Targeted transfers in the Big White Ghetto in the US

I am not a big fan of National Review, but this article is worth reading. It describes the "Appalachian white ghetto", one of the poorest parts of the US:

There are lots of diversions in the Big White Ghetto, the vast moribund matrix of Wonder Bread–hued Appalachian towns and villages stretching from northern Mississippi to southern New York, a slowly dissipating nebula of poverty and misery with its heart in eastern Kentucky (...)

If the people here weren’t 98.5 percent white, we’d call it a reservation.

The most interesting part of the article is the description of the use being made by locals of the "food stamp" (EBT) program:

it turns out that the local economy runs on black-market soda the way Baghdad ran on contraband crude during the days of sanctions.

It works like this: Once a month, the debit-card accounts of those receiving what we still call food stamps are credited with a few hundred dollars — about $500 for a family of four, on average — which are immediately converted into a unit of exchange, in this case cases of soda. On the day when accounts are credited, local establishments accepting EBT cards — and all across the Big White Ghetto, “We Accept Food Stamps” is the new E pluribus unum – are swamped with locals using their public benefits to buy cases and cases — reports put the number at 30 to 40 cases for some buyers — of soda. Those cases of soda then either go on to another retailer, who buys them at 50 cents on the dollar, in effect laundering those $500 in monthly benefits into $250 in cash — a considerably worse rate than your typical organized-crime money launderer offers — or else they go into the local black-market economy, where they can be used as currency in such ventures as the dealing of unauthorized prescription painkillers — by “pillbillies,” as they are known at the sympathetic establishments in Florida that do so much business with Kentucky and West Virginia that the relevant interstate bus service is nicknamed the “OxyContin Express.” A woman who is intimately familiar with the local drug economy suggests that the exchange rate between sexual favors and cases of pop — some dealers will accept either — is about 1:1, meaning that the value of a woman in the local prescription-drug economy is about $12.99 at Walmart prices. (...)

It’s possible that a great many cans of soda used as currency go a long time without ever being cracked — in a town this small, those selling soda to EBT users and those buying it back at half price are bound to be some of the same people, the soda merely changing hands ceremonially to mark the real exchange of value, pillbilly wampum. 

Direct cash transfers also have drawbacks:

“The draw,” the monthly welfare checks that supplement dependents’ earnings in the black-market Pepsi economy, is poison. It’s a potent enough poison to catch the attention even of such people as those who write for the New York Times. Nicholas Kristof, visiting nearby Jackson, Ky., last year, was shocked by parents who were taking their children out of literacy classes because the possibility of improved academic performance would threaten $700-a-month Social Security disability benefits, which increasingly are paid out for nebulous afflictions such as loosely defined learning disorders.