Court Opinion

ID: 2964320
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:23:58.055055+00
Date Added: 2024-06-11T11:42:54.088835
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USCA1 Opinion

	

                            UNITED STATES COURT OF APPEALS
                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT
                                FOR THE FIRST CIRCUIT

                              _________________________

          No. 96-1435
                              NANCY STRICKLAND, ET AL.,

                               Plaintiffs, Appellants,

                                          v.

                  COMMISSIONER, MAINE DEPARTMENT OF HUMAN SERVICES,

                                 Defendant, Appellee,

                                          v.

                      SECRETARY, U.S. DEPARTMENT OF AGRICULTURE,

                           Third-Party Defendant, Appellee.

                              _________________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                              FOR THE DISTRICT OF MAINE

                     [Hon. D. Brock Hornby, U.S. District Judge]
                                            ___________________

                              _________________________

                                        Before

                                Selya, Circuit Judge,
                                       _____________

                      Aldrich and Bownes, Senior Circuit Judges.
                                          _____________________

                              _________________________

               Rufus E.  Brown, with whom  Jack Comart,  Patrick Ende,  and
               _______________             ___________   ____________
          Pine Tree Legal Assistance, Inc. were on brief, for appellants.
          ________________________________
               Jennifer  H.  Zacks,  Attorney,  Civil  Division,  Dept.  of
               ___________________
          Justice, with  whom Frank W. Hunger,  Assistant Attorney General,
                              _______________
          Mark  B. Stern, Attorney,  Civil Division, Dept.  of Justice, and
          ______________
          Jay  McCloskey,  United  States  Attorney,  were  on  brief,  for
          ______________
          Secretary of Agriculture.

                              _________________________

                                  September 24, 1996

                              _________________________

                    SELYA, Circuit  Judge.   Nearly four centuries  ago, an
                    SELYA, Circuit  Judge.
                           ______________

          English playwright wrote of a young monarch exhorting his battle-

          weary  comrades  to  stride  "once  more  unto  the breach,  dear

          friends, once more."   William Shakespeare, King Henry the Fifth,
                                                      ____________________

          Act  III, Sc.  1, l.1  (1600).   Nancy and  Lyle Strickland,  the

          appellants here, issue a similar call, again requesting that this

          court invalidate a regulation  which the Secretary of Agriculture

          (the Secretary)  promulgated under authority granted  by the Food

          Stamp Act, 7 U.S.C.    2011-2025 (1988) (the Act).  In Strickland
                                                                 __________

          v.  Commissioner,  Me. Dept.  of Human  Servs.,  48 F.3d  12 (1st
              __________________________________________

          Cir.), cert. denied,  116 S.  Ct. 145 (1995)  (Strickland I),  we
                 _____ ______                            ____________

          applied  the  teachings  of   Chevron,  U.S.A.  Inc.  v.  Natural
                                        ______________________      _______

          Resources Defense Council,  Inc., 467 U.S. 837 (1984), and upheld
          ________________________________

          a portion of  the regulation  that gave meaning  to an  ambiguous

          phrase contained within the Act.  See Strickland I, 48 F.3d at 21
                                            ___ ____________

          (upholding 7 C.F.R.    273.11(a)(4)(ii)(D) (1994) as a reasonable

          rendition of 7 U.S.C.   2014(d)(9)).  This second time around the

          appellants seek to strike down  a different (but closely related)

          section of the same regulation.  Because Chevron is still the law
                                                   _______

          of  the  land,  we affirm  the  lower  court's  entry of  summary

          judgment in the appellees' favor.

