American political controversy circa 1981
The ketchup as a vegetable controversy stemmed from proposed regulations of school lunches by the USDA's Food and Nutrition Service (FNS) in 1981, early in the presidency of Ronald Reagan. The regulations were intended to provide meal planning flexibility to local school lunch administrators coping with cuts to the National School Lunch Program enacted by the Omnibus Reconciliation Acts of 1980 and 1981. The proposed changes allowed administrators to meet nutritional requirements by crediting food items not explicitly listed. While ketchup was not mentioned in the original regulations, pickle relish was used as an example of an item that could count as a vegetable.
A similar controversy arose in 2011, when Congress passed a bill prohibiting the USDA from increasing the amount of tomato paste required to constitute a vegetable; the bill allowed pizza with two tablespoons (30 mL) of tomato paste to qualify as a vegetable.
Summary.
The Omnibus Reconciliation Act of 1980, signed into law by President Jimmy Carter, reduced the Federal School Lunch and Child Nutrition Programs budget by approximately eight percent. Building upon these reductions, the Omnibus Reconciliation Act of 1981 (passed as the Gramm–Latta Budget) slashed the 1982 budget for the Federal School Lunch Program by an additional 25 percent. To administer the requirements made by the acts, the USDA's Food and Nutrition Service (FNS) was tasked with proposing ways to implement the regulations while maintaining nutritional requirements for school lunches despite the lower funding. Among the recommendations made in September 3, 1981 was a proposal to give local school lunch administrators flexibility in accrediting substitute food items that met FNS nutritional requirements and regulations. The report stated an item could not be counted as a bread that was not enriched or whole-grain, "but could credit a condiment such as pickle relish as a vegetable." 
In the Reagan administration’s attempt to slash $1.5 billion from children’s nutrition funding, school lunch program requirements were worded (whether deliberately or not) so as to conceivably allow for designating ketchup as a vegetable, allowing the USDA to eliminate one of the two vegetables required to meet minimum food and nutrition standards, and thus shrink costs. It also offered a group of protein substitutes – yogurt, nuts and sunflower seeds – and suggested that tofu, a soybean cake, be substituted for a hamburger to save money.
Critics demonstrated outrage in Congress and in the media against the Ronald Reagan administration for cutting school lunch budgets and allowing ketchup and other condiments to count as vegetables. According to "New York Times" reporter Benjamin Weinraub, "the opposition had a Dickensian field day of outrage and mockery that contrasted school children's shrinking meal subsidies with the Pentagon generals' groaning board of budget increases."
Legislative history.
The Food and Nutrition Service proposed regulations had roots in four previous pieces of legislation: the National School Lunch Act of 1946, the Child Nutrition Act of 1966, the Omnibus Reconciliation Act of 1980, and the Omnibus Reconciliation Act of 1981.
National School Lunch Act.
The National School Lunch Act of 1946 established the nonprofit National School Lunch Program to ensure the health and well-being of American children and increase the domestic consumption of agricultural products and commodities. Under Section II of the National School Lunch Act, eligible students at all participating schools gained access to free or reduced-cost school lunches. Served lunches had to meet minimum nutrition requirements as stated in Section 9a, and as set by the Secretary of Agriculture. As the 1981 Food and Nutrition Service regulations later explained, while no formal requirement existed requiring that school lunches provide a specific percentage of daily nutrients, it had come to be expected that meals would generally provide one third of daily Recommended Dietary Allowances (RDA).
Child Nutrition Act.
The Child Nutrition Act of 1966 further enhanced and strengthened the National School Lunch Program by extending the Special Milk Program, piloting a breakfast program, and adding support for non-food items such as equipment and additional staff. In addition, the act centralized the management and ongoing administration of the School Lunch Program to the US Department of Agriculture.
Omnibus Reconciliation Act of 1980.
Within its broad goal to "implement the reconciliation requirements provided for in the First Concurrent Resolution on the Budget for the fiscal year 1981", the Omnibus Reconciliation Act of 1980 amended both the National School Lunch Act of 1946 and the Child Nutrition Act of 1966 by cutting funding for the School Milk Program, establishing ceiling rates for grants on nutrition, and reducing provisions to specific, qualified institutions. It also made a range of cost-savings provisions—including reducing federal funding for school lunch general reimbursements, commodity, special assistance, and the child care food program-to reduce the Federal School Lunch and Child Nutrition Programs budget by eight percent.
Omnibus Reconciliation Act of 1981.
Title VIII of the Omnibus Reconciliation Act of 1981 extended the spending cuts enacted by the Omnibus Reconciliation Act of 1980 to include ending federal assistance for food service materials and shrinking appropriations allocated for nutrition education, special assistance, the child care food program, and the School Milk Program. The term "school", as defined in the Child Nutrition Act, now excluded private institutions with annual tuition exceeding specified amounts. The act also revised the income eligibility standards which determined which students received reduced cost or no-cost lunches and introduced stricter checks and balances to prevent income fudging. The previous requirement that a child's family income be at or below $17,560 to receive a reduced cost or no-cost lunch was dropped to $15,630 and the following new income standards were established:
The act established the subsidy cuts of 11 cents on full-price meals, 23 cents on reduced-cost meals, and three cents on free meals. As a result, the cost for a reduced-cost meal doubled to 40 cents over the prior year.
Section 818 of the act required that the Secretary of Agriculture review nutritional requirements of Section 10 of the Child Nutrition Act to find opportunities for cost savings at the local level. The act went on to require the USDA to "exhaust all alternatives for lowering local program costs" and ensure that proposals demonstrated a notable fiscal impact to the local community while meeting nutritional requirements. While all alternative plans had to meet the nutritional requirements established by the Secretary of Agriculture, the act did not require meals to deliver one third of RDA.
