ECONOMY:
 

Food stamps offer best stimulus - study

Moody's study suggests extending unemployment benefits, increasing food stamps fastest ways to stimulate economy.

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Can the stimulus save us?
Harvard Economist, Martin Feldstein, talks about the good, the bad and the ugly in the debate over how to kickstart the economy.

WASHINGTON (CNN) -- As Congress and the White House consider a $150 billion stimulus package that includes tax rebates and tax incentives for business, a report released Tuesday suggests that other methods would do a better job of infusing money into the flagging economy and doing it fast.

The industry research firm Moody's Economy.com tracked the potential impact of each stimulus dollar, looking at tax rebates, tax incentives for business, food stamps and expanding unemployment benefits.

The report found that "some provide a lot of bang for the buck to the economy. Others ... don't," said economist Mark Zandi.

In findings echoed by other economists and studies, he said the study shows the fastest way to infuse money into the economy is through expanding the food-stamp program. For every dollar spent on that program $1.73 is generated throughout the economy, he said.

"If someone who is literally living paycheck to paycheck gets an extra dollar, it's very likely that they will spend that dollar immediately on whatever they need - groceries, to pay the telephone bill, to pay the electric bill," he said.

Tracking that single dollar spent through the economic chain shows what economists call the ripple effect, Zandi said. For example, that dollar spent at the grocery store in turn helps to pay the salaries of the grocery clerks, pays the truckers who haul the food and produce cross-country, and finally goes to the farmer who grows the crops.

The report pointed to expanding unemployment benefits as the program that gets the next biggest bang for the buck. That's because, although the unemployed are already getting checks, they need to spend the money. For every dollar spent here, the economy would see a return of $1.64, Zandi said.

Expanding the food-stamp and the unemployment insurance programs are not in the current stimulus package expected to be passed by the House. In the Senate, the Finance Committee is now working on its own version of a stimulus package that might include extending unemployment benefits and other options.

Finally, Moody's report says business incentives such as tax breaks for buying new equipment - so-called accelerated depreciation - would give the least bang for the buck and potentially provide the slowest infusion of money. A dollar spent there would generate only 33 cents in the economy because, Zandi said, it takes longer for businesses to implement any benefit received.

-- From CNN's Kate Bolduan and Lesa Jansen To top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.