Today, America's Foodstamps Program Gets A 6% Haircut: What Happens Next?

Tyler Durden's picture




 

Today, one of America's best-known welfare programs with 47.6 million participants or 15% of the total population, the Supplemental Nutrition Assistance Program also known as "foodstamps" or EBT, is due for a substantial haircut: beginning Friday, there will be a phased in $5 billion reduction (6% of the program) for the 12 month period starting November 1st 2013. So what happens next? 

Nick Colas of Convergex explains.

The U.S. Supplemental Nutrition Assistance Program (a.k.a. Food Stamps) is the largest means-tested social support program in the country, with $6.3 billion in direct monthly cash transfers to individuals for the purchase of food.  Some 47.6 million people (15% of the total population) are in the SNAP program as of the most recent data (July 2013) and these individuals receive an average of $132 per month.  This support is set for a cut on Friday, with a $5 billion reduction (6% of the program) for the 12 month period starting November 1st 2013.  From a Wall Street perspective, these numbers may seem small at 0.0003% of GDP.  From the perspective of Main Street, however, is means a cut of $36/month for a family of four receiving full SNAP benefits.  Record levels for stocks, record level for SNAP participants…  An odd societal disconnect, to be sure. 

We’ve written about the U.S. Supplemental Assistance Program (SNAP, also known as food stamps) in these pages over the years even though the topic bears no direct relationship to corporate earnings, interest rates, the Federal Reserve, or any other recognized business topic.  The reason for this focus is threefold:

  • It is a very large visible government program with monthly data updates.  There are, for example, 47,637,407 Americans in the SNAP program as of the most recent update (July 2013) from U.S. Department of Agriculture.  A total of 23,074,914 households receive an average monthly benefit of $272.51.  This amounts to $6.3 billion in monthly support.  As a percent of the population, this is 15% of all Americans and +20% of all households in the program. 
  • It is a good measure of how deeply the economic recovery in the U.S. is reaching through the socioeconomic strata.  Qualifying for SNAP means you make no more than 130% of the poverty line and generally have limited assets.  Those 47.6 million people in the SNAP program are, for all intents and purposes, a record high for food stamp participation once you exclude months where the program includes disaster assistance. 
  • It generates a large amount of hate email direct to my inbox and voicemail from both ends of the political spectrum.  From the right comes criticisms over certain parts of the US population using EBT cards (the debit cards used to distribute the program’s payments) to buy beer and potato chips.  This, yes, does occasionally happen.  From the left, we get missives that feel a lot like that guy who told the world to “Leave Britney alone!” Food stamps, these folks argue, are part of living in a just society, which doesn’t allow anyone to go hungry.  Half of all the people enrolled in SNAP are children, so it is pretty easy to see their point of view as well.

In the spirit of bringing our two warring readerships together, I would propose the following statement: “Something has changed about America since the Financial Crisis, and the still widespread popularity of the SNAP program is emblematic of that shift.”  Or, in the words of Bill Parcells, “You are what your record says you are.”  The American economic record, based on the Food Stamp data, is still pretty lousy:

  • Before the Great Recession of 2009, enrollment in the SNAP program ebbed and flowed with the state of the U.S. economy.  There are links to the data after this note, with the high water marks in 1976, 1981, 1992-4 and cyclical lows in the late 1970s, 1980s, and 1990s. 
  • From 2004 to the present day, SNAP enrollment has doubled from 23 million people to more than 46 million.  The cost of the program over that period has moved from $25 billion annually to $75 billion in 2012. 
  • The notional economic “Recovery” which has helped domestic equities more than double from their March 2009 lows is entirely absent from the U.S. food stamp data.  As mentioned, enrollments are still essentially at record highs. 
  • Sometimes big numbers are hard to visualize, so here’s a few ways to think about the size of the SNAP program.  For example, if every SNAP participant lived in one state, it would be 20% more populous than California.  If every person in the program linked hands, human chain style, they could circle the Earth (assuming a 3 foot reach per person). 

