SNAP Expenditure Reductions

by Menzie Chinn,

This article appeared originally in Econbrowser 30 October 2013.

From CBPP (10/24 – with illustration below added by Econintersect):

The 2009 Recovery Act’s temporary boost in Supplemental Nutrition Assistance Program (SNAP) benefits ends on November 1, 2013, which will mean a benefit cut for each of the nearly 48 million SNAP recipients — 87 percent of whom live in households with children, seniors, or people with disabilities.

The November 1 benefit cut will be substantial. A household of three, such as a mother with two children, will lose $29 a month — a total of $319 for November 2013 through September 2014, the remaining 11 months of fiscal year 2014. (See Figure 1.) The cut is equivalent to about 16 meals a month for a family of three …

What are ramifications for expenditures? Figure 1 shows the evolution from 2010 through 2014, including the CBO’s February 2013 baseline.

Figure 1: SNAP expenditures for benefits, in billions of dollars per month, average for FY 2010 (blue), and fY2011- July 2013 (blue), and February 2013 CBO baseline (red).Source: USDA USDA, and CBO.
Click to enlarge

Note that the impending drop is pretty steep. It is even steeper after accounting for inflation, as in Figure 2.

Figure 2: SNAP expenditures for benefits, in billions of Chained 2009 dollars per month, average for FY 2010 (blue), and fY2011- July 2013 (blue), and February 2013 CBO baseline (red). Deflation calculated using PCE deflator; assumes 1.7% annual inflation from 2014M08 onward (1.7% is 2014 PCE inflation in the CBO February 2013 Budget and Economic Outlook).Source: USDA, USDA, CBO, and BEA via FRED.
Click to enlarge

The House is seeking to cut an additional $40 billion over the next ten years, while the Senate is seeking only $4.5 billion in cuts.[1]

What are the macro implications? From the Wall Street Journal:

Retailers and grocers are bracing for another drain on consumer spending when a temporary boost in food-stamp benefits expires Friday.

The change will leave 48 million Americans with an estimated $16 billion less to spend over the next three years and comes just months after the expiration of a payroll tax cut knocked 2% off consumers’ monthly paychecks.

Estimates of the multipliers for SNAP expenditures center around 1.5[2]. While not a big amount overall, it’s just one more bit of fiscal drag (and a particularly uncharitable one paid for by the lowest income groups). But I guess it’s important to keep tax rates low for the top income quintile at all costs.

Added after initial post: Reader Hans writes:

A 5% reduction in spending on a program that is out of control or is it in honor of our Food Stamp President…

Here are some illuminating statistics for those who are interested in data as opposed to invective. Real food stamp benefit expenditures rose 97.5% from 2001M01-2009M01 (log terms), under President GW Bush. Expenditures since 2009M01 have risen 38.8% through July. These calculations use quadratic match average interpolation of the annual FY data to monthly; I use the PCE deflator to convert to real 2009Ch.$.

From 2001M01-2009M01, real food stamp expenditures rose $2.5 billion per month; from 2009M01 to 2013M07, they rose $1.9 billion per month. In annual terms, these are 29.7 bn Ch.09$ (Bush) vs.22.6 bn Ch.09$ (Obama, through July).

So expenditures rose much more, even with a relatively muted unemployment picture, under G.W. Bush than under Obama.

Here is a plot of the data I used to obtain the numbers cited. All data is freely accessible. If you don’t have an interpolation program, try doing a centered moving average.

Figure 3: Unemployment rate, %, s.a. (blue, left axis), and real SNAP benefit expenditures in bn. Ch.09$ per month (interpolated using quadratic match, red, and actual, dark red, righ axis). Dashed vertical lines at 2001M01, 2009M01.Source: USDA, USDA, BEA and BLS via FRED, and author’s calculations.
Click to enlarge

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