          I.  THE STATUTORY SCHEME
          I.  THE STATUTORY SCHEME

                    First  enacted  in  1964,   the  Act  is  designed  "to

          safeguard the health and well-being of the Nation's population by

          raising  levels of  nutrition  among low-income  households."   7

          U.S.C.   2011; see generally Strickland I, 48 F.3d at 14-15.  The
                         ___ _________ ____________

                                          2

          states  administer most  aspects of the  Food Stamp  Program (the

          Program) while the federal government underwrites the cost (which

          now amounts to  some $29  billion per year).   Recipients,  whose

          eligibility  is determined  by  income and  family size,  receive

          assistance in  the form of coupons  that may be used  to purchase

          groceries  at local stores.   In order to  implement the Program,

          Congress  has   authorized  the  Secretary  to  promulgate  "such

          regulations . . . as [he]  deems necessary or appropriate for the

          effective and efficient administration"  of the Program's federal

          aspects.  See  7 U.S.C.   2013(a), (c).  Responsibility for other
                    ___

          elements  of the Program devolves upon state agencies.  In Maine,

          that  obligation reposes  with the  Department of  Human Services

          (DHS).

                    In  1971, Congress  instructed  the  Secretary  to  set

          national eligibility  standards for  the Program.   The Secretary

          did  so.    Of  particular  interest for  present  purposes,  the

          Secretary barred any consideration  of principal payments made on

          the purchase price of capital assets in computing the costs which

          could be offset against the income of a self-employed  individual

          to  determine whether  that person  met the  national eligibility

          standard.   See 36 Fed. Reg.  14102, 14107 (July 29,  1971).  Six
                      ___

          years later,  Congress overhauled  the Act.   It directed,  inter
                                                                      _____

          alia,   that  for   purposes  of   determining  eligibility   for
          ____

          participation  in  the  Program,  a person's  income  should  not

          include the "cost of producing self-employment income."  7 U.S.C.

             2014(d)(9).  Though Congress  did not define  the term "cost,"

                                          3

          the  House   Committee  on  Agriculture  noted,   seemingly  with

          approbation,  that existing  Program  regulations  did not  treat

          principal  payments as  a "cost"  that could  be set  off against

          income.  See H. Rep. No. 464, 95th Cong., 1st Sess. 25, reprinted
                   ___                                            _________

          in 1977 U.S.C.C.A.N. 1978, 2001-02.
          __

                    Throughout, the Secretary has consistently hewed to the

          position that principal payments on capital assets are not a cost

          of  producing self-employment  income.    The current  regulation

          epitomizes this  longstanding viewpoint;  it states  that "cost,"

          when figured  for that purpose, shall not  include "[p]ayments on

          the  principal of  the  purchase price  of income-producing  real

          estate  and  capital  assets,  equipment,  machinery,  and  other

          durable goods."  7 C.F.R.   273.11(a)(4)(ii)(A).

          II.  THE COURSE OF LITIGATION
          II.  THE COURSE OF LITIGATION

                    Mr. and Mrs. Strickland operate a construction business

          in  Belgrade,  Maine (where  they reside).   When  their business

          faltered, they  applied for  admission to the  Program and  began

          receiving  benefits.    In  1993  the  DHS  determined  that  the

          Stricklands'  average monthly  income  was more  than double  the

          Program's eligibility limit.   Had they been  permitted to deduct

          depreciation on business equipment as a "cost of  producing self-

          employment income,"  they would  have remained eligible  for food

          stamp assistance.   Consequently, they challenged  the regulation

          that  excluded  depreciation,  7  C.F.R.     273.11(a)(4)(ii)(D),

          arguing that it had been promulgated in derogation  of 7 U.S.C.  

          2014(d)(9).  See Strickland I,  48 F.3d at 15-16.  In  due season
                       ___ ____________

                                          4

          the  appellants  asserted claims  against  both the  DHS  and the

          Secretary, and  the district  court certified the  Stricklands as

          representatives of a class of "all Maine food stamp applicants or

          recipients adversely affected  by the []  regulation on or  after

          July 1, 1992."  Id. at 16.
                          ___

                    The appellants enjoyed some initial success.  After the

          parties  submitted  the case  on a  stipulated record,  the trial

          court  invalidated the Secretary's  "no depreciation" regulation.