We’ll sidestep the inevitable political discussion for a moment longer, and point out that things are about to change in the food stamp program.  On November 1st, everyone in the SNAP program will see lower payments.  Here’s the hows and whys:

  • Monthly payments increased because of the 2009 American Recovery and Reinvestment Act, but these increases expire on Friday.  The jumps were substantial – the average benefit per person increased to $125 in 2010 from $102 in 2009 and topped out at $133/person in 2010 – 2012. 
  • The change cuts $5 billion out of the program for the November 2013 – 2014 period, on a base of $75 billion (based on the latest run rate of $6.3 billion/month).  The USDA estimates that this will be a $36/month reduction in benefits for a family of four. 
  • The Center for Budget Policy Priorities, using USDA data, stated in a recent note that 80% of SNAP households live below the Federal poverty line ($19,500 for a family of three) and 40% live in households making less than half that amount.  The SNAP program helps feed 25% of all US children and over 9 million seniors.

Let’s see if we can dodge the political bullet for one more paragraph, with a few more fact-based points:

  • The SNAP program is explicitly NOT designed to provide the only income available to economically distressed Americans for the purpose of purchasing food.  There’s been a raft of celebrity and CEO ‘Live on SNAP benefits’ challenges, where these economically fortunate individuals chose to live on $133/month in food purchases.  This ignores the fact that the program is intended to be “Assistance” rather than 100% support. 
  • There are further cuts in the program coming in 2014 – 2016, to the tune of $11 billion over the period.  It is an odd quirk of the SNAP program that its funding is part of the annual Farm Bill in Congress.  That means these future cuts could be overturned as House and Senate consider this legislation. For right now, however, these proposed reductions would take the SNAP program down to $60 billion from the current $75 billion run rate.  Truth be told, the pressure within Congress is to cut these payments further, rather than to increase them. 
  • If you are looking for a capital markets impact, retailers in southern and western states are one place to look.  There are 13 states with over 1 million SNAP participants: Arizona, California, Florida, Georgia, Illinois, Michigan, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, and Washington.  The economic “multiplier” on food stamp purchases is about 2:1, so the $5 billion reduction in 2013-2014 looks more like $10 billion in the real economy. 

To sum up (apolitically, of course)…  The amount of money 15% of the U.S. population uses to purchase food is about to go down, and by enough so this group will notice its absence.  It may not matter to the economic data on which Wall Street hangs its fedora, but it is certainly enough to spark a political response.  How this plays out, I honestly have no idea.  We are in uncharted waters here, as the historical record clearly shows.  

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Fri, 11/01/2013 - 11:06 | 4111790 Cult_of_Reason
Cult_of_Reason's picture

Less money on our EBT cards?

Every American is entitled by God to get free food.

Fri, 11/01/2013 - 11:07 | 4111798 bania
bania's picture

I give up. What's the answer?

Fri, 11/01/2013 - 11:13 | 4111807 Cult_of_Reason
Cult_of_Reason's picture

Are you against God and hungry children?

You are the enemy of the people.

We need to pull out and examine your NSA file. We need to get rid of people like you, Chicago style.

Fri, 11/01/2013 - 11:13 | 4111823 FeralSerf
FeralSerf's picture

Livestock, as a matter of tradition, always get free food.

Fri, 11/01/2013 - 11:20 | 4111845 Cult_of_Reason
Cult_of_Reason's picture

Are you against free contraception for everyone?

If yes, you have declared the war on women and God. We need to exterminate you, Chicago style or our new founding father Joseph Stalin style.

Fri, 11/01/2013 - 11:28 | 4111885 Boris Alatovkrap
Boris Alatovkrap's picture

Food Stamp is not deliver... postage due!

(See what Boris is do there? Double entendre word play!)

Seriously, stamp is not of nutritional value, what is giving!?

Fri, 11/01/2013 - 11:40 | 4111926 Atlasshruggedme
Atlasshruggedme's picture

I love your comments Boris. Your outside perspective looking in and broken english are great. Allot of the times people can't see the trouble they are standing in, until someone from outside looking in points it out. +1. 

Fri, 11/01/2013 - 11:50 | 4111963 SamAdams
SamAdams's picture

Boris is a parody...

If you created your own money, would you charge yourself interest?

Would you create a bond contract with yourself to make sure you paid yourself interest?

Would you create more money so that you could pay the interest owed to yourself?

END THE PRIVATELY OWNED FED!

