Analysts agree that federal spending on low-income people during a recession has a large multiplier effect because the recipients are quick to spend the money, which ripples through the economy. Using the newly compiled Social Accounting Matrix, USDA economists Patrick Canning and Brian Stacy said the SNAP multiplier is a healthy 1.5.
“We find that a $1 billion increase in SNAP benefits due to new enrollment during an economic downturn increased GDP by $1.54 billion, implying a GDP multiplier of 1.5, supporting around 13,600 jobs and about $32 million of farm income,” they write in an Economic Research Service report. Canning and Stacy noted the strong linkage between agriculture and domestic food spending in their study. Food spending, after all, is the most important market for U.S. farmers and ranchers.
The premiere U.S. anti-hunger program, SNAP is countercyclical by design, with enrollment and outlays that increase during periods of economic distress. “A survey of recent research shows that the multiplier values for temporary deficit-financed increases in government spending range from 0.8 to 1.5,” said the ERS report. “However, new research also suggests that programs like SNAP, where government spending goes to low-income households, have relatively high multipliers with values up to $2 of economic activity per dollar spent.”
At latest count, 36 million people received food stamps at a monthly cost of $4.3 billion, or $121 per person. SNAP cost $64.9 billion in fiscal 2018. The peak year was fiscal 2013, when enrollment peaked at 47.6 million at a cost of $79.9 billion.
The report, “The Supplemental Nutrition Assistance Program (SNAP) and the economy: New estimates of the SNAP multiplier,” is available here.