What Is the Total Economic Impact of a Program Like Snap?

Recession warning indicators are flashing red all across the economy, from inflation to the stock market to GDP. This is particularly terrible news for the estimated 40 million Americans who get SNAP payments. During times of economic downturn, they rely on their monthly payments more than ever.

When circumstances are tight, SNAP participants aren’t the only ones who benefit from the program.

The fundamental goal of SNAP is to assist the most vulnerable households in avoiding food insecurity, but a monthly infusion of billions of dollars from the federal government benefits the whole economy – especially when the economy is in a downward spiral. Let’s look at the impact of this crucial initiative.

‘An Economic Stabilizer on Autopilot’

The United States Department of Agriculture (USDA) produced a report just before the epidemic that labeled SNAP “an automatic stabilizer for the economy.”

The theory is that low-income SNAP participants spend their benefits soon after they get them, causing a “cascading impact” across the economy, according to the USDA.

When SNAP beneficiaries spend their money, it produces revenue for those who produce, transport, market, and sell the food that those dollars buy.

As a result, those business owners and employees have more money to spend, injecting even more money into the economy.

Individuals lose their jobs, salaries decline, investments and assets lose value, and more people become SNAP-eligible during a recession.

The government then adds additional participants to the rolls, boosts aid, and the program’s ability to stimulate the economy is doubled even further.

SNAP Feeds People — and the Economy — During Recessions

Research undertaken by the USDA’s Economic Research Service (ERS) adds some actual facts to the notion of SNAP as an economic multiplier.

Every $1 billion in additional SNAP payments contributes $1.54 billion to the country’s gross domestic product during a sluggish economy, such as the one that’s just around the corner if America is headed for a recession (GDP).

That implies SNAP purchases 54 percent more economic output than the benefits themselves, enough to sustain almost 13,500 jobs.

In addition, when cash-strapped persons in a recession start receiving SNAP benefits, it frees up their limited personal resources for non-food purchases such as healthcare, durable goods, housing, and utilities.

According to the ERS, when SNAP expenditure rises during economic downturns, the commerce and transportation industries benefit the most in terms of GDP and jobs.

Pandemic Virus Experiment with the Multiplier Concept

The USDA boosted average SNAP payments by $36.24 per person per month on Aug. 16, 2021, on top of the $121 current amount. It was the first time in 15 years that something had changed.

Consumer mood was at its lowest point since the epidemic began, owing primarily to the Delta variety. Food banks were busier than ever before, yet they were running out of food.

What Is the Total Economic Impact of a Program Like Snap?

The $20 billion boosts to the $79 program couldn’t have come at a better moment – both for the suffering families who rely on SNAP and for the economy as a whole.

A surge in consumer spending almost instantly seemed to validate the USDA’s “automatic stabilizer” notion from two years ago, when the program was promoted as an economic investment rather than a cost.

The impact of increased SNAP spending during the pandemic was confirmed by Moody’s Analytics senior economist, who determined that every extra dollar in SNAP payments created $1.67 in new economic activity, which was higher than the USDA’s estimate of $1.54.

SNAP Makes Its Way Into Local Cash Registers During Times of Crisis

 in August 2021, at the time of the benefit hike, that small grocers and mom-and-pop stores were the most likely to profit from the flood of cash – precisely those most badly hit by the epidemic.

Because SNAP beneficiaries are more inclined to spend their benefits where they reside, towns that have been affected particularly hard by the recession will have a greater SNAP population.

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Because their money is most likely to end up in local cash registers, SNAP is one of the most precise sources of stimulation for both individuals and local businesses.

The Center on Budget and Policy Priorities stated a little more than a year ago, in May 2020, that 80 percent of SNAP-authorized sellers are small enterprises.

Many locally owned companies, such as private grocers, convenience stores, dairies, butchers, bakers, and farm stands, are among them, according to the research.

The greater the influence of SNAP on the local economy, the lower-income a community is.

The SNAP City-Rural Link

According to Marketplace, the majority of the country’s 40 million or more SNAP beneficiaries resided in cities around the time the benefit hike took effect in 2021.

Despite this, the Center for Rural Strategies found that SNAP payments had a greater impact on rural economies in terms of jobs and production than they do on urban economies.

Increased SNAP payments improve spending by poorer rural households, freeing up personal funds for non-food items like diapers and – in isolated communities with no public transit — auto repairs, just as they do in cities.

However, there’s another side to the story that makes SNAP a more effective economic stimulant in rural America. It all comes down to who does the eating and who does the growth.

The food that urban residents buy with SNAP funds comes from rural regions. The agriculture and food processing businesses, which underpin so many rural economies, profit from this expenditure.