Fri, 11/01/2013 - 12:04 | 4112024 redpill
redpill's picture

"How this plays out, I honestly have no idea." 

 

I read that whole thing only to find out you don't even have a guess?  WTF

Fri, 11/01/2013 - 12:19 | 4112075 RSloane
RSloane's picture

I could be completely jaded and point out this will increase the severity of drug wars in populations with a high dependency on welfare, as drug lords will be vying for less dollars available.

Fri, 11/01/2013 - 12:27 | 4112114 economics9698
economics9698's picture

In the 70’s there was a stigma to food stamps.  You did not get them unless you really needed them.  Today there is no stigma, in fact you are considered stupid if you are not getting them.

Food stamps changes consumer’s behavior, it’s the “free money” thing for a lot of people.  Users go for frozen meals and more expensive items. 

Needless to say like any government program this will result in increased food prices for the consumer.  The victim of these programs are the rest of society who must pay higher food prices.

How do you feed the poor?  Soup kitchens and private charity.  Poverty needs to be a horrible life, not a lifestyle choice.

 

It is a huge mistake for the federal government to get involved in this and it will backfire spectacularly when food prices increase faster than the 2.5% now.  Venezuela is learning the free shit lesson now with tis 43% inflation rate.  

Fri, 11/01/2013 - 12:40 | 4112152 Skateboarder
Skateboarder's picture

"Poverty needs to be a horrible life, not a lifestyle choice."

I don't think you understand poverty fully.

Fri, 11/01/2013 - 12:54 | 4112212 economics9698
economics9698's picture

I grew up in poverty, free lunches, food stamps, and court ordered bussing.  I understand it very well.

Fri, 11/01/2013 - 12:59 | 4112238 mophead
mophead's picture

I understand it very well.

No you don't. You can't eat a food stamp.

Fri, 11/01/2013 - 13:51 | 4112481 Boris Alatovkrap
Boris Alatovkrap's picture

Now Boris is confusing...? Is food stamp for pet, not consumption of citizenry?

Fri, 11/01/2013 - 17:16 | 4113426 Keyser
Keyser's picture

Liver Alpo on a cracker and you have pate'. 


 

Fri, 11/01/2013 - 18:15 | 4113664 Abi Normal
Abi Normal's picture

Nothing will happen until a majority feel the pain, 6% is doable! When it gets to 50% cuts, wake me up!  The house of cards is due to fall any time now, tick tock!!!

Fri, 11/01/2013 - 19:12 | 4113896 flacon
flacon's picture

5bn/mo reduction.... HOW MUCH IS DAILY POMO? 2-5BN? Look who the livestock is... it's LIVE.... STOCKS....!

Fri, 11/01/2013 - 19:47 | 4114006 Trimmed Hedge
Trimmed Hedge's picture

How small does a post get at the end of a ZH reply chain?

Fri, 11/01/2013 - 20:28 | 4114100 economics9698
economics9698's picture

Real small.

Fri, 11/01/2013 - 20:40 | 4114134 BellyBrain
BellyBrain's picture

You made an interesting point about being considered stupid if you're not on food stamps.  My wife isn't working, her UI ran out long ago, but we're doing ok on my earnings.  She could get on EBT, but I don't want to participate in that system for various reasons, the largest of which is that I simply refuse to be a cog in the government/goldman sachs machine.

 

 

Fri, 11/01/2013 - 22:58 | 4114423 Trimmed Hedge
Trimmed Hedge's picture

Too late...

Fri, 11/01/2013 - 23:09 | 4114448 defender
defender's picture

 I simply refuse to be a cog in the government/goldman sachs machine.

 

In that case, sign right up.  All of the EBT cards/payments are handled by JPM, so this is just one simple way to stick it to the squid.

Fri, 11/01/2013 - 20:47 | 4114131 Paveway IV
Paveway IV's picture

Is there anyone out there that remembers the curious timing of the laws making student loans largely non-discarageable through bankruptcy, or was it just me? The default rates rocketed a year or two later, and debt slavery for tens of millions was assured.

Now they're cutting SNAP? Damn... there's going to be a lot of hungry people pretty soon.

