October 31, 2013

As Cuts to Food Stamps Take Effect, More Trims to Benefits Are Expected

By CATHERINE RAMPELL

Starting Friday, millions of Americans receiving food stamps will be required to get by with less government assistance every month, a move that not only will cost them money they use to feed their families but is expected to slightly dampen economic growth as well.

Cuts to the Supplemental Nutrition Assistance Program, popularly referred to as food stamps, reflect the lapse of a temporary increase created by the administration’s stimulus program in 2009. They are slated to go into effect separately from continuing negotiations over renewal of the federal farm support program, which looks likely to further cut funds for food stamps, which this fiscal year are expected to come to about $76.4 billion.

The Republican-controlled House version of the farm bill proposes cutting $39 billion from the program over the next decade; the Democratic-controlled Senate would cut $4 billion over the same period.

The food stamp cuts scheduled to go into effect on Nov. 1 will reduce spending by $5 billion in the 2014 fiscal year, and another $6 billion over the 2015 and 2016 fiscal years. They are expected to shave 0.2 percentage point from annualized consumption growth in the fourth quarter of 2013 and trim an estimated 0.1 percentage point off the annual growth rate of the nation’s gross domestic product, according to estimates by Michael Feroli, the chief United States economist at JPMorgan Chase. Those drags may seem small, but right now projections for gains in fourth-quarter gross domestic product hover around an annual rate of just 2 percent.

“This could potentially affect consumption of food as well as nonfood items, as individuals may maintain the same food intake but reduce spending on other items,” Mr. Feroli said.

The amount that beneficiaries will lose depends on the size of the family. For a family of four receiving the maximum amount, monthly benefits will fall to $632 from $668, or a decline of $36, according to the Agriculture Department. The maximum benefits for a single adult would fall to $189 from $200, or by $11.

Supplemental Nutrition Assistance Program benefits were increased in 2009 as part of a suite of measures intended to support struggling workers and stimulate the economy in the wake of the financial crisis. The maximum monthly amount received per food stamp beneficiary rose by 13.6 percent at the time.

Food stamp caseloads have swollen in the last few years: In fiscal year 2007, before the recession began, there were about 26 million people receiving food stamps. As of this past July, the most recent month of data available, there were nearly 48 million, representing about a seventh of the American population. The increase has been attributed to more people losing their jobs and needing food assistance; government efforts to increase usage by families that did not know they were eligible; and to a lesser extent, policy changes in some states that relaxed eligibility requirements, according toStacy Dean, vice president for food assistance policy at the Center on Budget and Policy Priorities, a left-leaning research organization.

The 2009 increase in maximum monthly food stamp benefits was designed to be temporary. But as with other stimulus measures or social safety programs that received temporary increases during or after the recession — like the payroll tax holiday, or extended unemployment benefits — advocates have been fighting to push expiration off longer.

These arguments are made on the grounds of both compassion and the fragility of the recovery. Measures that grant more spending power to lower-income people generally have strong effects throughout the economy because the money is spent immediately and then re-spent. Moody’s Analytics has estimated that every additional dollar spent on food stamps generates about $1.74 in economic activity.

The payroll tax holiday was renewed once, before it was finally allowed to lapse in January. Similarly, unemployment benefits to jobless workers for longer than the normal maximum of 26 weeks have been extended repeatedly, although the maximum duration of benefits has fallen from a peak of 99 weeks to 73 weeks. The Emergency Unemployment Compensation program, financed by the federal government for states that meet certain unemployment and state benefit thresholds, is scheduled to end Jan. 1.

The recent fiscal showdown in Washington make further extensions less likely. And the end of these emergency unemployment benefits could create a further drag on the economy.

The so-called food stamp cliff “may be more of a sidewalk curb,” Mr. Feroli wrote in an email. “The bigger cliff, which I’m surprised people aren’t talking about, is emergency unemployment benefits Jan. 1.” That, he estimated, could shave 0.4 percentage point off growth in the first quarter next year.