          See Strickland v. Commissioner, Me. DHS, 849 F. Supp. 818 (D. Me.
          ___ __________    _____________________

          1994).  We reversed, finding ambiguity in the term "cost" as used

          in  the  statutory  phrase  "cost  of  producing  self-employment

          income."   See  Strickland I,  48  F.3d at  19.   Stressing  that
                     ___  ____________

          ambiguity made deference  appropriate, we upheld  the Secretary's

          right  to  exclude  depreciation  from "cost"  as  a  permissible

          rendition  of the statute.   See id. at  21.  In what  may now be
                                       ___ ___

          viewed as an overabundance of caution, we noted that the parties'

          arguments in Strickland I  did "not require us to  decide whether
                       ____________

          self-employed  food   stamp   recipients  must   be  given   some

          alternative deduction, such as a deduction for replacement costs,

          in recognition of either  the cost of acquiring capital  goods or

          their consumption in  the course of producing income."  Id. at 21
                                                                  ___

          n.6.1

                    Apparently  convinced that  a  judicial  footnote is  a
                              
          ____________________

               1That issue  was neither  briefed nor  argued in  this court
          during  the  pendency  of  Strickland  I.    In  any  event,  the
                                     _____________
          appellants  had told the district court that they did not dispute
          the  Secretary's  authority  to  disallow  principal  payments on
          equipment loans as a cost of producing self-employment income. 

                                          5

          terrible thing  to waste,  the Stricklands  promptly reformulated

          their   suit  to   challenge   that  portion   of   7  C.F.R.    

          273.11(a)(4)(ii)  in  which  the  Secretary purposed  to  exclude

          payments on  the  principal  of the  purchase  price  of  capital

          assets, averring that a favorable  finding would entitle them  to

          continued eligibility for food stamp assistance.

                    This  about-face proved  unproductive.    The  district

          court  granted summary judgment in favor of the state and federal

          defendants,  holding  that  the  Secretary  permissibly  excluded

          principal  payments in  determining the  cost of  producing self-

          employment income.  See Strickland  v. Commissioner, Me. DHS, 921
                              ___ __________     _____________________

          F.  Supp. 21, 24 (D.  Me. 1996) (Strickland  II) (concluding that
                                           ______________

          "if the Secretary is not required to recognize even depreciation,

          he  certainly  cannot be  required  to  recognize cash  principal
                                    ________

          payments").  This appeal followed.

          III.  STANDARD OF REVIEW
          III.  STANDARD OF REVIEW

                    Because the interpretation  of a statute or  regulation

          presents  a   purely   legal  question,   courts   subject   that

          interpretation  to de novo review.  See United States v. Gifford,
                                              ___ _____________    _______

          17  F.3d  462, 472  (1st  Cir. 1994);  Liberty  Mut. Ins.  Co. v.
                                                 _______________________

          Commercial Union Ins.  Co., 978  F.2d 750, 757  (1st Cir.  1992).
          __________________________

          This standard of  review is between appellate tribunals and lower

          courts.   It  does not  diminish the  deference that  courts must

          accord  to  authoritative  interpretations  of  opaque  statutory

          provisions  undertaken by  those whom  Congress has  empowered to

          administer  or enforce  particular laws.    As we  have regularly

                                          6

          held, such  deference is due the Secretary's  interpretation of a

          less-than-pellucid food stamp statute.   See, e.g., Strickland I,
                                                   ___  ____  ____________

          48 F.3d at  16; Massachusetts  v. Secretary of  Agric., 984  F.2d
                          _____________     ____________________

          514, 520-21 (1st Cir.),  cert. denied, 114 S. Ct.  81 (1993); see
                                   _____ ______                         ___

          also  7  U.S.C.     2013(a),  (c)  (empowering the  Secretary  to
          ____

          administer the Act).

