Hunger as an Incentive: The Shameful Assault on SNAP

The anticipated assault on the most vulnerable citizens in the wake of the tax cut bill is moving forward.

This week the administration ratcheted up the pressure on the Supplemental Nutritional Assistance Program (SNAP), colloquially referenced as “food stamps.”

The attention-grabbing dimension of the proposal – the idea of sending impoverished households “harvest boxes” rather than providing cards loaded with electronic cash to allow people to make their own food choices – would be laughable were it not so frightening in its disregard for human dignity. The proposal recalls passages from George Orwell’s The Road to Wigan Pier, his study of the unspeakable deprivation of working class Yorkshire and Lancashire during the Great Depression.

Toward the end of the book, Orwell details submissions to newspapers and magazines suggesting the ideal weekly budget for food, extracting the maximal nutritional value out of the most meager sum. A menu he cites “contains nothing for fuel,” which the writer cannot afford, consuming all his food raw. As Orwell observes, “When you are unemployed, which is to say when you are underfed, harassed, bored and miserable, you don’t want to eat dull wholesome food.” His point is that the notion that it is reasonable to impose on the poor a diet that squeezes the maximal nutritional value out of the minimal budget abstracts from the experience of poverty – and from humanity.

A century before Orwell’s book, the utilitarian era ushered in Victorian poor laws, reducing costs of aiding the poor by committing them to workhouses and shifting the blame for poverty to the poor themselves. Jeremy Bentham, the founder of the utilitarian movement, operated from the fundamental assumption that individuals, dominated by the pursuit of pleasure, will shirk to the extent they can. As Bentham put it in his Principles of the Civil Code, “The law which offers to poverty an assistance independent of industry, is, so to speak, a law against industry itself.”

Building on this theme, Nassau Senior, the British political economist, wrote in his 1834 Poor Law Commissioner’s Report that “The most pressing of the evils of which we have described are those connected with the relief of the Able-bodied.” As a corrective to this evil, aid could be afforded, but only “under strict regulations.” In short, there was a case for relieving indigence – that is, the state in which the individual falls below subsistence – but not for the relief of poverty. Assistance therefore could be administered sufficient to move the individual from starvation to poverty – but not above.

In short, “Every penny bestowed, that tends to render the condition of the pauper more eligible than that of the independent labourer, is a bounty on indolence and vice.” Since existing poor laws tended to lift living standards to those of the poorest laborers, they were wasteful and could be rendered less damaging by “the restoration of the pauper to a position below that of the independent labourer.”

But why are conservatives intent on taking us back two centuries in the development of social welfare policy? As the tax cut bill shows, the current administration and Congressional majority act on the assumption that there is a direct correlation between wealth and virtue. The benefit of such a philosophy is that it justifies measures such as tax cuts for the richest. Within this logic, taxes become a punishment imposed on the wealthy; social welfare benefits a reward for sloth.

The fact is that food stamp rolls and spending have been trending down (a reduction of more than 5 million people) during the past couple of years from the peak (of 47.6 million people) reached during and after the 2008-9 financial crisis. The rise in SNAP participants during the economic contraction and subsequent reduction in numbers shows the program functioning precisely as is designed to do.

Benefits are modest, averaging $254 per month per household, and make a huge marginal difference for the food security of 1 in 7 U.S. citizens. According to the Urban Institute, SNAP benefits moved more than 8 million people out of poverty in 2015, and reduced by half the number of children living in deep poverty (i.e., at less than half the federal poverty level).

Furthermore, the program is administratively efficient, with 93 percent of funds going directly to households for food spending.

The program supports families in urban and rural areas in every state, and it has a substantial economic multiplier effect, with every dollar of benefits generating $1.79 of economic activity.

Although most SNAP households have earnings from work, the administration proposes imposing stricter work requirements as part of a proposal to slash $213.5 billion from the program over the next decade. The cuts represent a policy in search of a problem, since only a tiny fraction — 6.8% — of Americans using food stamps are able bodied adults without dependents who are not employed.

The pending proposal from the US Department of Agriculture seeks to remove waivers from employment requirements previously established for higher unemployment localities. But there is little evidence of a deterrent effect of SNAP benefits on employment. In fact, by all accounts able-bodied recipients of SNAP benefits who do not work tend either to be looking for work and unable to find it, or face other barriers to employment, such as a lack of basic job skills. Not all areas served by SNAP have qualified education and training programs, precisely the sort of reality acknowledged by the current waiver program. As argued by the Center on Budget and Policy Priorities,able bodied individuals working less than 20 hours weekly receive about $5 per day in benefits, and likely would not lose these benefits even if they could find work for more hours – further evidence that there is little relationship between work requirements and benefit claims.

