Monday, November 18, 2013

The Ripple Effect of Cuts in Food Stamps

When Congress cut $5 billion from SNAP program (Supplemental Nutrition Assistance Program or food stamps), it was done so with the thought that it would save the government money.

Now true, it wasn't an actual 'cut', in the commonly understood fiscal sense of the word. Congress chose to let the additional money allocated to SNAP expire. It nonetheless means an average $36 fewer dollars in the grocery budget of some of the poorest Americans, even as the country struggles overcome the impact of the greatest financial disaster since the Great Depression. But the rationale for cutting those stimulus dollars - the idea that it will help reduce the deficit, is specious at best and penny wise pound foolish at worst.

Daily Kos has an example of what the impact on one state's economy will be and when extrapolated throughout 49 other states it raises some serious questions as to whether or not even lawmakers understand what cutting food stamps does to the economy.

The state is Delaware and, while a small state it and the impact of the cuts are astonishing...
"Delaware Democratic Congressman John Carney is in agreement.  Here is how that cutback will affect John Carney's district, a district at large for the entire state of Delaware....
"Of those 36,382 households, 26,763 are families.  Of these families, 31% have two more more workers in the past 12 months.  50.1% of these families have one person working over the past 12 months. Together that is over 81%.  Only 17.7% fall in the category commonly associated with food stamps.  people who are not working.
"The benefits will be cut $11 dollars per month per single person, maxing out at $36 dollars per month for families four and over....  Using the figures above,  per month the 9619 individuals will cost Delaware $105,809 in less food purchased, and the 26,763 families will spend $963,468 less food dollars.  These are rough estimates using the averages provided here.
"But these cuts mean that grocery stores across the state starting in November will receive $1 million less in sales for every month.  Of course a year means that 12 million will not be entering the Delawarean economy per year.
"There are 326 Grocery stores listed in Delaware.   Although stores closer to areas that are less affluent will suffer worse, the average monthly loss to this slice of our economy per store is $3280 dollars.   Each store over the course of a month will lose $3280 dollars.  In a classic business structure, one expects to pay one third for product, one third for labor, and one third to everything else.  If one profits, it is because one has beaten the odds in any of those three categories...   Meaning that labor will be impacted by one third or $1100 each month....
"Each of the grocery stores on average will need to cut $1100 each month...  because of John Carney's support of this piece of legislation.
"One can expect the entry positions to be cut first.  Entry levels are minimum wage, but just for our calculations, let us go with $10 per hour.   100 hours can be expected to be cut....  or if not spread across the staff, their loss will cost the removal of a half worker from each of the 326 grocery stores in Delaware.....
"So the cutting of  SNAP benefits to appease Republicans appears to now cost Delaware an additional loss of 160 jobs....  According to August 2013's  figures,  there are 51,200 Delawareans working in Delaware's retail trade.  160 of those jobs disappearing is a 0.3% drop in that industry.... It is a small percentage of our total state workforce... 1 hundreths of one percent.

"Now this does not account for 6 months later, when the impact of losing the cumulative of losing 1.1 million every month starts hitting farms.  Nationally the drop is $5 billion.  Simply put.  $5 billion less in food will be purchased over the course of a year...."

To say a family of four has to buy $36 less food as a result of the cuts is one thing. The unsympathetic among us shrug. But to say "$5 billion less in food will be purchased over the course of a year...."" means that $5 billion has just been taken out of our nation's economy. 


I'm willing to bet that those who snatched $36 out of the hands of hungry families, didn't stop to think that the five billion represents jobs, car notes, mortgages, rent payments and the purchases of goods and services that help churn still sluggish economy. Or to put it another way, "Most people don't know how subsidies work; they never would complain about SNAP if they really knew."

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