          IV.  ANALYSIS
          IV.  ANALYSIS

                    When  courts review  an  agency's  interpretation of  a

          statute  that it administers, Chevron directs them to engage in a
                                        _______

          bifurcated  inquiry.  See Passamaquoddy Tribe v. State of Me., 75
                                ___ ___________________    ____________

          F.3d 784, 794  (1st Cir. 1996); Strickland I, 48 F.3d  at 16.  In
                                          ____________

          an oft-quoted passage, the Chevron Court delineated the nature of
                                     _______

          the inquiry:

                    First,  always,  is   the  question   whether
                    Congress has directly  spoken to the  precise
                    question at issue.  If the intent of Congress
                    is clear, that is the  end of the matter; for
                    the court,  as well as the  agency, must give
                    effect to the unambiguously  expressed intent
                    of   Congress.     If,  however,   the  court
                    determines   Congress    has   not   directly
                    addressed the precise  question at issue, the
                    court   does  not   simply  impose   its  own
                    construction  on the  statute,  as  would  be
                    necessary in the absence of an administrative
                    interpretation.   Rather,  if the  statute is
                    silent  or  ambiguous  with  respect  to  the
                    specific issue, the question for the court is
                    whether the  agency's  answer is  based on  a
                    permissible construction of the statute.

          Chevron, 467 U.S. at  842-43 (footnotes omitted).  These  are the
          _______

          same questions that this  court posed in Strickland I, 48 F.3d at
                                                   ____________

          16, and we retrace our steps to the extent appropriate.

                                          A
                                          A

                                          7

                    We  first look  to see  if Congress  has spoken  to the

          precise question  at issue by  mandating either the  inclusion or

          the exclusion  of principal payments  on capital assets  from the

          computation of  the  "cost of  producing self-employment  income"

          under 7 U.S.C.    2014(d)(9).2  Since this branch  of the inquiry

          deals exclusively  with statutory construction  and congressional

          intent, no deference is due the Secretary's views.

                    In  Strickland  I we  determined  that  the statute,  7
                        _____________

          U.S.C.   2014(d)(9), did not  require depreciation to be included

          as  a "cost  of producing self-employment  income."   In reaching

          this conclusion, we focused on the ambiguity inherent in the word

          "cost"   a word that Congress  chose not to define.  We concluded

          that  "the word  `cost'  is a  chameleon,  capable of  taking  on

          different  meanings,  and shades  of  meaning,  depending on  the

          subject matter  and the circumstances of  each particular usage."

                              
          ____________________

               2In their complaint, the appellants asked the district court
          to strike down  the Secretary's  policy, embodied in  7 C.F.R.   
          273.11(a)(4)(ii)(A),  of disallowing  principal payments  made to
          purchase capital assets (which  they term "capital costs").   The
          district court  confined its ruling accordingly.   See Strickland
                                                             ___ __________
          II, 921  F. Supp. at 24-25.  At oral argument before us, however,
          __
          the appellants'  counsel suggested that the  pivotal issue should
          be  cast  in broader  terms; he  posed  the ultimate  question of
          whether  the  Secretary's  general   regulatory  scheme,  in  not
          allowing any  offset for wear and tear on capital assets by means
          of   depreciation,   principal   payments,   or   otherwise,   is
          permissible.  For purposes  of Chevron's first step, it  makes no
                                         _______
          difference whether we  accept or reject  this formulation of  the
          issue.  Because the statute (and, particularly, the  word "cost")
          is ambiguous,  see text  infra, either formulation  of the  issue
                         ___       _____
          leads ineluctably to the second step of the Chevron inquiry.
                                                      _______

                                          8

          Strickland I, 48  F.3d at 19.3  We  therefore found that Congress
          ____________

          had not spoken directly  to the matter at issue.  See  id. at 19-
                                                            ___  ___

          20.

