SNAP for the economy

Today, Congresswoman Rosa DeLauro held a press conference to discuss food stamps and the critical role they play in our economy. She asked several experts, including myself, to discuss the role of food stamps in helping people and helping the economy. I’ve summarized my comments below:

First, food stamps help people. About 46 million people participate in the Supplemental Nutrition Assistance Program (SNAP), which translates into over 1 in 7 Americans who use food stamps. Nearly 75 percent of SNAP participants are in families with children, and more than one-quarter of participants are in households with seniors or people with disabilities. Food stamps primarily help children – roughly 50 percent of those on food stamps are under the age of 18. Over 40 percent of all recipients live in households where family members are employed.

Food stamps go to people truly in need. To be eligible, households have to make a gross income below 130 percent the poverty line and a net income (once all deductions are applied) of less than 100 percent of the poverty line. The average monthly allowance is about $130 per person. In 2010, these modest payments kept over 5 million people out of poverty.

Second, food stamps provide extremely effective support for the overall economy. Food stamps go to people that are cash strapped, by definition, which means they spend the money right away, putting the cash received directly back into local businesses and grocery stores. Nearly all macroeconomic forecasters agree that food stamps are among the most effective forms of fiscal support to create economic activity and jobs.

Third, SNAP is a very efficient program, with 92 percent of SNAP benefits going directly to people to spend on food (the remainder is low administrative costs of running the program, determining eligibility, and the like, and other food assistance). When the money goes to people, they spend it and stimulate the economy on the order of $1.5 to 1.7 for every dollar spent. This means that the $78 billion spent on food stamps in 2011 led to $115 billion in overall economic activity.

Finally, SNAP swelled because the economy entered the worst recession since the Great Depression and remains severely depressed even 18 months after the official recovery began. And this expansion of SNAP was a good thing – benefits keep 5 million people out of poverty and are universally considered some of the most effective fiscal support available to help an economy that is projected to see unemployment rates above 8 percent until 2015. Cutting these benefits would simply be a mistake for families and a mistake for the economy.

Jobs are a top priority in this country at this time. If our main goal is to create jobs, we need to stimulate demand. To stimulate demand, we need to put money in the hands of people who will spend it.  One of the more efficient and effective ways to put money in the hands of people who will spend it is food stamps.