I would be back in a couple years to gloat about my prescience, but

1) I'll be dependent on SNAP to feed my family.

2) I won't have time to post - the early bird gets the welfare cheese at food riots. Boris will be overcome with nostalgia when no American dares leave home without a few empty plastic bags and sprints to get in a line anytime they see one forming - somebody must have something good to sell.

3) The FEMA camps will have internet connections, but they will all funnel through a single 2400 baud modem that repeatedly drops the connections.

4) Not that 3) will matter by then. You'll only get local sites, unless you're willing to pay a small long distance charge for every IX you cross.

Sat, 11/02/2013 - 10:04 | 4115035 GMadScientist
GMadScientist's picture

Here's another alternative "future" for you:

You work doing whatever you're told. wherever you're told, but you'll be in constant contact with your overlords through the wireless device they implanted in the back of your head for receiving "commands". Don't worry about unionizing or otherwise attempting to fight back, because we've specifically arranged for you to be a contractor that is shifted from shell co to shell co as necessary to evade taxes for our master limited partnership's dearest friends. You will be allowed to purchase expired food for your family according to how well you've followed your commands for the day, and will be allowed to visit them occasionally if we feel your compliance has been complete and genuine.

(only some of the above is fiction for the Wal-Mart loaders in Fontana, CA)

 

Sat, 11/02/2013 - 01:04 | 4114667 StychoKiller
StychoKiller's picture

Poverty is a state of mind! (Jesus himself said:  "The poor ye shall always have with ye." [assuming he really spoke olde English])

Sat, 11/02/2013 - 06:10 | 4114834 boogerbently
boogerbently's picture
Ezekiel 22

 

23 Again the word of the Lord came to me: 24 “Son of man, say to the land, ‘You are a land that has not been cleansed or rained on in the day of wrath.’ 25 There is a conspiracy of her princes within her like a roaring lion tearing its prey; they devour people, take treasures and precious things and make many widows within her. 26 Her priests do violence to my law and profane my holy things; they do not distinguish between the holy and the common;they teach that there is no difference between the unclean and the clean; and they shut their eyes to the keeping of my Sabbaths, so that I am profaned among them. 27 Her officials within her are like wolves tearing their prey; they shed blood and kill people to make unjust gain. 28 Her prophets whitewash these deeds for them by false visions and lying divinations. They say, ‘This is what the Sovereign Lord says’—when the Lord has not spoken. 29 The people of the land practice extortion and commit robbery; they oppress the poor and needy and mistreat the foreigner, denying them justice.

Fri, 11/01/2013 - 13:09 | 4112293 Fedaykinx
Fedaykinx's picture

i stoppoed reading when i got to the part about food stamps "occasionally" being used to buy shit like potato chips and beer.

motherfucking really?  how about when they get sold for $.60 on the dollar for crack or oxy??

sigh.

Fri, 11/01/2013 - 13:52 | 4112487 Boris Alatovkrap
Boris Alatovkrap's picture

If can use food stamp for buy street drug, obvious is crack in system.

(See, Boris is make more word fun! Boris is eating roll today!)

Fri, 11/01/2013 - 16:24 | 4113230 Hacked Economy
Hacked Economy's picture

Boris!  You are (and have been) a breath of fresh air for some time now.  You and Rocky Raccoon are the only two members for whom I stop to read *every* comment I see.

Honest truth...I unfortunately had to shoot another raccoon in my yard yesterday because it was tearing up my grass and wouldn't shoo away.  Sorry, Rocky, but when the line is crossed, life hits you in the face.  As for you, Boris, keep it light and funny..."keep it classy" LOL!

Fri, 11/01/2013 - 17:55 | 4113575 RockyRacoon
RockyRacoon's picture

I'm rather enjoying the roll that Boris is on as well.   The fella sure has a way with words, even if they are arranged somewhat haphazardly.  Therein lies the humor!  He'll be a hoot at the upcoming ZH confab.

Fri, 11/01/2013 - 21:40 | 4114273 dannyboy
dannyboy's picture

Zerohedge confab?

Sat, 11/02/2013 - 01:25 | 4114691 geekgrrl
geekgrrl's picture

FEMA camp?