                    Although Strickland I did  not address exactly the same
                             ____________

          question that  confronts  us today,  we agree  with the  district

          court that its analysis  controls.  The appellants would  have us

          believe  that  by  some thaumaturgical  sleight-of-hand  the word

          "cost" has acquired a  plain meaning in the brief  interval since

          we decided  Strickland I.  They seek  to persuade us that, though
                      ____________

          "cost"  was  not   clear  enough  to   force  the  inclusion   of

          depreciation,  the word nonetheless  possesses sufficient clarity

          to force  the inclusion of  either principal payments  on capital

          assets,  or, at least, some  offset for the  expense of acquiring

          and  using up  such  assets.4   We  are unconvinced.    Statutory

          ambiguity does not flash on and  off like a bank of strobe lights

                              
          ____________________

               3Though noting  the open question as  to whether legislative
          history  could  be considered  at the  first  stage of  a Chevron
                                                                    _______
          inquiry, see Strickland I, 48 F.3d at 16-18, we examined the slim
                   ___ ____________
          legislative history underpinning 7 U.S.C.   2014(d)(9) and deemed
          it  insufficient to "suck the elasticity from the word `cost' and
          convey an  `unambiguously expressed intent of  Congress,'" id. at
                                                                     ___
          19-20 (quoting  Chevron, 467  U.S. at  842-43).   That conclusion
                          _______
          remains unscathed.

               4In  this  connection, we  are  puzzled  by the  appellants'
          reliance on Estey  v. Commissioner,  Me. DHS, 21  F.3d 1198  (1st
                      _____     ______________________
          Cir. 1994).  We ruled there that the term "energy assistance" had
          a generally understood meaning and  then proceeded to apply  that
          meaning to a  particular set of  facts.  See  id. at 1201,  1207.
                                                   ___  ___
          The appellants'  suggestion that the  term "cost" has  an equally
          familiar meaning   a meaning  that includes principal payments on
          capital  assets as a component of "cost"    flies in the teeth of
          our unequivocal holding that "cost," as that term is used  in the
          Act,  does not have any readily apparent meaning.  See Strickland
                              ___                            ___ __________
          I, 48 F.3d at 19.
          _

                                          9

          at a discotheque, shining brightly at the time of one lawsuit and

          then vanishing mysteriously in the interlude before the next suit

          appears.

                    We need not  dawdle.   There is nothing  in the  record

          before  us to indicate  that Congress  ever had  an unambiguously

          expressed intent to include  principal payments on capital assets

          as a cost of producing  self-employment income.  The text  of the

          statute  does not encourage such  a construction and  there is no

          legislative history  (beyond that  already considered  and deemed

          insufficient  in Strickland  I, 48 F.3d  at 19-20)  that supports
                           _____________

          including principal payments  or any proxy therefor  as a "cost."

          To the precise contrary, all the extrinsic evidence suggests that

          Congress  concurred in  the Secretary's longstanding  decision to

          disregard  such payments.   The most persuasive  datum comes from

          the  archives of the Program.   The Secretary  had been excluding

          principal  payments from  the cost  of producing  self-employment

          income for several years by the time Congress enacted  7 U.S.C.  

          2014(d)(9).   That  being so,  the presumption  is that  Congress

          intended  the word  "cost"  to be  given  the same  meaning  that

          already  had been  established in  the regulatory  context.   See
                                                                        ___

          Commissioner v. Keystone Consol. Indus., Inc., 508 U.S.  152, 159
          ____________    _____________________________

          (1993); Strickland I, 48 F.3d at 20.
                  ____________

                    Here,  moreover, it  cannot  plausibly  be argued  that

          Congress  merely  overlooked   the  Secretary's   contemporaneous

          treatment  of  principal payments,  for  the  House Committee  on

          Agriculture explicitly  recognized the prevailing  practice.  See
                                                                        ___

                                          10

          H.  Rep.  No. 464,  supra, 1977  U.S.C.C.A.N.  at 2001-02.   This
                              _____

          combination       congressional   awareness   of    an   existing

          administrative praxis coupled with a concomitant unwillingness to

          revise  that  praxis     strongly  implies legislative  approval.

