NEW REPORT: SNAP (Food Stamps) Offers Significant Bang for the Buck

November 22, 2011


Lifeline for Families, Support for the Economy: The Supplemental Nutrition Assistance Program

Millions of Americans remain unemployed in the aftermath of the Great Recession and wage growth has lagged behind inflation, strating the budgets of millions more.  The Supplemental Nutrition Assistance Program (SNAP), also know as food stamps, provides critical support to individuals and families during hard economic times.  SNAP is one of only a few sources of public support for those who have exhausted their unemployment benefits and yet still cannot find work.  SNAP benefits, while modest, work to guard against malnutrition and other negative outcomes resulting from food insecurity.  SNAP also provides substantial spillover benefits to the broader economy, as cash-strapped recipients quickly pump the money they receive back into the economy.  This works to stabilize demand and promote job retention and growth during cyclical downturns in the economy.  One dollar of spending on SNAP is estimated to increase GDP by as much as $1.79 - a significant "bang for the buck."  In other words, spending on SNAP not only provides much-needed support for vulnerable Americans, it also gives a significant boost to the economy.

SNAP Provides Critical Benefits to the Most Vulnerable Americans

The Supplemental Nutrition Assistance Program (SNAP), previously know as the Food Stamp Program, traces its origins to the 1930s, when widespread unemployment coupled with unmarketable food surpluses combined to spur the creation of the first food stamp program.  Currently, SNAP benefits are particularly valuable for the long-term unemployed and their families.  Long-term unemployment remains near record levels by any measure - the number of workers, as a percentage of the labor force, and as a share of total unemployment.  Many of these long-term unemployed workers have run out of unemployment insurance benefits, and, without continuation of the emergency unemployment insurance program that expires in December, many more will exhaust their benefits in 2012.

SNAP benefits play an increasingly important role in providing food security as unemployment spells lenthen.  More than one in five workers are also eligible for benefits.  The SNAP participation rate of the long-term unemployed and their families was 24 percent in 2010, compared with 21 percent of people in families with a member who was unemployed for six months of less.  SNAP benefits also represent a larger share of family income for the typical person who has been unemployed for over six months, compared to 14 percent for those unemployed for six months or less.  As one of the few sources of public support for individuals who have exhausted their unemployment benefits and yet still cannot find work, SNAP offers critical assistance to guard against food insecurity and the added costs that malnutrition imposes on families and society more broadly.  In 2010, nearly one-quarter of Americans who exhausted their unemployment benefits or lived with someone who did received SNAP benefits.

As Figure 1 shows, the heightened use of SNAP during times of economic difficulty is not a new phenomenon.  There is a clear link between long-term unemployment and SNAP participation, as families turn to SNAP for support during hard times.  The Congressional Budget Office noted this relationship in testimony earlier this month, citing nutrition assistance as a program for which outlays increase "because unemployment rises and more people experience reductions in income, qulaiyfing them to enter existing progams."  Outlays can also increase when a higher share of eligible individuals elect to participate, as occurred during the mid-2000s, when increased outreach efforts and streamlined alpplication processes led more eligible individuals to receive benefits.

SNAP is effective in targeting benefits, albeit modest in size, to the most vulnerable.  Last year, SNAP provided an average monthly benefit of $130 to 40.3 million people, 47 percent of whom were children and 8 percent of whom were over the age of 60.  Over three quarters of households that received SNAP benefits in 201 included children, and elderly person, or a disabled person, and these households received 84 percent of benefits.  Moreover, the vast majority of SNAP recipients live below the poverty line or are one bad bread away from slipping below it.  In 2010, 96.5 percent of SNAP households lived at or below 130 percent of the federal poverty level, and these households received 99 percent of all benefits.  While critics of SNAP claim that many recipients are ineligible for the benefits they receive, SNAP payment errors have declined to record lows in recent years, according to the Government Accountability Office.

SNAP benefits also make a particularly big difference when food costs are high.  Over the past year, the price of food, measured by the food at home price index, has risen by 6.2 percent, compared with a modes 2.1 percent increase in core inflation (which excludes food and energy prices).  Given that poorer individuals spend a higher share of their income on food, SNAP provides critical support to preserve the ability of these recipients to purchase food when prices spike.

SNAP Has Substantial Spillover Benefits for the Broader Economy

SNAP supports consumer spending directly by providing supplemental income for spending on food, which then spills over to other parts of the economy.  SNAP has a direct impact on a vaariety of different secotrs of the food industry, as illustrated in Figure 2.  As cash-strapped recipients quickly spend benefits, the impact is felt by grocers, truck drivers, food production workers, and farmers.  Products purchased with SNAP benefits account for significant share of food retails' sales.  Thus, SNAP allows retailers and others to retain employees who migh otherwise have been let go.

SNAP provides a particularly effective boost to the economy, because benefits quickly flow to those individuals who will spend them.  The number of beneficiaries automatically increases during a weak economy when more people qualify and ratchets down as the economy picks up.  A number of analyst have quantified SNAP's substantial "bang for the buck".  For example, USDA estimates that $1 in SNAP benefits increases GDP by $1.79 and that an increase of $1 billion in SNAP spending generates as many as 17,900 full-time jobs.  Because 97 percent of SNAP benefits are spent in the month they are received, and 80 percent of benefits are spent in the first tow weeks, SNAP benefits flow quickly into the economy, constituting a "particularly powerful form of stimulus," according to one independent study.

Conclusion

SNAP provides the most vulnerable Americans with critical supplemental income to purchase food for themselves and their families.  SNAP keeps millions of low-income children and elderly Americans, already struggling to get by, from suffering further consequences as a result of malnutrition and food insecurity.  Additionally, by boosting purchasing power for low-income consumers, SNAP supports consumer spending during economic downturns, saving jobs in a variety of sectors of the economy.  SNAP is a particularly effective automatic stabilizer to the economy because benefits immediately flow to recipients and then throughout the broader economy.

Read the full JEC Report