Food Stamps : A boost to economic recovery

U.S.  economic recovery under threat from the Delta variant of the coronavirus got a shot in the arm this week from an unexpected source: Food Stamps.

Consumer sentiment, a leading economic indicator, plunged by 13.5 percent for early August as the Delta variant rose with the possibility of shutdowns making a comeback

Anti-hunger advocates say the increases in the $79 billion Supplemental Nutrition Assistance Program, or SNAP, which went 15 years without an adjustment, are not just vital for the millions of Americans who face food insecurity from the pandemic; but are also a good investment.

Every dollar spent on SNAP benefits generates $1.67 in economic activity, according to calculations by Economists.

That’s greater than the $1.31 per dollar for federal aid to state governments and the 32 cents per dollar for cutting corporate tax rates.

People who receive SNAP benefits are generally living paycheck to paycheck. It increases their spending on nutritious food, and it helps them to be more financially secure broadly, so that’s why one can see that it boosts consumer spending.

The average benefit will increase by about 25 percent. That equates to about $36 a month on top of the existing average benefit of $121. A leading newspaper’s analysis estimated that the SNAP program’s overall cost would go up by $20 billion.

The influx of money will be especially significant for small grocers and mom-and-pop retailers who have been battered by the pandemic and face the prospect of raising workers’ pay to compete with larger rivals.

Being able to afford groceries free enhances other spending, as money now is mainly spent in local neighborhoods, providing targeted economic stimulus to hard-hit communities. In simple terms, when you give someone access to SNAP, that extra money that they may have goes to paying a bill or goes to buying their kid a new set of clothes — it goes directly into the economy

“The entire grocery sector will benefit from this — everyone in the supply chain, starting with the farmers through the manufacturers and retailers,” said Arun Sundaram, an equity analyst at CFRA Research.

People who run food banks say the increase to SNAP benefits in October will come just in time for many of their clients.

Food pantries had an overwhelming surge in demand at the onset of the pandemic; since then, the initial financial shock that struck many households has been somewhat mitigated by stimulus payments and expanded unemployment benefits, but those backstops are being dismantled.

What will be the effect of SNAP on economic revival is yet to be ascertained fully, but one thing is for sure that it is indeed one booster shot which has come unexpectedly for the economy.