          "[W]hen Congress revisits a statute giving rise to a longstanding

          administrative  interpretation  without  pertinent   change,  the

          `congressional  failure   to  revise   or  repeal  the   agency's

          interpretation is persuasive evidence  that the interpretation is

          the one intended by Congress.'"  CFTC v. Schor, 478 U.S. 833, 846
                                           ____    _____

          (1986)  (quoting NLRB v. Bell Aerospace Co., 416 U.S. 267, 274-75
                           ____    __________________

          (1974) (footnotes omitted)).5

                    In sum,  because Congress has not  plainly resolved the

          interpretive question that is  now before us, we must move to the

          second step of the Chevron pavane.
                             _______

                                          B
                                          B

                    During  the  second stage  of  a  Chevron analysis,  an
                                                      _______

          inquiring  court  accords  substantial  respect  to authoritative

          agency  interpretations.   See Strickland  I, 48  F.3d at  17-18.
                                     ___ _____________
                              
          ____________________

               5We  dismiss out  of  hand the  appellants' contention  that
          Strickland I etched  in stone a particular  conception of "cost,"
          ____________
          equating  the word with cash outlays.  This contention reflects a
          misunderstanding of the thrust of our opinion.  The first step of
          a Chevron  inquiry  requires a  court  to determine  whether  the
            _______
          language of a  statute is  susceptible to more  than one  natural
          meaning.    Finding "cost"  to  be  inherently ambiguous  in  the
          context of the Act, we held that plain meaning did not  foreclose
          the Secretary's decision to exclude depreciation from the cost of
          producing self-employment income.   See Strickland I, 48 F.3d  at
                                              ___ ____________
          19.   Our intention was to  explain why the courts  must defer to
          any   permissible  interpretation  of   "cost"  adopted   by  the
          ___
          Secretary,  not  to endorse  a  particular  conception of  "cost"
          (whether it  be that of an  economist, a layman, or  a food stamp
          recipient).

                                          11

          Thus,  an interpretive  regulation must be  honored unless  it is

          "arbitrary, capricious,  or manifestly contrary to  the statute."

          Chevron, 467 U.S.  at 844.  In deciding this  issue, a court must
          _______

          avoid inserting its own policy considerations into the mix.  "The

          agency need  not write a rule that serves the statute in the best

          or most  logical manner; it  need only  write a  rule that  flows

          rationally  from a  permissible  construction  of  the  statute."

          Strickland I,  48 F.3d at  17; accord  Cohen v. Brown  Univ., 991
          ____________                   ______  _____    ____________

          F.2d 888,  899 (1st  Cir.  1993).   Though the  level of  respect

          varies  with  the   circumstances,  deference   to  an   agency's

          interpretation is "particularly appropriate in complex and highly

          specialized areas  where the regulatory net  has been intricately

          woven."  Massachusetts Dept.  of Educ. v. United States  Dept. of
                   _____________________________    _______________________

          Educ., 837 F.2d 536,  541 (1st Cir. 1988) (quoting  Citizens Sav.
          _____                                               _____________

          Bank  v. Bell, 605 F. Supp. 1033, 1041 (D.R.I. 1985)).  Moreover,
          ____     ____

          longstanding  agency  interpretations  generally receive  greater

          deference than newly contrived ones.  See Visiting Nurse Ass'n of
                                                ___ _______________________

          No. Shore, Inc. v. Bullen, ___ F.3d ___, ___ (1st Cir. 1996) [No.
          _______________    ______

          95-1849, slip op. at 24].