Other elements of the act included spending reductions in student loan programs; civil service, postal service, and related programs; highway and rail; airport and airway improvements; veterans' programs; small business; Medicare and Medicaid; and Social Security Act Programs.
Food and Nutrition Service proposed regulations.
The Omnibus Reconciliation Act of 1981 required that final regulations be made available by November 11, 1981–90 days after the act's signing into law— and assigned the USDA's Food and Nutrition Service with proposing regulations to carry out the act's requirements. At the time the act became law, over 26 million children in 94,000 schools participated in the National School Lunch Plan. Of the participating students, 38 percent received free meals, 7 percent received reduced-price meals, and over half (55 percent) paid full cost.
As requested in Section 818 of the act, such proposed regulations had to be based on a full review of all potential cost saving opportunities that local school districts could implement. The administrator and staff of the Food and Nutrition Service participated in a countrywide fact-finding mission, interviewing local school lunch administrators to discuss cost-effective options that gave them more flexibility in meal planning. In his testimony before the Subcommittee on Elementary, Secondary, and Vocational Education on September 17, 1981, FNS Administrator G. William Hoagland described the ongoing frustration expressed by local school lunch administrators in having to adhere to strict guidelines in what foods to serve. "This is not a homogeneous nation. It is a compendium of likes and tastes", he said. Hoagland stated that the resulting proposed regulations reflected the opinions and needs communicated by local school districts.
Overall goals.
The Food and Nutrition Service's Proposed Plan was designed around three major goals towards providing more flexibility to local programs: 
Section I: removing red tape in record keeping &amp; streamlining administration.
Several of the report's recommendations centered on eliminating some of the School Lunch Program record keeping and cost reporting burdens required of local school administrators. The report proposed streamlining procedures for school mid-year announcements and eliminating school biannual estimates of eligible subsidized lunch recipients. In addition, the report proposed removing the Hardship Provision, which had allowed families to file claims for unexpected high costs.
Beyond simplifying school-wide reporting requirements, the report focused on adjusting the number of age/grade patterns and their associated meal plans. Instead of the previous five age-specific groups, the report suggested streamlining meal plans to fall within three, more general groups—preschool, elementary, and secondary students—and made such meal portions consistent within these specified groups. Additionally, school administrators were advised to focus on bulk production rather than per-plate individual quantities and encouraged to develop their own per-plate monitoring systems.
Section II: meal crediting.
Designed to give school lunch administrators increased flexibility and broader food choices when planning school lunches, the FNS proposed additional food choices that could be offered. Such additions complied with the overall five food plan that required all school lunches include a meat, milk, bread, and two vegetables or fruit. Alternates were proposed for all five food groups. 
School choice in crediting food alternates: pickle relish as a vegetable.
Section II of the FNS proposed regulations concluded expounding the benefits of increased menu variety in increasing children's knowledge of different types of foods and in improving overall nutritional education. Because there were a host of viable, alternate food options not specifically mentioned in the report, the FNS gave state agencies authority to explore additional alternates as long as they were reported to the FNS and met the meal crediting requirements. Bread that was not made of enriched flour would not count as a bread alternate, but a state "could credit a condiment such as pickle relish as a vegetable (Section II, 5)".
Quantity reductions.
To generate the immediate cost savings required in the Omnibus Budget Reconciliation Act of 1981, the FNS authors argued that simplifying administrative burdens and introducing choice and flexibility with alternative meal options could only do so much. As a result, the report proposed decreasing food quantities served while still contributing to a student's daily RDA intake. The FNS detailed minimum quantity requirements to receive federal reimbursement—schools could still serve larger portions. In addition, under the FNS' offer versus serve proposal, while children would be offered full-size portions of all five meal items, high school students could choose to take only three. Children would also have the option to request tasting-size portions of each meal component instead of full portions. Under the proposal, minimum quantities of the following food components were reduced:
In his testimony before the Subcommittee on Elementary, Secondary, and Vocational Education of the Committee on Education and Labor of the U.S. House of Representatives, G. William Hoagland, administrator of the Food and Nutrition Service, defended these changes and contended that despite reduced quantities, such meals would "continue to be excellent nutrient sources". Hoagland explained that caloric intake would be reduced by four percent (from 21 percent to 17 percent), but certain meal components surpassed existing RDA requirements: protein and niacin met half of RDA; vitamin A, riboflavin, vitamin B-12 exceed one third of RDA; and calcium and vitamin C met the one third requirement.
Reaction.
The critical response centered on several key elements of the proposed regulations:
Ketchup.
Reporting on the proposed directive, "Newsweek" magazine illustrated its story with a bottle of ketchup captioned "now a vegetable". The proposal was criticized by nutritionists and Democratic politicians who staged photo ops where they dined on nutrition-poor meals that conformed to the new lax standards. Compounding this outrage, the same day that the USDA announced the cost-cutting proposal for school lunches, the White House purchased $209,508 worth of new china and place settings embossed in gold with the presidential seal.
During her testimony before the Subcommittee on Elementary, Secondary, and Vocational Education on September 17, 1981, Food Research and Action Center Director Nancy Amidei described a "mini meal" that she stated would meet the proposed FNS standards made up of a hamburger, half of a roll, nine grapes, of milk, and six French fries. She described a second meal that included "a lot of relish and ketchup on a tiny hamburger" as also meeting the full quantity of both meat and vegetables