Can Expanding Food Stamps Jolt The Economy?
Food stamp interactive. - Through the recession, 4.8 million people have been added to the rolls of the federal food stamp program.
The federal food stamp program is being beefed up in hopes that it will help jolt the sagging economy back to life. However, economists are conflicted over how big an impact this increase will ultimately have.
Food In The Fridge
The government is spending $20 billion to expand the Supplemental Nutrition Assistance Program, formerly known as the Food Stamp Program, by about 13 percent. For Charmaine McCauley, a single mother of two in suburban Atlanta, this increase translates into an extra $45 a month.
"You know, just the staple stuff you need like bread, milk, cheese, eggs — those little things. That little extra can help with that," McCauley said.
McCauley had been doing well as a mortgage broker, but after the recession hit, she lost her job and her $680,000 home. About six months ago, she started receiving food stamps.
Amid the recession, 4.8 million additional people have sought out food stamp assistance. In February 2008, 27.7 million people nationwide were receiving food stamps, compared to 32.5 million people 12 months later.
McCauley now sells Mary Kay cosmetics full time, but she says the food stamps give her the extra help she needs to keep the refrigerator stocked for her family.
"It's definitely something that has helped our family," said McCauley. "A lot."
A Multiplier Effect
The idea of the stimulus plan is simple. The concept assumes people who get extra money will spend it — and that increased spending will bolster the economy.
"This injection of funds ends up being spent on food, and that has a multiplier effect through the economy," explains Ray Hill, professor of finance and economics at Emory University. "As more people are employed in grocery stores, more people are employed to make the food, more people are employed to grow the food as a result of that stimulus."
Most economists say every dollar spent on food will result in $1.50 to $2 in stimulus. The problem, Hill says, is that $20 billion is not enough.
"Increasing the amount of food stamps itself is not going to have a major effect on the economy. You get a good value for the money in the sense that each dollar is highly stimulative," said Hill. "But it's a drop in the bucket compared to the total size of the economy and the total employment in the United States."
Increasing Stability
The total cost of the federal stimulus plan is $789 billion. It is difficult to measure the effectiveness of the plan, but Mark Zandi, chief economist with Moody's Economy.com, says the food stamp increase is a good, quick way to create spending.
"If the stimulus is working, along with all the other things policymakers have done, we should see a more stable economy by the fall and, hopefully, we start to see a bit of growth in 2010," said Zandi. "I don't think even under the best of circumstances we're going to come roaring back. But I think we are past the worst of it, and hopefully, we have a more stable economy later this year and into next."
Zandi says spending federal dollars on food stamps, benefits for the unemployed, aid to state governments and infrastructure improvements provides the best chance of stimulating the economy out of the recession.
Others fear too much of the stimulus money will not be spent until 2010 or 2011, and by then the economy is expected to begin turning around on its own.
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RENEE MONTAGNE, host:
One of the ways the federal stimulus plan is hoping to give a boost to the economy is by giving a boost to the amount of food stamps people get. It's welcomed by those who have more food stamps to spend, though gauging how much it helps stimulate the economy is a challenge. NPR's Kathy Lohr reports.
KATHY LOHR: The government is spending $20 billion to increase the Supplemental Nutrition Assistance Program, or food stamps, by about 13 percent. For Charmaine McCauley, a single mother of two in suburban Atlanta, the increase means an extra $45 a month.
Ms. CHARMAINE MCCAULEY (Mary Kay Salesperson): You know, just the staple stuff you need like bread, milk, cheese, eggs - those little things. That little extra can help with that.
LOHR: McCauley just started getting food stamps about six months ago. She shows me her refrigerator, which is full.
And you've got…
Ms. MCCAULEY: Vegetables, tons of vegetables, tons of fresh vegetables. Leftovers. This is chicken I'll be cooking tonight.
LOHR: McCauley was doing well as a mortgage broker, but after the recession hit, she lost her job and her $680,000 home. Now she sells Mary Kay Cosmetics full time. She's one of 33 million people receiving food stamps.
Ms. MCCAULEY: Oh, it just keeps the refrigerator full. And, you know, having access to food on a regular basis, the kids not saying when are you going shopping? You know, low on food. And so it's definitely something that has helped our family a lot.
LOHR: The idea of the stimulus plan is simple. It assumes people who get extra money will spend it. Then that increased spending would bolster the economy. Ray Hill teaches finance and economist at Emory University. He explains the idea.
Professor RAY HILL (Finance and Economics, Emory University): This injection of funds ends up being spent on food, and that has a multiplier effect through the economy. As more people are employed in grocery stores, more people are employed to make the food, more people are employed to grow the food as a result of that stimulus.
LOHR: Most economists say every dollar spent on food will result in one-and-a-half to $2 in stimulus. The problem, Hill says, is that $20 billion is not enough.
Prof. HILL: Increasing the amount of food stamps itself is not going to have a major effect on the economy. You get a good value for your money in the sense that each dollar you spend there is highly stimulative. But it's a drop in the bucket compared to the total size of the economy and the total employment in the United States.
LOHR: The total cost of the federal stimulus plan is $787 billion. It's difficult to measure its effectiveness, but chief economist with Moodys.com, Mark Zandi, says the food stamp increase is a good, quick way to create spending.
Mr. MARK ZANDI (Chief economist, Moodys.com): If the stimulus is working along with all the other things that policymakers have done, we should see a more stable economy by the fall and, hopefully, we start to see a bit of growth in 2010. You know, I don't think even under the best of circumstances we're going to come roaring back. But I think we're past the worst of it, and hopefully, we have a more stable economy later this year and into next.
LOHR: Zandi says spending federal dollars on food stamps, benefits for the unemployed, aid to state governments and infrastructure improvements provide the best chance of stimulating the economy out of the recession. Some others fear too much of the stimulus money won't be spent until 2010 or 2011, and by then the economy is expected to begin turning around on its own.
Kathy Lohr, NPR News.
MONTAGNE: During the recession, nearly five million people nationwide have been added to the rolls of the food stamp program. See the statistics on food stamps in your state in an interactive map at npr.org. Transcript provided by NPR, Copyright National Public Radio.
