The American Recovery and Reinvestment Act of 2009 injects $787bn into the US economy in an effort to revive the downturn.
According to Roger Szemraj, counsel at law firm Olsson Frank Weeda, which specializes on food and drug issues, the food industry could stand to benefit from a provision that would stimulate spending on food items.
More food purchases
This stimulus is created by around $20bn in funding for food program assistance, intended to help lower income consumers better deal with rising food prices.
The funding, to be received by the Supplemental Nutrition Assistance Program (SNAP), is expected to increase benefit levels by 13.6 percent.
“Given that these benefits can only be spent on food items, the presumption is that it will result in additional food purchases to the benefit of the recipients and the food industry,” Szemraj told NutraIngredients-USA.com
Funding for SNAP – formerly the Food Stamp program – will be spread out over several years, with nearly $15bn to be spent by September 30, 2010.
Szemraj said that throughout the debate on the stimulus bill, proponents argued that every additional dollar spent on SNAP will result in $1.73 of economic activity. Some referenced a higher multiplier of $1.84 used in a USDA report, which can be found here.
Multiplier effect
Another report, conducted last year by the US Department of Agriculture’s Economic Research Service explained the economic stimulus generated by food stamp benefits as having a ‘multiplier’ effect on food production.
“The increased benefits stimulate the economy through a succession of effects,” wrote ERS in a report that can be accessed here.
“The rise in food stamp benefits increases spending by recipient households, which in turn stimulates production. Higher production boosts demand for workers and/or hours worked and income of households throughout the economy.”
“Increased household income triggers additional spending. Totaling the succession of effects, higher food stamp benefits can increase overall production and income by more than the initial expenditure – a ‘multiplier’ effect.”
Tomorrow, NutraIngredients-USA.com will examine the indirect benefits of the economic stimulus package on food and beverage manufacturers.