27.88 million people in the US are going hungry this year. That’s 1.5 million more than last year. As food prices are rising all over the world, more low income families in the US are turning to the government for help.

In the US low incomes families and individuals can apply for food stamps. Food stamps are vouchers that can be used to purchase basic food items, milk, bread, eggs, cheese, chicken etc. These direct subsidies serve two functions, one is to feed more people and the other is to stimulate the domestic economy. With the unemployment rate at 5.5% and with inflation rising, everyone is affected but the poorest of the poor are most affected as they deal with these rising costs and shrinking incomes (less purchasing power).

“The record for food stamp participation is 29.85 million people in November 2005, which included emergency benefits to victims of hurricanes Katrina, Rita and Wilma, said USDA. Second-highest was 27.97 million people in March 1994, said the Food Research and Action Center, an antihunger group.”

In 2005 it was a major catastrophe that caused the jump in demand for food stamps. Today, the problem is much bigger, and broader. Rising fuel costs, rising costs of wheat, and the credit crunch are affecting businesses and businesses are beginning to lay off employees or are passing on their rising costs of production to the consumer, exacerbating rising inflation. So what can be done? Many people are encouraging Congress to take action.

“Now is the time for Congress to pass temporary increases in food stamps, extended unemployment insurance and other targeted relief that will stimulate the economy and help struggling families,” said James Weill, FRAC’s president. He pointed to May’s increase in unemployment, to 5.5 percent.

The Department of Food and Agriculture listed 1994 as the last time that 27 million people were using food stamps.

“Food stamp enrollment has exceeded 27 million people each month this fiscal year. USDA estimates enrollment will average 27.98 million people in fiscal 2009, which begins on October 1, at a cost of $40.3 billion.”

$40.3 billion dollars in government spending on food stamps alone seems like an enormous sum of money, but what is the alternative?

Discussion Questions:

1. What will be the affect of using expansionary fiscal policy at a time when inflation is already rising?
2. How will increasing government spending on food stamps when the government is already running a budget deficit affect interest rates and private investment in the economy?
3. What effect would expansionary fiscal policy have on aggregate supply if crowding-out of private investment occurs?
4. How else could the government allocate the $40.3 billion it spends on food stamps to stimulate the economy and bring relief to the hungry poor? Brainstorm other policy options in your comments.