                    Applying  these standards,  we readily conclude  that 7

          C.F.R.    273.11(a)(4)(ii) is within  the pale.   The regulation,

          which  reflects the  agency's consistent  interpretation for  the

          past  quarter-century, emanates  from the  Secretary's reasonable

          determination that the purpose  of the Act is to  help low-income

          families  purchase food,  not  to underwrite  the acquisition  of

                                          12

          capital assets.6  To  be sure, rental payments on  capital assets

          are, as the  appellants point  out, deductible as  a "cost,"  but

          such  payments  easily   can  be  distinguished  from   principal

          payments.   When one leases  a capital asset  (say, a tractor) no

          ownership  interest  is  acquired,  and  the  lease  payments  go

          entirely toward producing  self-employment income.   By contrast,

          when one  buys a capital asset  and pays for  it in installments,

          the payments  not only permit  the payer  to use the  asset as  a

          means of producing self-employment income  but also permit him to

          build  equity.  This additional feature changes the nature of the

          transaction.   The  Secretary's regulation  reasonably  seeks  to

          avoid subsidizing such "dual purpose" payments.

                    Of  course, the appellants now  put a different spin on

          the situation.   See supra note 2.  They suggest that, instead of
                           ___ _____

          appraising  the validity  of 7  C.F.R.    273.11(a)(4)(ii)(A), we

          should view the matter in broader terms and determine whether the

          Secretary must allow some offset for expenses associated with the
                               ____

          acquisition  and depletion of capital  assets used in  a trade or

          business.

                    Passing  potential  procedural problems  and addressing

          this  argument on the merits, it does not benefit the appellants.

                              
          ____________________

               6Our  determination that  the Secretary  reasonably excluded
          principal payments  on capital assets from the  cost of producing
          self-employment  income  is bolstered  by  the  evidence, already
          chronicled, that this interpretation of "cost" is very likely the
          one that  Congress  intended.   See  supra pp.  10-11.   When  an
                                          ___  _____
          agency's  interpretation  jibes  with  discernible  congressional
          intent, a  court is  hard-pressed to declare  that interpretation
          impermissible under Chevron's second step.
                              _______

                                          13

          Their premise is that, by putting capital assets to one side, the

          Secretary has defined "cost  of producing self-employment income"

          so grudgingly as to frustrate Congress' intent.  But this premise

          is  faulty.   The Secretary  has not ignored  the costs  of doing

          business; rather,  he has recognized numerous  items as allowable

          costs, e.g.,  labor, stock, inventory,  business-related interest

          (including  interest  associated  with  installment  payments  on

          capital  assets), and  taxes paid  on income-producing  property.

          See  7  C.F.R.    273.11(a)(4)(i).    He  simply  has refused  to
          ___

          recognize the kind of costs for which the appellants seek credit,

          saying in  effect that  when a  self-employed person  is building

          equity  (a  phenomenon  that  almost  invariably  accompanies the

          purchase  of capital  assets), the  Secretary will  define "cost"

          very restrictively (probably because no good way exists to give a

          credit  for expenses  related to  the purchase of  capital assets

          without also subsidizing some intangible ownership interest).  As

          a result, food stamp  recipients who buy capital assets  are able

          to claim  relatively few offsets  for the expense  connected with

          acquiring and using those assets.

                    We   frankly   acknowledge    that   the    Secretary's

          interpretation is  a  harsh  one,  especially as  it  relates  to

          persons in the appellants' position.  The regulatory edifice that

          now exists may not be the  one which we, if building on an  empty

          site, would choose to  construct.  But that is largely beside the

          point.  The term "cost" is ambiguous, and a harsh interpretation,

          as here, which  arises out of the Secretary's  reasonable refusal

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          to subsidize ownership, is not per se arbitrary or capricious.
                                         ___ __

          V.  CONCLUSION
          V.  CONCLUSION

                    We need go no further.   The  "cost of producing  self-

          employment  income,"  7 U.S.C.     2014(d)(9),  is imprecise  and

          Congress has neither specified that payments designed to amortize

          the  purchase price of capital assets  must be deemed part of the

          cost  nor   decreed  that  some  equivalent   write-off  must  be

          recognized in calculating the cost.  Thus, the regulation here at

          issue  represents  a  permissible construction  of  the  statute.

          After  all, within the wide limits that Chevron sets, courts must
                                                  _______

          respect the Secretary's policy choices.

          Affirmed.
          Affirmed.
          ________

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