Hearing of the House Budget Committee - Near-Term Economic Outlook

Statement

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REP. JAMES MCGOVERN (D-MA): Thank you, Mr. Chairman.

Thank you, Chairman, for being here.

I think we all get it, that we need to enact a targeted, timely, and temporary stimulus package, and we need to act sooner rather than later. And I think it is also clear that we need to enact a stimulus package that adds up to more than just helping the rich get richer, that we need to have a more broad-based approach to providing relief to people across the country.

And experts across the political ideological spectrum seem to be coming to a consensus that we need to develop a plan that also helps the most vulnerable people in households and that allows currency to flow. Many of these experts believe strongly that any stimulus plan should include a temporary increase in food stamp benefits. And I know my colleague from California, Mr. Becerra, kind of raised that issue.

My colleagues in this committee have heard me talk about rising hunger and the moral need to ensure that nobody in this country is without food, or without adequate food. And I understand that to kind of deal with that challenge, it requires a long-term strategy. And today we're focused on talking about the best way to jump-start our economy.

It is -- seems clear to me that an increase in food stamps not only should be part of any economic stimulus package, but really needs to be. Increasing food stamp benefits for the current recipients can be done quickly, and particularly now, with electronic benefit transactions, very efficiently.

Fraud is not an issue today like it was under the old food stamp program. The money goes to people who have trouble with their food and other bills and, more importantly, these people will spend this money and these funds go directly into the economy.

Based on USDA research, we know that every federal food stamp dollar generates nearly twice that in economic activity. And according to the CBO, and I quote, "The vast majority of food stamp benefits are spent extremely rapidly, and because food stamp recipients have low income and few assets, most of any additional benefits would probably be spent quickly," end quote.

Administrative costs of such an increase are negligible, meaning that the majority of the stimulus would go directly into the economy. Currently, over half of all benefits go to the 39 percent of food stamp households whose income was less than or equal to (half ?) the poverty line.

During FY 2006, approximately 27 million people received food stamp benefits each month. Nearly all benefits went to 87 percent of food stamp households that were in poverty. And according to the Center on Budget and Policy Priorities, many low-income consumers do not receive unemployment insurance and are not tax filers and, thus, would receive no help from extended unemployment insurance benefits or a tax rebate. So a food stamp increase would reach a significant portion of this group.

And, you know, I've read quotes from Treasury -- former Treasury Secretary Larry Summers and Martin Feldstein, a former economic adviser to President Reagan, all kind of seem to agree that this would be a major help in terms of stimulus.

So my questions are, I mean, do you agree with these assessments? Does this fit into the categories that you're talking about in terms of what would constitute real stimulus? What role do you see the food stamp program playing in any economic stimulus package, and in your opinion, what would be the effect of including in a stimulus package a temporary increase in the food stamp program?

MR. BERNANKE: Well, Congressman, I don't want to usurp Congress's prerogative in terms of figuring out the best ways to --

REP. MCGOVERN: That's okay. You can do that -- (inaudible).

MR. BERNANKE: (Laughs.) So I think what I will say is I think there is good evidence that cash that goes to low- and moderate-income people is more likely to be spent in the near term, and so I think that logic carries through. But the exact way that you deliver, if you decide to do that, the exact way you deliver, an exact mix, I think is up to you.

I guess I would also comment that food stamps and some of these other things are relatively small compared to the overall size of a package, and so certainly could not be the -- if you were doing that, it couldn't be the only mechanism.

REP. MCGOVERN: No, and I appreciate that. But again, listening to what you were saying here today about what would constitute an important stimulus, getting benefits to people quickly. We know -- we saw how we were able to do that in Hurricane Katrina, and there was a big snowstorm in Buffalo, New York, and we were able to respond with food stamps quickly. Giving, you know, knowing that this generates more economic activity, we're going to -- I'm not saying that this should be the only thing in a stimulus package, but clearly it seems to me that it should be an important thing. And I wanted to make it fit into what you were talking about in kind of general categories of what would help the economy move forward.

MR. BERNANKE: Getting money to people quickly is good, and getting money to low- and moderate-income people is good in the sense of getting bang for buck.

REP. MCGOVERN: Thank you.

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