Finally, money invested in lifting people across the margins of poverty can preempt the costs of “diseases of despair,” including homelessness, depression and associated health problems. But as we saw in last week’s blog post the current administration and Congress will only invest in their own political fortunes.

spondi-restaurant-athens.jpgBy the way, my new restaurant is thriving. However, I’ve decided to suspend our program of donating leftover food to the local food pantry. I originally thought we might be helping to feed some of the many hungry people in the state of Oklahoma. I realize now that that donated food is simply pushing up the unemployment rate.  I’m sorry for my earlier confusion.

The Infrastructure “Plan” and the end of Public Investment

 

The administration’s infrastructure proposal released earlier this week conjures $1.5 trillion of infrastructure spending with a mere $200 billion of federal funds.

A brilliant act of leveraging federal resources to galvanize significant results? Hardly. The “plan” instead amounts to the latest catastrophic failure to invest our national resources in future growth and prosperity of the country.

Worse, this proposal arrives at the ultimate destination of a policy path paved by conservatives and libertarians for the past decade: abandonment of the idea of public investment.

The need for expanded infrastructure investment has been evident for at least a decade. As a study published last month by the Congressional Research Service indicates, “The United States lags behind many other advanced economies with respect to transportation infrastructure investment as a percentage of GDP. According to OECD data, which include spending on roads, rails, inland waterways, maritime ports, and airports, the United States spends less on transportation infrastructure as a percentage of GDP than most OECD countries.” The infrastructure gap is the result of a steady decline in nondefense government investment since the 1960s, from the 3-4 percent of GDP range to 2.5% in 2016.

Libertarians and other opponents of government make the usual case against public investment: claims about deteriorating infrastructure are overstated, taxpayers would be burdened by the borrowing required to finance infrastructure investment and – falling back on dogma rather than an evidence-based analytical case – the government cannot be trusted to invest wisely.

The American Society of Civil Engineers disagrees vehemently with the first point, estimating total infrastructure investment needs – for everything from roads and bridges to electricity networks and schools – at $4.6 trillion for the decade from 2016 to 2025, with a funding gap of $2 trillion. The evidence also indicates that infrastructure investment brings significant returns. This is why Larry Summers, former World Bank Chief Economist, U.S. Treasury Secretary and Director of the National Economic Council, among others, has long advocated for greatly expanded infrastructure investment. Summers has made a sustained case that such investment is likely to generate returns that far surpass low government borrowing costs. Economic studies show that infrastructure investment has a large economic multiplier effect; it is also likely that well-chosen infrastructure spending can produce increases in economic productivity that enhance growth and job creation. Crucially, federal investments that augment resilience to natural disasters can ultimately save money – a point for which we’ve observed much tangible evidence this past year. The study by the American Society of Civil Engineers indicates that failure to close the infrastructure spending gap will reduce GDP by $3.9 trillion by 2025 and result in a loss of $3400 of disposable income per household. These estimates of collective returns illuminate the very essence of public investment.

The deep flaw of libertarian thinking is that improvements to the collective welfare drop out of the equation since society does not exist, only individuals. Investments become nothing more than spending.

Unfortunately, the administration’s proposal treats public investment in a similar way. The proposal follows the libertarian path by seeking to decimate environmental and other regulations in the name of “efficiency” to make way for private infrastructure projects. Such an approach invites investment that creates private returns, while socializing costs in the form of environmental degradation AND user fees for access to private infrastructure. As it turns out,  there already are mechanisms in place to streamline environmental review and construction permitting by the federal government.

The White House outline at least acknowledges the need for infrastructure investment. From that modest bright spot, the remainder of the legislative outline is darkness. The core of the proposal is an infrastructure incentives program involving a relatively paltry $100 billion. Cash-strapped states and local authorities are expected to fill the gap to meet local infrastructure needs – while attracting private sector partners.

The formula for funding proposed infrastructure projects nakedly reveals the abandonment of the idea of public investment.  Evidence of how each project will secure non-federal revenue for the investment (50%) and for operations and maintenance (20%) together account for 70% of the criteria by which funding will be allocated. The weighting of evidence of social returns on the investment? 5%.

