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October 19, 2014

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As cuts to food stamps take effect, more trims to benefits expected

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Matt Rourke / AP

In this Oct. 8, 2013, photo, Jennifer Donald, whose family receives money from the Supplemental Nutrition Assistance Program also known as food stamps, takes in the evening’s dinner to her home in Philadelphia.

Starting today, millions of Americans receiving food stamps will be required to get by with less government assistance every month, a move that not only will cost them money they use to feed their families but is expected to slightly dampen economic growth as well.

Cuts to the Supplemental Nutrition Assistance Program, popularly referred to as food stamps, reflect the lapse of a temporary increase created by the administration’s stimulus program in 2009. They are slated to go into effect separately from continuing negotiations over renewal of the federal farm support program, which looks likely to further cut funds for food stamps, which this fiscal year are expected to come to about $76.4 billion.

The Republican-controlled House version of the farm bill proposes cutting $39 billion from the program over the next decade; the Democratic-controlled Senate would cut $4 billion over the same period.

The food stamp cuts that go into effect today will reduce spending by $5 billion in the 2014 fiscal year, and another $6 billion over the 2015 and 2016 fiscal years. They are expected to shave 0.2 percentage point from annualized consumption growth in the fourth quarter of 2013 and trim an estimated 0.1 percentage point off the annual growth rate of the nation’s gross domestic product, according to estimates by Michael Feroli, the chief U.S. economist at JPMorgan Chase. Those drags may seem small, but right now projections for gains in fourth-quarter GDP hover around an annual rate of just 2 percent.

“This could potentially affect consumption of food as well as nonfood items, as individuals may maintain the same food intake but reduce spending on other items,” Feroli said.

The amount that beneficiaries will lose depends on the size of the family. For a family of four receiving the maximum amount, monthly benefits will fall to $632 from $668, or a decline of $36, according to the Agriculture Department. The maximum benefits for a single adult would fall to $189 from $200, or by $11.

The so-called food stamp cliff “may be more of a sidewalk curb,” Feroli wrote in an email. “The bigger cliff, which I’m surprised people aren’t talking about, is emergency unemployment benefits Jan. 1.” That, he estimated, could shave 0.4 percentage point off growth in the first quarter next year.

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