The start of September brought more than just a new calendar page; it also marked the loss of food assistance for millions of Americans. New tax laws that took effect on Monday include sweeping cuts to the Supplemental Nutritional Assistance Program (SNAP), commonly known as food stamps.
Biggest cuts in program history
SNAP dates back to 1939 and became permanent with the Food Stamp Act of 1964.
Today, more than 40 million people receive benefits. But the Congressional Budget Office estimates that the new rules will remove roughly 2.4 million people from the program each month over the next decade — the largest cut in its history.
Families who remain eligible are projected to lose between $72 and $231 a month, according to the Urban Institute.
Who gains, who loses
The loss of SNAP benefits could lead to an uptick in business for larger grocery stores that offer discounts, such as Walmart. The retail giant is the leader when it comes to SNAP spending, followed by Kroger and Costco, according to CNBC.
“Walmart can use its scale and extremely low cost of debt to capitalize on SNAP cuts – as it has done with food inflation – offering better prices than its smaller peers can afford to match, strengthening its customer value proposition,” said Scott Moses of Solomon Partners.
Michael Baker, from D.A. Davidson & Company, agreed. He said customers may cut back on the volume or size of their purchases but they still need groceries.
“On the surface one would think less SNAP would be a negative,” he said. “But the way these things have played out in the past and the way I think it will play out this time is that discount grocers that focus on value, these kinds of economic headwinds for lower-income customers end up being a positive.”
Independent and local grocers, however, could take the biggest hit.
“Walmart will benefit totally because they are able to get volume at a lower price. We don’t take in a large volume and we pay a higher price already,” Katina Holliday, who owns Freshly’s Market in Aberdeen, Mississippi, told CNBC.
Experts warn that the changes could widen the gap between big-box giants and small community stores, forcing millions of lower-income households to make painful trade-offs at the checkout line.
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Author: Craig Nigrelli
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