Food stamps help more than the hungry
Every dollar of food stamps generates $1.79 for the economy.
Around 40 million Americans, roughly one in every eight people, receive food stamps, which help stave off hunger and deep poverty.
But food stamps — or SNAP, for Supplemental Nutrition Assistance Program — also wind up benefiting people who have never received government assistance.
When SNAP recipients spend their average monthly household benefit of $250 in food stores, they collectively pump billions into the economy, creating jobs and bolstering the food industry, economists say.
During the 35-day partial shutdown of the federal government from Dec. 22 through Jan. 25, advocates for people in poverty feared that SNAP benefits would be cut off, endangering millions. At the same time, economists worried that the potential loss of income could ripple throughout the United States.
“There’s nothing worse than not paying out food stamps,” said Mark Zandi, chief economist at Moody’s Analytics, an economics research firm in West Chester and New York City. “It’s the absolute worst thing you can do to households and to the economy."
During the Great Recession, Zandi calculated that every dollar of SNAP generates $1.79 for the economy — the “multiplier” effect.
“There’s no federal program that provides a bigger bang for the buck than food stamps,” he said. “It’s a very potent way to stimulate the economy."
If food stamps are not paid out, Zandi said, it would be “the absolute worst thing you can do to households and to the economy, becoming a problem for tens of millions of people.”
‘A lot of money’
Looking back a year, economist James Ziliak, director of the Center for Poverty Research at the University of Kentucky, said that in March 2018, the U.S. Department of Agriculture distributed $4.9 billion in SNAP benefits, which generated around $8.4 billion for the U.S. economy.
“That," Ziliak said, ’"is a lot of money.”
What’s interesting about SNAP money is how efficiently it spreads throughout the economy, starting with supermarkets and food stores, said Deborah Weinstein, executive director of the Coalition on Human Needs, a Washington-based alliance of national organizations that address issues facing low-income Americans.
Because SNAP is for food, a person who receives monthly benefits will go quickly to the store to redeem them, Weinstein said.
Rapid spending means that by the end of every month, 90 percent of every SNAP dollar distributed is back in the economy, Weinstein said. “It helps stores keep or add employees, and it means workers are able to buy things themselves in other stores, or pay their utilities, spreading money throughout the economy.”
Every billion dollars of SNAP spending sustains 10,000 jobs, Weinstein added. The SNAP budget is around $71 billion annually, according to figures from the USDA, which administers SNAP.
SNAP begets spending
SNAP recipients whose food bills are at least partially covered by federal benefits tend to also spend some of their own money in stores for items that SNAP doesn’t cover, such as birthday cakes, school supplies, or prepared foods, further benefiting the economy, said Alex Baloga, president and CEO of the Pennsylvania Food Merchants Association in Harrisburg.
In Pennsylvania in 2017, SNAP recipients received $2.67 billion in benefits. “That gives you a sense of the revenue flowing through stores," Baloga said. “But if that goes away, it has an effect on stores, food distributors, farmers all up and down the food chain.”
About 85 percent of the 10,257 authorized SNAP retailers in the state are smaller stores, such as bakeries and mom-and-pop groceries, according to Ashley Putnam, a director at the Federal Reserve Bank of Philadelphia. “SNAP drives purchasing, and creates a steady stream of revenue for local businesses,” she said.
The single largest redeemer of SNAP benefits in Pennsylvania is Philadelphia’s Reading Terminal Market, according to the USDA.
SNAP accounts for 5 percent to 30 percent of sales in the 14 Terminal stores that accept SNAP, said Sarah Levitsky, director of marketing at the market.
SNAP and health
Beyond hunger, SNAP helps in other ways.
Weinstein, of the Coalition on Human Needs, said SNAP benefits cut down on hospitalizations for children who’d be sick without enough food. People who receive SNAP as children do better in school and enter the workforce healthier and better prepared to work, helping the economy in the long run, she added.
For years, Republicans have called for limiting SNAP, with President Donald Trump proposing in his 2019 budget to slash $200 billion from SNAP over 10 years.
Craig Gundersen, an economist and national SNAP expert at the University of Illinois, decried the proposal, calling SNAP “far and away the best government program.”
He added, “It works amazingly well. And if we didn’t have it, millions would suffer.”
Philadelphia Media Network is one of 21 news organizations producing Broke in Philly, a collaborative reporting project on solutions to poverty and the city’s push toward economic justice. See all of our reporting at brokeinphilly.org.