Sat, 11/02/2013 - 10:06 | 4115041 GMadScientist
GMadScientist's picture

"No Jumpy Castle?! This party sucks!"

Sat, 11/02/2013 - 10:16 | 4115061 centerline
centerline's picture

Special box cars from each region just for it!  lol.

Fri, 11/01/2013 - 22:07 | 4114324 nmewn
nmewn's picture

Boris is one of my favorite Americans ;-)

Fri, 11/01/2013 - 13:58 | 4112504 FEDbuster
FEDbuster's picture

Food stamps are wealth transfers to Food Inc. (Kraft, General Mills, Nestle, etc...)  If food stamps were about getting nutritional food to the hungry, SNAP and EBT card holders would be limited to basic foods with good nutritional value (see the WIC Program which limits which foods can be purchased).  No more swiping your EBT at KFC.

Fri, 11/01/2013 - 17:18 | 4112678 macholatte
macholatte's picture

If food stamps were about getting nutritional food to the hungry, SNAP and EBT card holders would be limited to basic foods with good nutritional value...

 

Spot On and EVERYBODY knows it, even Michelle (just another opportunist hypocrite) Obama with her BS school nutrition program. All Barry need do is sign off on an exec order and restrict EBT use for tobacco & alcohol (just for starters) but that would alienate his voter base. Think Blue Team Votes.

 

The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money.

Alexis de Tocqueville

Fri, 11/01/2013 - 19:14 | 4113901 superflex
superflex's picture

My favorite quote.

Fri, 11/01/2013 - 18:11 | 4113646 Five8Charlie
Five8Charlie's picture

I wish I had a Diebold machine so I could keep voting for that comment.

Fri, 11/01/2013 - 21:38 | 4114271 Sam Clemons
Sam Clemons's picture

Food stamps = Peace stamps

Sat, 11/02/2013 - 14:31 | 4115564 algol_dog
algol_dog's picture

Finally, someone gets it!

Fri, 11/01/2013 - 23:10 | 4114453 Fedaykinx
Fedaykinx's picture

of course its corporate welfare, but sugarcoating what is really happening on the ground just helps them maintain the illusion that it's all "fo da chilrens" and other such bullshit

Fri, 11/01/2013 - 13:47 | 4112460 Skateboarder
Skateboarder's picture

Alright, you're off the hook for experiencing American poverty, but my previous statement still stands.

Fri, 11/01/2013 - 17:36 | 4113485 Miffed Microbio...
Miffed Microbiologist's picture

My brother flies regularly to India and Sri Lanka. I now know what real poverty is though I haven't seen it as he. The key is your categorizing it as "American" poverty which is completely different from what most of the world experiences.

Miffed;-)

Fri, 11/01/2013 - 18:04 | 4113602 Skateboarder
Skateboarder's picture

That's why I make the distinction, Miffed, and you know entirely what I mean by making that distinction at all.

Fri, 11/01/2013 - 18:24 | 4113708 Miffed Microbio...
Miffed Microbiologist's picture

Absolutely. I commented because I was confused about the down votes. You have a valid point IMHO.

Miffed;-)

Fri, 11/01/2013 - 18:16 | 4113662 dark pools of soros
dark pools of soros's picture

most of those Indians are bootlickers.  That's why they live like slime

Fri, 11/01/2013 - 18:32 | 4113749 Miffed Microbio...
Miffed Microbiologist's picture

I think that is because of the acceptance of the caste system. My brother stays at a,what is considered newly "middle class" , family. Three people live on their front door porch. My brother had a headache and was told to tell a porch person to get him aspirin. My brother gave him a rupee for his trouble and he bowed to my brother in gratitude. My brother was shocked. Especially when told to be a porch person is not the worst you could have it in India.

Miffed;-)

Fri, 11/01/2013 - 22:20 | 4114342 Tsukato
Tsukato's picture

Haha! Stupid coolies. Keep having those babies! I've been to India, and can say, those assholes deserve the lives they have. And what's wrong with the caste system. It's merely nature expressed in human terms, without apology for what is clearly evident. If we were honest Americans, we would see the truth of the caste system here. Can anyone guess which folks would fill the untouchable ranks? Of course you can. It's easy, if you can be honest, and/or pull your heads out of Sanriolandia.

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