About 15 percent of the United States population—that's 47 million Americans—rely on food stamps to buy their groceries. And those Americans experienced a significant cut to their benefits last week.
The U.S. food stamp program, more formally called the Supplemental Nutrition Assistance Program (SNAP), rolled out a $5 billion benefit reduction on November 1. The cuts stemmed from the expiration of a 2009 economic stimulus boost.
The cuts translate to a $36-per-month loss in benefits ($432 per year) for a family of four, according to CBS Money Watch—not an insignificant amount for a household living on the edge economically.
While the food stamp program’s cuts may not seem like a big deal on the surface, they could take a surprising and negative toll on thousands of U.S. businesses and the economy overall, some economists say.
Erick Perez, manager of Rightway Food Express in Baltimore, says that 40 percent of his grocery store’s business comes through the food stamp program, according to National Public Radio’s Marketplace. Perez calculates that Rightway will lose $3,600 a month in revenue for every 100 families of four that now see lower benefits.
Grocery stores and other food businesses aren't the only ones that could suffer due to low-income Americans losing benefits. Walmart and Target are also bracing for losses due to the food stamp cuts, according to Bloomberg.com, as well as thousands of smaller discount retailers that rely on business from low-income Americans.
With about 8 percent of shoppers now getting less government assistance, SNAP benefit recipients might be less able and willing to spend on all types of purchases. Every dollar increase in SNAP benefits generates about $1.74 in economic activity, according to Moody’s Analytics. JPMorgan Chase U.S. economist Michael Feroli estimates that the food stamp cuts could shave 0.2 percent off annualized U.S. gross domestic product growth in the fourth quarter due to lower consumer spending.
“Do I pay the light bill, or do I buy milk for my kids?" Stacy Dean, vice president of food assistance policy with the Center on Budget and Policy Priorities, told NPR. "I think that means that it won’t just play out as being an impact on retailers, but any number of the other kinds of businesses that low-income families frequent.”
The most recent cuts to SNAP could be just the beginning. Many congressional Republicans argue that the program is rife with abuse and hope to push for reforms and more cuts as part of the current U.S. farm bill negotiations.
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