Oh, SNAP: Is Biden’s food stamp expansion inflating grocery prices?

Since President Biden entered the Oval Office in January 2021, spending for the Supplemental Nutrition Assistance Program (SNAP), also known as food stamps, has increased by 27 percent. This giant increase in SNAP funding has unsurprisingly coincided with a steep rise in food prices.

According to the U.S. Department of Agriculture, “Average annual food-at-home prices were 11.4 percent higher in 2022 than in 2021. For context, the 20-year historical level of retail food price inflation is 2.0 percent per year. In 2022, prices for all food categories increased faster than their historical averages from 2002–21. Prices for nine food categories increased by more than 10 percent in 2022.”

Is this just a coincidence? Correlation does not necessarily imply causation, but a new report from the Foundation for Government Accountability contains data indicating a direct relationship between spiking prices at the grocery store and the Biden administration’s misguided decision to break the bank on SNAP funding.

“Taxpayer spending on food stamps contributes to higher inflation, leading to higher grocery prices for all,” the report states. “Researchers at the World Bank reviewed more than a decade of retail scanner data before and after the Great Recession to measure the impact food stamp spending has on food prices. … That research found that a 1 percent increase in per-capita food stamp benefits increased grocery store prices by 0.08 percent. Put another way: Food prices increase by one percent for every 12.5 percent increase in food stamp spending.”

To be fair, SNAP benefits had already increased massively during the pandemic under President Donald Trump, increasing from roughly $4.5 billion per month in 2019 to $7.8 billion per month in 2020, at the height of the COVID-19 lockdowns.

But by December 2021, a year after Biden had entered the White House and almost a full year after vaccines had become available, SNAP spending swelled to $9.9 billion per month. By December 2022, it had risen to nearly $11 billion per month.

“Between December 2019 and March 2023,” the report goes on, “food prices grew by a staggering 23 to 24 percent…Food stamp spending hikes could account for at least two-thirds of that increase. Per-capita food stamp spending grew by more than 90 percent between December 2019 and March 2023 — even after the pandemic-related emergency allotments expired. This suggests food stamp spending increases fueled grocery price increases of more than 15 percent. The food stamp program’s impact on inflation is even larger after accounting for the now-expired emergency allotments.”

More concerning, due to Biden’s unilateral decision to massively expand SNAP benefits, food stamp spending is projected to cost taxpayers more than $1 trillion over the next decade, contributing to even higher grocery store prices in the future.

We have seen this movie before. Over the last few decades, the federal government has poured hundreds of billions of taxpayer dollars into federal subsidized loans for higher education and billions more into Pell Grants and other college loan programs. Over the same time, we have seen college tuition and associated costs go through the roof.

In 2017, the New York Federal Reserve issued a study titled, “Credit Supply and the Rise in College Tuition: Evidence from the Expansion in Federal Student Aid Programs.” The study found “a pass-through effect on tuition of changes in subsidized loan maximums of about 60 cents on the dollar, and smaller but positive effects for unsubsidized federal loans.”

Al Lord, the former CEO of Sallie Mae, told a reporter after the study was published that “schools were able to hike tuition, since students now had expanded access to loans.”

The same effect is now occurring at the grocery store. It is a rather simple formula: When the federal government subsidizes a good or service, either through direct payments on EBT cards or by providing guaranteed loans, its price rises as the government intervention distorts the forces of supply and demand.

For another example, see the housing crisis of 2008. A good case can be made that this originated with Fannie Mae and Freddie Mac providing ever-dodgier home loans at bargain rates to borrowers who lacked creditworthiness, thanks to the Community Reinvestment Act.

Unfortunately, this government-created cost crisis is harming all Americans, arguably even worse than previous government-sparked economic distortions. Every family goes to the grocery store, and therefore every family is facing higher prices due to Biden’s SNAP expansion.

Chris Talgo is editorial director at The Heartland Institute.