Senate Approves FMAP and Schools Funding -- But At the Cost of Food Stamp Cuts

This week, the U.S. Senate finally overcame a filibuster by conservative Senators to move emergency Medicaid funding through the first half of 2011 and provide key funding for education jobs.  The legislation will provide a 3.2 percent increase in federal medial assistance percentages (FMAP) paid for Medicaid through the first quarter of next year, a 1.2 percent increase through the second quarter, and $10 billion toward state educational systems. This action is critical for state budgets and will protect both medical services and education programs in states across the country.

Budget Hysteria Pushes Misguided SNAP Cuts: Due to over-hyped long-term deficit concerns, the total cost of the package is offset by spending cuts and closing a tax loophole for multinational corporations.  According to the Congressional Budget Office, the bill would reduce the deficit by $1.4 billion over the next decade. 

Unfortunately, the bill cuts Supplemental Nutrition Assistance Program (SNAP) benefits, or food stamps, by $12 billion beginning in 2014. Lawmakers justified this reduction by asserting that the cuts will bring down benefits to pre-Recovery Act levels and the cost of food has decreased more than expected.

Yet, participation in the program has reached record highs, making this action an especially harmful approach.  Further, the Senate's action is imprudent economic policy as families receiving food stamps readily spend their money on basic necessities, which boosts short-run demand and fosters market activity.  Mark Zandi, chief economist at Moody's, specifically finds that each federal dollar spent on food stamps creates $1.73 in market demand.

More Recovery Dollars Needed in States: Unemployment remains at 10 percent and according to a new report by the National League of Cities, National Association of Counties, and the U.S. Conference of Mayors, local governments may cut up to 500,000 jobs in the next two years, substantially degrading the amount and quality of essential service provision.  Misguided and inflated deficit hysteria should not supersede supporting working families and job creation in hard-hit local economies.