Video: EBT "glitch" sparks run on Walmart shelves in Louisiana

My, these “glitches” sure do get expensive these days, huh? A computer outage that impacted food-stamp operations in 17 states kept many low-income Americans from buying groceries this weekend:

People in 17 states, including Maryland and Virginia, who tried to buy groceries using electronic food-stamp cards were turned away from supermarkets Saturday as a result of a computer outage.

The system failure affected low-income individuals and families who receive food benefits through the Supplemental Nutrition Assistance Program (SNAP) and Women, Infants and Children program (WIC).

The outage occurred during a “routine test” of backup systems Saturday morning, Jennifer Wasmer, a spokeswoman for Xerox, which administers the program, said. By late Saturday, access had been restored.

After the system failed, SNAP and WIC beneficiaries in the affected states were unable to buy food using electronic benefit transfers.

“Beneficiary access to programs such as SNAP, TANF, and other programs has been restored to the 17 States where Xerox provides EBT service. Re-starting the EBT system required time to ensure service was back at full functionality,” Wasmer said in a statement.

The problem had nothing to do with the government shutdown, nor with the debate over the farm bill. The money was available (at least through the end of this month), but the computer system couldn’t verify whether the individual consumers had reached their food-stamp limit. The EBT cards function just like a debit card, drawing off of the accounts of recipients until their allotment runs out. Without the computer on line, retailers couldn’t confirm whether they would be repaid, and had to decline purchases until Xerox fixed the problem — which took several hours.

Why couldn’t retailers just ignore the glitch and allow the EBT users to complete their sales? An answer to that question came in Louisiana, where that decision had a disturbing and unintended effect. The regional Walmart office tried to choose the humane option, and got a lesson in price signal opacity through third-party payers:

KSLA News 12 Shreveport, Louisiana News Weather

Shelves in Walmart stores in Springhill and Mansfield, LA were reportedly cleared Saturday night, when the stores allowed purchases on EBT cards even though they were not showing limits.

The chaos that followed ultimately required intervention from local police, and left behind numerous carts filled to overflowing, apparently abandoned when the glitch-spurred shopping frenzy ended.

Springhill Police Chief Will Lynd confirms they were called in to help the employees at Walmart because there were so many people clearing off the shelves. He says Walmart was so packed, “It was worse than any black Friday” that he’s ever seen.

Lynd explained the cards weren’t showing limits and they called corporate Walmart, whose spokesman said to let the people use the cards anyway. From 7 to 9 p.m., people were loading up their carts, but when the cards began showing limits again around 9, one woman was detained because she rang up a bill of $700.00 and only had .49 on her card. She was held by police until corporate Walmart said they wouldn’t press charges if she left the food.

Lynd says at 9 p.m., when the cards came back online and it was announced over the loud speaker, people just left their carts full of food in the aisles and left.

“Just about everything is gone, I’ve never seen it in that condition,” said Mansfield Walmart customer Anthony Fuller.

This should embarrass everyone involved, but the reaction is rational in one sense. The system broke down, creating an artificial shortage of currency, the length of which users could not immediately predict. The market then essentially declared currency unnecessary for transactions, trusting that consumers would act rationally in its absence during a perceived shortage situation. The impulse to hoard should have surprised no one in that situation, and the stores should consider themselves fortunate that a riot didn’t break out.

This is an extreme example of what happens to markets when pricing signals are removed from the consumer. We’ve often used the theoretical example of “food insurance” to demonstrate why costs increase and provider shortages exist in the health-care market, thanks to third-party payers and rationing policies from the government. Consider this a real-world if almost unbelievably extreme demonstration of that argument. The EBT system actually addresses the poverty situation in a rational manner by handing the cash to consumers and staying out of the retail food market, without the intervention of a third-party “insurance” model to create irrational consumption. Perhaps that would have been the better model for health-care reform, too, or at least a better one than Democrats chose with ObamaCare.