Yahoo Finance’s Brian Cheung breaks down the Supplemental Nutrition Assistance Program, formerly known as the food stamp program.

Video Transcript

ZACK GUZMAN: In the meantime, that $1.9 trillion relief package signed by President Biden is extending a 15% increase for the country's food stamp program, a.k.a, SNAP, through September of this year. But what exactly is SNAP? Yahoo Finance's Brian Cheung is here to explain that, in this week's Yahoo U.

BRIAN CHEUNG: Class is in session. Today, we're talking about a critical program-- food stamps. A lot has changed since it became a permanent standing program in 1964, but the idea is still the same-- to provide low-income households with a way to supplement their food budget, to get more nutrition, and live healthier lives.

SNAP itself stands for Supplemental Nutrition Assistance Program. And it's run by the US Department of Agriculture, and distributed by the states. But not every household can get access to the program. You have to be eligible.

The first test is monthly income. Broadly speaking, a household can't have gross monthly income above 130% of the federal poverty level. The second test is account of your resources. These would be assets that aren't your home, but held at the bank, or cash on hand. The threshold for resources-- $2,250. The third is a work requirement. Broadly, able-bodied adults without dependents have to work for at least 20 hours a week to get the benefits.

Eligible users have funds loaded onto an Electronic Benefits Transfer, or EBT, card, which they can use at SNAP retailers like your local supermarket. But you can't just buy anything at the store. For example, EBT funds cannot be used for alcohol, or tobacco, or hygiene items. In fact, EBT also can't be used for hot foods, even if from the supermarket counter.

Still, almost 36 million Americans participated in the SNAP program in 2019-- almost 11% of the entire US population. Notice, however, that the figure is down quite a lot from the peak of almost 48 million in 2013. These figures tend to track very closely with the amount of Americans in poverty.

This is the same chart, but zoomed in to the period in 1995 to 2019. We can see that, out of the Great Financial Crisis, the amount of people on SNAP-- the blue line-- grew faster than the amount of people in poverty-- the orange line-- and, essentially, equal each other. That's why the program is called "counter-cyclical," because, by design, it's supposed to cover more people during the toughest times-- when people may have lost their jobs, but still have families to feed.

And with the pandemic, more people may be turning to the over 50-year-old program for help, underscoring the importance of SNAP. And that's this week's Yahoo U. Class is dismissed.