Has US business dynamism declined?
Leveraging SNAP to alleviate poverty — a proven policy approach needed now
Unemployment is soaring due to COVID-19 business closures, with unprecedented disruptions in the food supply and to school or childcare-based food assistance. Increasing financial benefits to households participating in the Supplemental Nutrition Assistance Program (SNAP), is a proven policy approach to reduce poverty. In 2017, SNAP lifted 3.4 million people, including 1.5 million children, out of poverty.
Families living at or near poverty are one of the hardest hit groups during this pandemic, and reliance on SNAP is increasing. SNAP currently helps about 40 million low-income Americans -half of them children - afford food each month. It is by far the largest program in the federal nutrition safety net.
The federal government has used a variety of policy approaches to respond to this pandemic. On March 27, 2020, President Trump signed a $2 trillion stimulus - the largest in U.S. history - to help boost the economy that grinded to a halt due to COVID-19. The stimulus will provide brief financial relief for Americans (either in the form of direct checks to individuals or unemployment insurance, or some combination of the two) and help with immediate needs such as food or bills.
The bipartisan $100 billion Families First Coronavirus Response Act, signed into law March 18, granted states some flexibility to ask for emergency SNAP allotments. But, these approaches depend on each state's use of these flexibilities, which vary greatly, and these approaches do not directly or consistently increase benefits for all SNAP participants. This needs to be a priority for Congress as they explore additional policy approaches.
SNAP expenditures are one of the most effective supports for the economy during economic downturns. A $1 billion increase in SNAP benefits during an economic downturn increases GDP by $1.54 billion, supports 13,560 jobs and creates $32 million in farm income. That is, every $5 in new SNAP benefits generates almost twice as much ($9.20) in total economic activity.
During the Great Recession, and in an effort to quickly boost the economy, Congress increased the average monthly SNAP benefit amount by 14 percent ($80 per month for a family of four) for about four years through the American Recovery and Reinvestment Act (ARRA). Now, the Center for Budget and Policy Priorities is calling for a similar boost - a 15 percent increase in average SNAP benefits ($100 per month for a family of four) - until the economy improves. Congress should listen. This step would also address the long-standing issue of SNAP benefit adequacy and the need for such a change has never been more time sensitive.
Ample evidence suggests that increasing the size of the SNAP benefit helps low-income families with their immediate food needs and stimulates the economy, making it a no-brainer for Congress. It would also help to address the well-recognized inadequacy of the SNAP benefit amount. Specifically, the calculation for the SNAP benefit unrealistically assumes that households have certain types of ingredients, time, equipment and knowledge to prepare food from scratch. They don't. Moreover, because the benefit is not adequate, most SNAP families run out of their SNAP benefits well before the end of the month; 80 percent of SNAP benefits are redeemed within two weeks of receipt.
The exhaustion of food budgets over the course of the month has significant and negative consequences for health, education and a host of other outcomes. For example, among adults with diabetes, reduced calorie intake (by 10-25 percent) is associated with a 27 percent higher hospital admission rate for hypoglycemia in the last week of the month compared to the first week. For children, running out of food is associated with lower standardized test scores in the last versus first week of the benefit month. Evidence from the ARRA boost teaches us that an increase in SNAP benefits can reduce food insecurity and increase food spending as well as mitigate the decline in calorie intake over the month.
Apart from the politics of increasing size of the SNAP benefit (which are contentious), there are logistical hurdles. Based on the 2008 Farm Bill, cost neutrality is a requirement for the calculation of SNAP benefit adequacy. This means that to increase the benefit size, some other aspect of the net income formula would have to be restricted. Congress can and should modify this requirement to allow the SNAP benefit to be increased.
Now, is the time for Congress to take bold action and increase the SNAP benefit to help it approach an adequate level for Americans living in poverty. Doing so will have the dual benefit of providing critical assistance to low-income households most affected by COVID-19 and simultaneously providing a needed economic boost. Doing nothing will surely have negative short- and long-term consequences that will ripple across society.
Sara Bleich, Ph.D, is a professor of Public Health Policy at the Harvard Chan School of Public Health. Caroline Dunn, Ph.D, RD, is a research associate at the Harvard Chan School of Public Health. Sheila Fleischhacker, Ph.D, JD, is an adjunct professor of Law at Georgetown University Law Center. The authors recently authored a paper examining legislative and executive branch development affecting SNAP.