Food stamp economics.

[pawnraider]

[FONT=times new roman, times, serif]I was watching CNBC and a union official stated that every $1 of food stamps generates $1.74 of economic activity. What do you think? [/FONT]

 

[trident343]

Was the point of the report to say that food stamp usage is good? Seams like the typical garbage argument you would hear from a Statist-Friendly channel like NBC. Wealth (or food stamps for that matter) doesn't come out of thin air. If the tax spent by the taxpayer for the food stamp was retained by the taxpayer, would the taxpayer not spend the money on something producing "economic activity"?

 

[variant]

Was the point of the report to say that food stamp usage is good? Seams like the typical garbage argument you would hear from a Statist-Friendly channel like NBC. Wealth (or food stamps for that matter) doesn't come out of thin air. If the tax spent by the taxpayer for the food stamp was retained by the taxpayer, would the taxpayer not spend the money on something producing "economic activity"?

You would be wrong.

A lot of people have to be employed for other people to eat properly.

If the government gives people the means to feed themselves properly in an economy where food is abundant and many people work in the food and agricultural industry, each dollar spent on this yields more than a dollars worth benefit.

The money comes from people who most likely wouldn't spend it and goes to people who definitely spend it on a product that is mainly made inside the united states. We get fewer hungry people and more people employed than if we just left things be.

The reason supply side economists don't like this argument is because it is a demand side argument and it shows that supply side means of stimulating the economy are less effective overall.

Demand side solutions like food stamps yield a lot more economic activity than their preferred means of tax cuts.

Of course anything can be done in excess, much as we have seen over reliance on supply side stimulus in the past and what that causes (demand side collapses) the same would be true for demand side stimulus (a supply side collapse).

 

[pawnraider]

Sounds like your typical statist response. The government knows best what to do with your money therefore we'll dictate what one should by.

Demand side solutions like food stamps yield a lot more economic activity than their preferred means of tax cuts.

If this were true then the economically depressed areas where food stamp usage is more prevalent would be the most economically active and vibrant yet reality shows that this is not the case.

 

[variant]

If this were true then the economically depressed areas where food stamp usage is more prevalent would be the most economically active and vibrant yet reality shows that this is not the case.

That argument doesn't follow from any of the premises involved.

The argument is that a dollar spent on food stamps yields 1.7 ex in economic activity. Either it does or it doesn't and these things can be tracked.

An area would have to be economically depressed in order to have a large usage of food stamp usage, and the usage itself is obviously not going to turn around economic areas all on it's own. Unless you think grocery stores are (or can be) the hubs of successful local economies.

Further, food production (subsidized by food stamps) is not limited to economically downtrodden areas.

An area like mine for instance (which produces a lot of milk) is subsidized by food stamps and people buying milk in Philadelphia.

 

[trident343]

That argument doesn't follow from any of the premises involved.

The argument is that a dollar spent on food stamps yields 1.7 ex in economic activity. Either it does or it doesn't and these things can be tracked.

I don't question that this is true, My point is that I don't believe this necessarily a good thing. If I steal a $1000 from my neighbor, and spend it, I will have caused economic activity, possibly $1700 worth. That doesnt mean it was a good thing.

 

[variant]

I don't question that this is true, My point is that I don't believe this necessarily a good thing. If I steal a $1000 from my neighbor, and spend it, I will have caused economic activity, possibly $1700 worth. That doesnt mean it was a good thing.

Right the ethics involved are divorced form the economics as is usual.

One has to ponder weather the economic activity and the well fed people are worth the taxes. But I wasn't aware that was the discussion we were having.

 

[trident343]

The money comes from people who most likely wouldn't spend it...

This is pure fallacious reasoning. You are logically saying that everybody who pays tax would not have spent the money unless they were taxed.

If I didn't have to pay tax, I would most definitely be spending a lot of that money on goods and services I would like to purchase.

 

[variant]

This is pure fallacious reasoning. You are logically saying that everybody who pays tax would not have spent the money unless they were taxed.

If I didn't have to pay tax, I would most definitely be spending a lot of that money on goods and services I would like to purchase.

No I am saying that the money taxed for food stamps was less likely to be spent than the money used on food stamps.

I am not saying you wouldn't have spent the money just that you are less likely to.

For me at-least I do not spend all of my disposable income, which is what most people who don't live paycheck to paycheck do (we call them responsible people).

Now the portion of my taxes that actually goes to food stamps is probably fairly small, what we have to judge is if cutting my taxes by that much would automatically prompt me to go out and buy something.

That is why taking the money from me and giving it to someone who both, needs money for food, and is entirely likely to use this money will produce a net positive effect.

And again, doing this may be "wrong" in your ethical estimation, but that doesn't mean that the economics do not work out that way.

 

[trident343]

And again, doing this may be "wrong" in your ethical estimation, but that doesn't mean that the economics do not work out that way.

You misread me my friend. I am sorry if I came off too rashly. And no, I don't think it is unethical to tax people so others who cannot eat can eat.

