The Census released its annual income and poverty report this week, which, among other highlights, calculates the number of people who are kept out of poverty by various government assistance programs. While many of the headline numbers stayed the same, the number of people kept out of poverty by the Supplemental Nutrition Assistance Program (SNAP) increased to an all-time high of 4 million people.1
The data arrived, coincidentally, as the House of Representatives announced it will be voting today to cut SNAP spending by 5 percent over the next 10 years, cutting 3.8 million people from the program by as early as next year. Understanding why SNAP has increased over the last five years helps us understand why it would be irresponsible–indeed cruel and stupid—to cut spending on the program now.
The Census report confirmed that the vast majority of American households have made only slight progress in recovering from the Great Recession. The number people in poverty remained at 15 percent of the population (unchanged from 2011), and incomes remain substantially lower than they were before the recession began for all but the top 5 percent of the income distribution. Between 2011 and 2012, earnings for full time full year workers hardly budged—not surprising given the employment-to-population ratio is 4.4 percentage points below its 2007 level. The reduced bargaining power that results from a lack of outside job opportunities hurt earnings growth even for those with full-time, full-year work. Americans who utilize SNAP, therefore, are no better off this year they were last year.
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As of 2011, about 45 million people (more than 1 in 7 Americans) participate in SNAP. Over 41 percent of all recipients live in households where family members are employed; these are largely families that have been left behind by a deeply damaged labor market. Beyond increasing deprivation for these families, the proposed cuts to SNAP would damage the overall labor market even further. Nearly all macroeconomic forecasters agree that food stamps are among the most effective forms of fiscal support to create economic activity and jobs in an economy where there is tremendous slack in the labor market. This is because food stamps go to people that are by definition cash strapped, which means they spend the money right away, putting the cash received directly back into local businesses and grocery stores. Because of this high propensity to spend SNAP dollars, estimates are that each dollar spent on SNAP generates $1.50 to $1.70 in additional economic activity. This means that the $75 billion spent on food stamps in 2012 supported roughly $120 billion in overall economic activity.
Majority Leader Eric Cantor seems to think that cutting these benefits will make people more self-sufficient, but today’s economic problem is not that Americans are unwilling to work, it’s that there are not enough jobs. At a time when unemployment is still above 7 percent, Congress should instead be working to deliver a jobs program for Americans, not cutting the few resources going to families that need them most. Cutting these benefits, would simply be a mistake for families and a mistake for the economy.
1. The official poverty measure includes cash income only; 4 million is, therefore, the number of people kept out of poverty if SNAP benefits were included as money income.