A new study blames increased food stamp spending—including a massive expansion of the program under President Joe Biden—for contributing to soaring grocery prices, with food inflation hitting lower-income Americans the hardest.
In 2021, under the Biden administration, the U.S. Department of Agriculture (USDA) introduced updated nutritional guidelines for federal food stamp benefits. These changes led to an approximate 27 percent expansion of the Supplemental Assistance Nutrition Program (SNAP) compared to its pre-pandemic scale.
This increased food stamp spending has, in turn, led to a whopping 15 percent (at minimum) jump in grocery prices, per the FGA report.
“Grocery prices have risen by at least 15 percent due to increases in food stamp spending,” FGA wrote in the report, which estimated that repealing President Biden’s 2021 food stamp expansion could save taxpayers over $190 billion over the next decade.
Neither the White House nor the USDA responded to a request for comment on the FGA’s findings linking food stamp spending to grocery inflation.
The note blamed a variety of factors for “higher than normal” grocery inflation, including “pandemic-induced shifts in food demand from restaurants to groceries, global supply chain bottlenecks, and unforeseen supply shocks like avian flu, the war in Ukraine, and poor weather.”
Getting to ‘At Least 15 Percent’
The FGA based its calculations on USDA data on monthly food stamp enrolment and expenditures, data on monthly resident population totals from the U.S. Department of Commerce, and World Bank estimates of the impact on grocery prices for each percentage point increase in per capita food stamp spending.“We estimate that a 1 percent increase in benefits per population causes a moderate and persistent increase in grocery-store prices of 0.08 percent,” the World Bank study states.
“Food stamp spending hikes could account for at least two-thirds of that increase,” the FGA report estimates, based on a methodology as outlined above.
Two-thirds of 24.3 percent is around 16 percent, which fits with the “at least 15 percent” estimated increase in grocery prices caused by food stamp spending, as cited by FGA.
Some individual food item prices have risen much faster over the same period, with the price of margarine up over 59 percent and egg prices up 54 percent.
It’s not clear if FGA’s “two-thirds” rule-of-thumb calculation can be applied to individual products in the same way that they’ve been applied to a basket of goods—or the average grocery cart. But assuming the same methodology, this would suggest that food stamp spending led to a 39 percent increase in the price of margarine and a 36 percent rise in the price of eggs between December 2019 and March 2023.
Food Stamp Spending Soars
The FGA report shows a significant increase in overall expenditures on the food stamp benefit program between 2019 and 2022. The funding allocation surged from $4.5 billion in 2019 to $11 billion in 2022, more than doubling within this period.While some of the spending increase stemmed from pandemic-related emergency allotments (which expired in February 2023), most of the higher spending came from permanent benefit increases, per the FGA.
The food stamp program expansion itself—which bypassed Congress—accounts for around $250 billion of that over the next ten years, per the FGA.
High grocery prices hit lower-income Americans the hardest, with the Consumer Expenditure Survey indicating that groceries made up around 8 percent of total consumer spending in 2021, but over 11 percent for those in the bottom fifth of the income distribution.
Not only do grocery prices have an outsized impact on lower-income Americans, they also have a major effect on future inflation expectations.
The White House note says that the Council of Economic Advisors found that 1 additional percentage point of food inflation leads to a 0.11 percentage point increase in the one-year-ahead inflation expectations.
Future inflation expectations, in turn, have an impact on wage demands, and higher wages tend to drive up inflation. While inflation expectations have come down in recent months, if for whatever reason they become de-anchored and rise significantly from historic baselines, this would threaten to drive up inflation under the dreaded “wage-price” spiral that economists have repeatedly warned about.
The FGA said in its report that not only would cutting food stamp spending ease inflationary pressures, it would also provide relief to taxpayers.
“Rolling back President Biden’s unlawful food stamp expansion could provide significant relief for taxpayers, saving $193 billion” through 2033.
Food stamp reform is poised to become a contentious issue amid an expected battle on Capitol Hill over reauthorizing the farm bill, which includes food stamp spending levels.
