Food Stamp Stimulus

Grocery stores are seeing a rising number of customers use food stamps as unemployment remains high and the number is likely to increase as unemployment benefits start runnning out for the long-term unemployed.

According to an article in The Economist, approximately 45 million Americans receive food stamps, of which about half are children and 8% are elderly. Only 14% of food-stamp households have incomes above the poverty line, 41% have incomes of half that level or less, and 18% have no income at all. The average benefit is $133 a month and the maximum, for an individual with no income at all, is $200. The cost to the Federal government is $65 billion in 2010, up from $35 billion in 2008, and the Department of Agriculture estimated that only 66% of those eligible apply for the benefit.

When Moody’s Analytics assessed different forms of stimulus, it found that food stamps were the most effective, increasing economic activity by $1.73 for every dollar spent. Unemployment insurance came in second, at $1.62, whereas most tax cuts yielded a dollar or less. The reason? Food stamp funds are spent immediately.