis saying "It's not perfect, but this is an important program and we should work to improve it." Child nutrition is important, but my goal was to evaluate the WIC program. By promoting infant formula, the Women, Infants and Children program has caused considerable harm to infants in poor families. It has failed to "safeguard the health and well-being of the Nation’s children." I'm not a fan.My guess is that you're not a fan of the WIC program to begin with. Am I right?
Further reading helped me elucidate the infant formula lifecycle, and also allayed some of my concerns about the negative consequences of the WIC program. I see that WIC does a lot of good, and there has been effort to promote breastfeeding, though formula continues to be a big component of WIC benefits. The program's focus has evolved beyond simply delivering calories in a can when malnutrition was a problem in the 1960s. It is still concerning that WIC users have lower rates of breastfeeding than average, since this is such an important factor in child health. But it's likely that the rate would be lower in these households anyway. I don't know if the appeal of "free formula" discourages breastfeeding more than the awareness-building efforts promote it. It's a difficult problem. I would more likely be more a fan of the program if it just gave the cash to needy people rather than patronizing them and creating weird incentives in the food market. Information and training on nutrition and breastfeeding is important too, and might be made available to beneficiaries who are not disinterested. Bad parents will still be bad parents; forcing them to sell WIC food on Craigslist to get liquor money won't help much. Here's what I found about formula. As of 2008, the overall formula market in the U.S. is dominated (98%) by the Big Three: Abbott had 43% with Similac, Mead Johnson had 40% with Enfamil, and Nestlé had 15% with Gerber. These three manufacturers bid for the state-by-state rights to supply formula to WIC customers. Winning a contract means that WIC users in that state will be allowed to obtain formula from that brand using their WIC credit, which can also be used for foodstuffs (on the cheap & nutritious approved list). So the contract holder sells formula to retailers at "wholesale" cost, which is about $4 for enough powder to make 26 ounces of formula. Other manufacturers are free to sell formula to retailers as well, like any other product. When a WIC user buys a can of "contract" formula, they "pay" the full retail price with their WIC voucher or card (if they want a different brand of formula, they must pay out of pocket). Retailers who sell WIC products are required to charge "competitive" prices, but there is evidence that they cheat a little. Retailers are reimbursed by the WIC program for the qualifying goods sold. So far it is pretty simple: USDA uses public funds to reimburse parents who qualify (based on income) when they purchase the selected brand of formula. But which brand gets selected? Here's where it gets a little strange. The manufacturers bid with a wholesale price as well as a rebate, which is returned to the WIC program for each purchase. The rebate ranges from 77% to 98%, with 21 states receiving a discount of 95% or more. The contract is awarded to the manufacturer who bids the lowest net price: wholesale minus rebate. The rebate money is returned to the WIC budget, providing nearly a third of the $6 billion total annual budget. Manufacturers can't be making much on these rebated sales, and I wouldn't be surprised if they are losing money. But WIC products may get better product placement on shelves, and might be the only brand carried by stores that don't have much space. So the manufacturers have to gamble with their bids that the revenue they make on unrebated sales (being four to fifty times higher per unit) will balance the rebated sales. The end result is probably that non-WIC customers pay more for formula, and this money helps WIC customers get formula and food. Not all bad, but it is an extra burden on formula customers who don't participate in WIC due to pride, ignorance, or apprehension, as well as income. There are still complaints that most states exclude organic foods from the WIC program, but the approved food lists are not all as restrictive as the "whole milk only, no added calcium" rule I found. It took a few years, but eventually formula with DHA believed to be important for brain development, was approved. The blog post WIC on the Chopping Block has a good overview of the program with a favorable overall perspective that also mentions a number of concerns. • WIC tends to operate as a subsidy upon the industrial food system • The Farmer’s Market Nutrition Program is tiny and excludes milk, cheese, dried beans, grains or juices (approved for WIC when purchased in supermarkets) • WIC's breastfeeding programs seem to have made little difference – or even to slightly discourage breastfeeding The author shares my primary concern about breastfeeding:
No one wants to risk poor infant development by restricting formula access – at the same time, we know that nursing has a greater remunerative return than WIC on short and long term child health, as well as being a way of cutting the budget without harming families – programs that increased the emphasis on nursing and incentivized nursing further might save WIC more – infant formula represents a significant portion of its overall budget.
But even if breastfeeding were to completely supplant formula, poor mothers would still need support, as the calories have to come from somewhere. Calorie for calorie, breastfeeding is more expensive, since there is a net energetic charge for converting food to breastmilk. (Note: This isn't to say it's more expensive when all the externalities are factored in.) Therefore, food supports are probably still necessary for poor women with children, else the child cannibalize her mother. I totally agree that incentivizing formula consumption is to be avoided. However, I din't think it's wise to throw out the baby with the bathwater.
Mothers on the lower end of the ladder might be better off with some more of that "net energetic charge." "Wages were inversely related to BMI and obesity." Also, calories are cheap. We could do worse than to use funds now subsidizing Big Mac Attacks to alleviate poverty. If we are going to divert resources to fight the harmful effects of poverty, in my view simpler is better and direct cash transfers, while not perfect, have the fewest unwanted side effects. I think we agree here.