Rising Food Prices Take a Bite Out of Food Stamp Benefits

Economic Information Bulletin No. (EIB-41) 21 pp, December 2008

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by Kenneth Hanson and Margaret Andrews

The Food Stamp Program is designed to provide low-income families with increased food purchasing power to obtain a nutritionally adequate diet. As in most other Federal Government assistance programs, benefits are adjusted in response to rising prices-in this case, rising food prices. The current method of adjustment results in a shortfall between the maximum food stamp benefit and the cost of a nutritionally adequate diet as specified by USDA's Thrifty Food Plan. During fiscal year (FY) 2007, the shortfall in the caseload-weighted maximum benefit for the program grew from $7 in October 2006 to $19 in September 2007. In FY 2008, the amount grew from almost $8 in October 2007 to $34 in July 2008 and to $38 in September 2008. In an average month, food stamp households faced shortfalls of over $2 in FY 2003, $12 in FY 2007, and $22 in FY 2008. These losses in food purchasing power account for 1 percent, 4 percent, and 7 percent of the maximum benefit in each respective year. Alternative adjustment methods can reduce the shortfall but will raise program costs.

Keywords: Rising food prices, food price inflation, food stamp benefits, Supplemental Nutrition Assistance Program, Food Stamp Program, food purchasing power, cost of the Thrifty Food Plan

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