That makes zero sense to me. The rationale for food stamps is that people need to eat, period.
Economically, putting cash into the hands of a needy person is going to divert resources toward consumption at the expense of capital formation. Since capital formation = productivity, all transfers from haves to have-nots create negative economic multipliers. Some are necessary in spite of those economic negatives, but they’re still negative.
Your fallacy is in the phrase “save it or spend it on luxury…”. Wealthy people have already bought whatever they want to consume. “Unfair” it may be, but dropping another dollar (or million) into a wealthy person’s bank account means more investment (that “save it” that you so casually skip over as if it were nothing). Of course, if you don’t like capitalism, then it’s natural that you’d have a blind spot there. Unfortunately, it’s at that exact “they don’t need it” point of capital formation that a free country creates its productivity, hence socialists’ complete lack of appreciation for it.
If you can find credible “research” to the contrary, then I’d like to see it.
PS: The capital formation I describe is not the same thing as “trickle-down” theory. Trickle-down is the crazy idea that luxury spending leads to high-paying jobs for artisans. It may do that, but it’s still a net shift to consumption at the expense of capital, so trickle-down is fallacious as well. The “magic” of fair-market capitalism is to let the uber-wealthy receive floods of wealth and then convince them to perpetually reinvest virtually all of it in economic activities that benefit the rest of us. Looking at it that way, you come to realize that it doesn’t matter how much surplus wealth someone has. All that matters is how much a person consumes.