WSJ: Boost in food stamp funding percolates through economy

The Wall Street Journal has an illustration of how supports for the poor, such as food stamps, have follow on effects that boost the economy generally. An excerpt:

AVENPORT, Iowa -- The lush red strawberries caught the attention of Rachel Patrick, a mother of five shopping at a farmers market along the Mississippi River here. She selected two cartons and ignited a little-noticed chain reaction that is an important part of President Barack Obama's economic stimulus plan.

Ms. Patrick handed a plastic card loaded with her monthly food-stamp allocation to farmer Ed Kraklio Jr., who swiped it through his electronic reader. Mr. Kraklio now regularly takes in several hundred dollars a month from food-stamp sales, a vital new revenue stream that has allowed him to hire another assistant to help tend a cornucopia of fruits and vegetables. The new worker, in turn, spends her income in nearby stores, restaurants and gas stations.

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But it also has put more money into the hands of the poorest Americans by boosting monthly food-stamp allocations. Starting in April, a family of four on food stamps received an average of $80 extra.

Money from the program -- officially known as the Supplemental Nutrition Assistance Program -- percolates quickly through the economy. The U.S. Department of Agriculture calculates that for every $5 of food-stamp spending, there is $9.20 of total economic activity, as grocers and farmers pay their employees and suppliers, who in turn shop and pay their bills.

While other stimulus money has been slow to circulate, the food-stamp boost is almost immediate, with 80% of the benefits being redeemed within two weeks of receipt and 97% within a month, the USDA says.

The quick influx of cash into the economy reflects the often desperate situation faced by millions of households struggling to put enough food on the table. For many families, monthly food-stamp allotments rarely last more than a few weeks, leaving them with dwindling grocery supplies -- and sometimes bare cupboards -- by the end of the month.

Angie Minix rushes to her local Save-a-Lot grocery store on Chicago's South Side at the start of every month, when her new food-stamp allocation appears on her card. So do many of her neighbors. "You can't even get in the parking lot," she says.

On a recent shopping trip, she headed straight to the fresh produce section. Before her increase in April to $606 from $525, Ms. Minix said she would rarely even troll the fresh-food aisles. Now, she talks about how she has introduced her two sons to cauliflower, cabbage, lettuce and cucumbers.

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For years, the food-stamp program was plagued by criticism that it was an inefficient way to help the poor. Many who qualified wouldn't apply because of a lack of information, daunting paperwork or the embarrassment of handing over stamps in a grocery checkout line. And it did little to increase access to more nutritional food, since fresh produce remained scarce in poor areas.

In recent years, though, registration has been streamlined; many food pantries offer information and direct sign-up services. The switch from stamps to plastic cards offers a cloak of anonymity. Meanwhile, more farmers markets offering fresh produce in urban areas have adopted the technology to accept the cards.

Nationwide, enrollment in the program surged in March to about 33.2 million people, up by nearly one million since January and by more than five million from March 2008. In a recent research report, Pali Capital Inc. estimated that food-stamp spending will increase between $10 billion and $12 billion this year from $34.6 billion in 2008.

For grocery stores and farmers markets, the added food-stamp revenue has helped offset slower sales to other consumers.

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Farmers markets in Iowa have been particularly aggressive in courting the business of food-stamp recipients. At the Davenport market, food-stamp purchases have boosted business at Sawyer Beef. As farmer Norman Sawyer's sales increase, he says he plans to buy more fencing and water tanks to improve grazing areas for his cattle. "This has been a good deal for us," he says.