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

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.

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