Can Food Spending Stimulate the Economy?

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The federal government is ramping up the food stamp program by $20 billion. Now known as the Supplemental Nutrition Assistance Program, the expansion amounts to about 13 percent. This increased spending is hoped to stimulate the economy, but who will it really benefit?

Emory University finance and economics professor told NPR:

“This injection of funds ends up being spent on food, and that has a multiplier effect through the economy. As more people are employed in grocery stores, more people are employed to make the food, more people are employed to grow the food as a result of that stimulus.”

Will Increased Food Spending Really Help the Economy?

Economists say that every dollar spent on food will create a ‘multiplier effect’ resulting in $1.50 to $2 in stimulus. Experts, including Mark Zandi, chief economist with Moody’s Economy.com, agree that while it is difficult to measure the effectiveness of the plan, the food stamp increase is a good way to nudge the economy.

I’m no expert. But it doesn’t make a whole lot of sense to me.

  • People receiving food stamps are presumably getting enough to eat, whether the food they consume is purchased with the federal benefits they receive, picked up at a food bank, or purchased with cash.
  • I’m not saying increasing the benefit won’t make lives easier, but will increased spending really create jobs?
  • With a limited food budget, there’s not much room for convenience foods. If you’ve only got a few bucks, you’re going to opt for the dry beans versus the cans. And forget about prepared chili.
  • More to spend on food means more convenience foods. Therefore, forget the beans – go for the chili. Does the processing of convenience foods create more jobs? Maybe. 
  • I wonder if instead of stimulating the entire food industry, there are certain large companies that stand to benefit from this particular stimulus.
  • I also wonder how much better off we’d be if we taught people to grow some of their own food. But that wouldn’t stimulate the economy. Or would it? Seed sellers, home improvement stores, and natural food cookbooks would surely benefit.
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On the other hand, maybe given more money to spend on food, people will actually eat more, and the whole scenario will play out as the economists predict. Either way we’ll probably be fatter. Then we can spend our money on healthcare. And that’ll create jobs too.

Image Credit: KitAy, Flickr