Biden's historic food-stamp increase could hurt long-term economic growth, wages

The Biden administration's massive food-stamp expansion, the largest permanent increase to benefits in the program's history, could cut economic growth over the next decade, according to a new study published last week. 

Findings from the Penn Wharton Budget Model, a nonpartisan group at the University of Pennsylvania's Wharton School, show the changes to the program will reduce GDP by 0.2% in the next 10 years. The negative impact becomes more pronounced in the future: By 2041, it will slash growth by 0.3%, and by 2051, the economy will shrink by 0.5%, the projections show. 

The expansion will also weigh on wage growth, disproportionately hurting young people with high incomes as well as wealthy retirees.

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That's because government debt will finance the increase of the Supplemental Nutrition Assistance Program, which will be formally implemented in October. With the SNAP benefit increase in place, the economy is estimated to accrue 2.1% more government debt in 2031, 3.5% in 2041 and 4.6% in 2051.

"Higher SNAP benefits increase household income and reduce incentives to work," the analysis said. "As a result, hours worked fell by 0.4% throughout the period analyzed." 

Average hourly wages are expected to temporarily rise due to a smaller workforce, but fall as time goes by due to the decrease in capital that makes each worker less efficient. Wages are projected to decline 0.1% in 2051. 

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"The negative effect of the policy is larger for higher income people since the probability that they get SNAP benefits at some point in the future is low," the study said. "Working-age older people who are in the second quintile and above benefit from the short-term increase in wage."

Under the new rules, average benefits will rise more than 25% from pre-pandemic levels; the changes – which will be available to all 42 million SNAP beneficiaries – are intended to be permanent. The increase coincides with the end of a 15% boost to SNAP benefits installed by Congress last year as a pandemic relief measure.  

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The White House has combined the aid boost with a major revision to the USDA's Thrifty Food Plan, which estimates the cost to purchase groceries for a family of four and determines how the government calculates benefits. The average monthly per-person benefits for recipients is expected to jump from $121 to $157.

The increase, which is projected to cost about $20 billion a year, does not need to be approved by Congress under a farm law — passed in 2018 and signed by former President Trump — which directed the Agriculture Department to reexamine the Thrifty Food Plan.