This is an ugly example of the law of unintended consequences. Georgia resident Mark Milota was laid off in November and began collecting unemployment benefits. After the stimulus was passed, he started to receive an extra $25 a week--or about $100 extra each month--in benefits. Sounds good. But Milota last month discovered that the extra income made him ineligible for the $300 a month in food stamps he was previously receiving--his monthly income is now $21 over the limit for food stamp eligibility. Essentially, Milota's getting $200 less in assistance than before the stimulus.
As is always the case with these kinds of stories, Milota is not alone. In fact, lawmakers were apparently aware of this possible outcome, but the necessity of a swiftly passed stimulus was overwhelming, the AP reports:
Lawmakers crafting the stimulus knew this would become a problem, said Stacy Dean, director of food assistance policy at Center on Budget and Policy Priorities, a liberal think tank. They could have headed it off by raising the income tax or declaring that the $25 stimulus checks would not affect food stamp eligibility. Both were expensive options that could have forced states to reprogram their computer systems.
But more importantly, hashing out those details would have taken time.
"People were aware of this but, as you recall, the stimulus was moving along and then it was passed in about a day," Dean said. "There was not a lot of policy discussion on this."
Some studies show unemployment benefits and food stamps are among the most effective economic stimuli, because they put money in the hands of individuals who will spend it immediately. In that respect, one should hope the number of individuals whose net government assistance actually drops as a result of the extra $25 in benefits is a very small one indeed.