Today marks a milestone on the road from recession: The expiration of a 13.6% expansion to US food subsidies for the poor included in the fiscal stimulus bill in 2009. While the need for support hasn’t necessarily reduced (unemployment and hunger are still unusually high) there is little appetite to extend the law, and grocery budgets will shrink.
– $5 billion is being cut in the coming year. The average benefit is $278 a month for the 48 million recipients of food assistance; a household of four will see that cut by $36. According to the independent Center for Budget and Policy Priorities, in 2014, benefits will be less than $1.40 per person per meal. More than 80% of households using the subsidy have incomes below the poverty line.
– Retailers are hit, too. Wal-Mart tells analysts that it garners 18% of food stamp outlays, about $14 billion of the $80 billion spent last year. Assuming the cut hits it evenly, the store could lose $1.9 billion in US revenue. Notably, many of Wal-Mart’s employees are on public assistance, including food stamps. But its executives wonder if their low prices will make consumers with a shrinking budget more likely to patronize them over its competitors. Still, Wal-Mart and Target have already lowered their sales forecasts for the all-important holiday season; grocery-chain Kroger is considering price cuts.
– Which could add to weak growth in the fourth quarter. We’re already expecting a slowdown thanks to the government shutdown, and a cut in food stamps—which economists say support an unusually high amount of economic activity for government spending—could add to the burden.
– It’s not the end of the food stamp debate. Conservative lawmakers are still proposing massive cuts to the program, and a compromise on how to treat the program will likely be part of any deal to avoid another US government shut-down in January.