Food Stamp Stimulus

USDA Economic Research Service
Kenneth Hanson and Elise Golan
Food Assistance and Nutrition Research Report No. (FANRR26-6) 4 pp, August 2002
The Food Stamp Program (FSP) provides assistance to more households during recessions and to fewer households during times of economic expansion. These changes in FSP expenditures can have stabilizing effects on the economy, stimulating economic activity during recessions and slowing demand during expansions. This issues brief shows that the FSP provides an economic stimulus during recessions only if the Government funds the increase in program expenditures through emergency financing, rather than through increased taxes or other budget-neutral means.


Mark Zandi of Moody's Economy.com on Stimulus:
The boost to GDP from every dollar spent on public infrastructure is large - an estimated $1.59 - and there is little doubt that the nation has underinvested in infrastructure for some time, to the increasing detriment of the nation's long-term growth prospects.

Fiscal stimulus does carry substantial costs. The federal budget deficit, which topped $450 billion in fiscal year 2008, could reach $2 trillion in fiscal 2009 and remain as high in 2010. Borrowing by the Treasury will top $2 trillion this year. There will also be substantial long-term costs to extricate the government from the financial system. Unintended consequences of all the actions taken in such a short period will be considerable. These are problems for another day, however. The financial system is in disarray, and the economy's struggles are intensifying. Policymakers are working hard to quell the panic and shore up the economy; but considering the magnitude of the crisis and the continuing risks, policymakers must be aggressive. Whether from a natural disaster, a terrorist attack, or a financial calamity, crises end only with overwhelming government action.

Extending unemployment insurance and expanding food stamps are the most effective ways to prime the economy's pump. A $1 increase in UI benefits generates an estimated $1.64 in near-term GDP; increasing food stamp payments by $1 boosts GDP by $1.73 (see table). People who receive these benefits are very hard-pressed and will spend any financial aid they receive within a few weeks. These programs are also already operating, and a benefit increase can be quickly delivered to recipients.

Increasing food stamp benefits also has the added benefit of helping many low-income households ineligible for UI, such as part-time workers. It also helps those who do not pay income tax and thus will not receive a rebate.

Fiscal Economic Bang for the Buck
One year $ change in real GDP for a given $ increase in spending
$1.73 - Temporary Increase in Food Stamps
$1.64 - Extending Unemployment Insurance Benefits
$1.59 - Increased Infrastructure Spending
$1.36 - General Aid to State Governments

See FRAC's real stimulus page, also