My original beef with the article is that I suspect it is being used to make light of the economic situation by looking at much lesser good things that come from it.

Its kind of like saying that it was a good thing New Orleans was ruined by Katrina, because of all the Construction Jobs that will be created for the rebuilding effort.

 

[trident343]

You would be wrong.
Demand side solutions like food stamps yield a lot more economic activity than their preferred means of tax cuts.

Understanding that you subscribe to the Keynesian school of thought brings some light to my understanding of your position.

I do not think that Demand-side solutions creates more economic activity, but I do think Food Stamps do provide a proper "Redistribution of Wealth" to people who are in need.

 

[variant]

Understanding that you subscribe to the Keynesian school of thought brings some light to my understanding of your position.

I do not think that Demand-side solutions creates more economic activity, but I do think Food Stamps do provide a proper "Redistribution of Wealth" to people who are in need.

Food stamps are used as a example because they have one of the most net positive effects on the economy. I believe people should be for them regardless of their overall economic outlook.

I don't think demand side economics are always called for, just sometimes. I think that if one focuses too much on supply or demand side economics, the system will invariably suffer as a result.

 

[trident343]

The real crux of the matter with economic theories is finding the balance of Maximum wealth production vs. Appropriate Distribution of wealth.

It matters little if a county is the richest in the world, but the bulk of that wealth is retained only by the few.

 

[OldWiseGuy]

The only way that one dollar's worth of (food stamp purchased) food can generate $1.70 in economic activity is for the same food, when replaced onto the store shelf, to be sold for $1.70. That's a lot of inflation.

 

[variant]

The only way that one dollar's worth of (food stamp purchased) food can generate $1.70 in economic activity is for the same food, when replaced onto the store shelf, to be sold for $1.70. That's a lot of inflation.

Argue with this guy then:
http://www.economy.com/mark-zandi/documents/assissing-the-impact-of-the-fiscal-stimulus.pdf

Fiscal Economic Bank for the Buck
One year $ change in real GDP for a given $ reduction in federal tax revenue or increase in spending

Tax Cuts
Non-refundable Lump-Sum Tax Rebate 1.02
Refundable Lump-Sum Tax Rebate 1.26

Temporary Tax Cuts
Payroll Tax Holiday 1.29
Across the Board Tax Cut 1.03
Accelerated Depreciation 0.27

Permanent Tax Cuts
Extend Alternative Minimum Tax Patch 0.48
Make Bush Income Tax Cuts Permanent 0.29
Make Dividend and Capital Gains Tax Cuts Permanent 0.37
Cut in Corporate Tax Rate 0.30

Spending Increases
Extending UI Benefits 1.64
Temporary Increase in Food Stamps 1.73
General Aid to State Governments 1.36
Increased Infrastructure Spending 1.59

 

[OldWiseGuy]

Economic 'activity' can be stimulated and food stamps are a way of temporarily redistributing existing wealth. So I'll concede the 'stimulation' factor of 1.73, not to be confused with true economic 'growth', however.

 

[variant]

Economic 'activity' can be stimulated and food stamps are a way of temporarily redistributing existing wealth. So I'll concede the 'stimulation' factor of 1.73, not to be confused with true economic 'growth', however.

The .73 would be the growth associated since the dollar spent would stay in the economy.

 

[Saving Hawaii]

The only way that one dollar's worth of (food stamp purchased) food can generate $1.70 in economic activity is for the same food, when replaced onto the store shelf, to be sold for $1.70. That's a lot of inflation.

Not at all. You have to remember what happens after the dollar is spent on a pack of Hebrew Nationals. The grocery store, seeing an increased demand for their products, will find it necessary to employ some kid with a baseball cap. He therefore receives a paycheck and spends it on chewing gum and sunflower seeds. This is additional economic activity that would not have taken place were it not for the food stamp. The $1.74 figure mentioned in the OP comes from economic studies designed to gauge the strength of this effect.

 

[pawnraider]

Not at all. You have to remember what happens after the dollar is spent on a pack of Hebrew Nationals. The grocery store, seeing an increased demand for their products, will find it necessary to employ some kid with a baseball cap. He therefore receives a paycheck and spends it on chewing gum and sunflower seeds. This is additional economic activity that would not have taken place were it not for the food stamp. The $1.74 figure mentioned in the OP comes from economic studies designed to gauge the strength of this effect.

Nonsense! The money that is used to employ and pay the kid in the baseball cap comes from either available or expected funds. The money the kid uses to pay for the chewing gum and sunflower seeds comes from money he already has. No more, no less.

 

[variant]

Nonsense! The money that is used to employ and pay the kid in the baseball cap comes from either available or expected funds. The money the kid uses to pay for the chewing gum and sunflower seeds comes from money he already has. No more, no less.

Not really, the 1.00 that came from food stamp becomes a part of the available funds of the store.

What you are essentially saying is that the dollar spent where no dollar would have been spent before has no effect on the economy which is what is nonsense.