By Amitrajeet A. Batabyal
Statistics paint an alarming picture of obesity in America. For instance, in 1960-1962, 13.4 percent of American adults were obese. In 2003-2004, the corresponding number was 32.2 percent.
In other words, in the last four decades, the number of obese Americans has more than doubled. Obesity is now a serious public health issue because, at the level of an individual, it leads to higher risk of morbidity and mortality. In turn, this results in large and growing health care costs to society. Researchers have estimated that almost $40 billion of the increased medical spending between 1998 and 2006 is attributable to the increased prevalence of obesity.
The recent uptick in the obesity rate is the result of an energy imbalance in which, given a particular genetic predisposition, calories consumed exceed calories expended. First lady Michelle Obama has sought to address this imbalance in our children with her “Let’s Move” campaign.
However, because the energy imbalance for a median body weight person is pretty small, researchers have pointed to economic factors as being responsible for the observed gain in body weight. One economic factor that has gained a lot of attention is the price of food. Several researchers believe that changes in food prices coupled with farm subsidies that make farm commodities – key ingredients in fattening foods – cheap are responsible for the observed increase in obesity.
Economists agree that in order to discourage the consumption of a good, we need to tax it. To encourage the consumption of a good, we need to subsidize it. Beyond this, there is little agreement on what food products to tax and what to subsidize.
Recent research by economists Abigail Okrent and Julian Alston sheds light on this salient policy question. They study the impacts of food and farm commodity taxes and subsidies on food consumption, body weight and social welfare in America. Their study leads to four important findings.
First, they show that eliminating farm subsidies will have little impact on calorie consumption and obesity. Second, the policy that gets most directly at obesity is a tax on the caloric content of food. Specifically, a tax of $0.0165 per 1,000 calories leads to a net national benefit of $2.28 billion, or $10 per adult. Contrary to thinking in some quarters, sugar and fat taxes are shown to be less useful than the calorie tax. Third, subsidies on fruits and vegetables turn out to be very inefficient. Finally, because a calorie tax would be regressive – hurting the poor more than the rich – for it to be successful, it would have to be implemented as part of a package of reforms including, for instance, education programs.
Amitrajeet Batabyal is the Arthur J. Gosnell professor of economics at the Rochester Institute of Technology. These views are his own.