(Recasts; adds reaction from lawmakers, senators)
By Tom Polansek and Humeyra Pamuk
CHICAGO/WASHINGTON, July 23 (Reuters) - The Trump administration on Tuesday proposed a rule to tighten food stamp eligibility that would cut about 3.1 million people from the program, U.S. Department of Agriculture officials said, drawing ire from Democratic senators and advocacy groups.
The administration has been rolling out rule changes related to the food stamps, known as the Supplemental Nutrition Assistance Program (SNAP), after efforts to pass new restrictions on it were blocked by Congress last year. The program provides free food to some 40 million Americans, or about 12 percent of the total U.S. population.
The USDA billed Tuesday's move as a way to save money and help eliminate what it sees as the widespread abuse of the program. But Democrats and advocacy groups criticized it as an attack on the nation's poorest.
"This rule would take food away from families, prevent children from getting school meals, and make it harder for states to administer food assistance," said Democratic Senator Debbie Stabenow, ranking member of the Senate Committee on Agriculture, Nutrition and Forestry.
Currently, 43 U.S. states allow residents to become eligible for food stamps automatically through SNAP, or if they receive benefits from another federal program known as Temporary Assistance for Needy Families, or TANF, according to the USDA.
The agency wants to change that by requiring people who receive TANF benefits to pass a review of their income and assets to determine whether they are also eligible for free food from SNAP, officials said.
If enacted, the rule would save the federal government about $2.5 billion a year by removing 3.1 million people from SNAP, according to the USDA. Advocacy group First Focus on Children said 7.4% of households with children participating in SNAP would lose their access to food stamps.
"To cut money for people who need to be fed? It’s just another example of the heartlessness of this administration,” Senate Minority Leader Chuck Schumer told reporters.
President Donald Trump has long argued that many Americans using SNAP do not need it given the strong economy and low unemployment, and should be removed as a way to save taxpayers as much as $15 billion.
"Some states are taking advantage of loopholes that allow people to receive the SNAP benefits who would otherwise not qualify and for which they are not entitled," USDA Secretary Sonny Perdue told reporters on a conference call on Monday.
The USDA does not need congressional approval to stop states from automatically allowing recipients of TANF benefits to become eligible for SNAP, said Brandon Lipps, a USDA acting deputy undersecretary.
Current rules allow people to access SNAP benefits worth thousands of dollars for two years without undergoing robust eligibility reviews, he told reporters on the call.
"Unfortunately, automatic eligibility has expanded to allow even millionaires and others who simply receive a TANF-funded brochure to become eligible for SNAP when they clearly don't need it," Lipps said.
The liberal-leaning Center For American Progress advocacy group said the proposal would hurt the poor "by forcing states to take food assistance away from those with even modest savings of a few thousand dollars" as well as raise administrative costs for states.
The move could also potentially hurt discount retailers such as Dollar Tree and Dollar General, which have blamed weaker traffic on reduced food stamp coverage in the past. Dollar General shares were down 0.67% while Dollar Tree shares were down 1.90%.
The Congressional Budget Office in December estimated the rule could save the federal government $8.1 billion from 2019 to 2028, lower than the USDA's estimate. In 2016, the CBO said there were concerns the move would eliminate benefits for households in difficult financial situations and increase the complexity and time needed to process SNAP applications. (Additional reporting by Amanda Becker, Susan Heavey, Sinead Carew in New York; editing by Peter Cooney, Jonathan Oatis and Dan Grebler)