As a New York Times evaluation of the proposal suggests, the approach abandons a longstanding tradition of federal involvement in infrastructure investment dating back to improvement of harbors and navigable rivers in the early 19th century.  As the article concludes regarding the incentive formula, “In this new competition for federal funds, a plan to, say, build a better access road for a luxury development — a project with the potential to bring in more dollars from private investors — could have a strong chance of getting the green light. By comparison, a critical tunnel overhaul that has trouble getting new money might not be approved.” Furthermore, critical funding for infrastructure to increase resilience to national disasters is unlikely to be forthcoming from the private sector.

In short, like much of the policy behavior we’ve seen from this administration, the proposal for infrastructure is nothing more than a strategic deployment of government resources to amplify opportunities for private profit – at the expense of the public welfare and long-term health of the U.S. economy. The approach ignores the fact that thoughtful public investment inherently creates opportunity for increased private returns.

By the way, I’m opening a new gourmet restaurant, and you’re invited to the grand opening – a sumptuous buffet dinner. I’m providing the napkins. Just bring a protein, side dish or dessert! (And silverware, we’ll need that.) When you arrive with your dish, mention that you’re a reader of my blog and you’ll receive a 10% discount off the fixed dinner price. I believe in community!

The Administration’s Investment in Social Division

We witnessed a stunning irony this past week: a rebellion against the Republican tax cut by its greatest beneficiaries. This came in the form of a stock selloff as evidence materialized that the tax cut and a budget agreement in Congress would together propel budget deficits past $1 trillion from fiscal year 2019 onwards.

Deficits of this magnitude represent a return to fiscal conditions during the 2008/9 financial crisis – except that the economy is now growing steadily rather than contracting and the spike in deficits comes on top of an accumulation of federal debt attributable to the financial crisis itself. Massive deficits were warranted in the aftermath of the financial crisis; they make no economic sense today. However, they may prove politically useful for the current administration and the Congressional majority.

In response to rising deficits of their own creation, Republicans are now primed to follow up their massively lopsided tax cuts with their well-rehearsed mantra: “we have a spending problem.”

This message is designed to lay the groundwork for cuts to social welfare spending. For anyone genuinely concerned with deficits and debt, the exclusive focus on one side of the budget ledger (spending) while ignoring the other (revenue) is entirely dishonest. Nonetheless, the catchphrase has also been deployed at the state level in places such as Kansas  and Montana.

Purveyors of this rhetorical trick turn their critical attention to growth in mandatory spending for Social Security, Medicare and such items as “food stamps” (the Supplemental Nutritional Assistance Program, or SNAP); we should fully expect an assault on these and other programs that benefit vulnerable populations.

Even before the tax cut, U.S. federal tax revenue relative to GDP was low both by historical standards and in international comparison. If 2017 tax revenue was simply equal to the average share of GDP for the past 40 years, there would have been an additional $62 billion of tax revenue. If we exclude the historically low revenue years of the financial crisis – 2009 and 2010 – the implied loss of federal revenue is $91 billion. By itself, this would pay for a full year of the Supplemental Nutritional Assistance Program, which assists about 43 million Americans living on the edge of poverty to stave off hunger.

Even more stark is the share of U.S. tax revenue in international comparison. In 2016, tax revenue from all levels of government was 26% of GDP in the U.S., versus an average of 34.3% for all 35 Organization for Economic Cooperation and Development (OECD) countries. Of these countries, the U.S. ranks 31st. Only Turkey, Ireland, Chile and Mexico raise smaller shares of revenue relative to GDP.

Why the higher tax revenue in most wealthy countries, especially European democracies? Do citizens in these countries simply enjoy paying taxes more than Americans?  Of course not. But these countries invest in social cohesion, which is why even center-right political parties, such as Germany’s Christian Democrats, have long supported sustained social welfare spending. U.S. governments do not make this investment. Instead, American society operates under the myth that social cohesion will emerge from the inclusiveness of the “American Dream.” That myth has been shattered, and American society is in desperate need of renewed investment in social cohesion.

That investment is not forthcoming. Instead, the deficits conjured by the current administration and the Republican Congress will serve as a pretext for an assault on social welfare spending. The most vulnerable will pay the price.

Worse, divisiveness has become a conscious political weapon of the current administration and congressional majority. In their hands, the U.S. government is no longer investing in the long-term future of American economy and society; it is investing in social division.

Tragic Tax Cut Discourse

img-thing.jpegIt has begun. The narrative of the Republican tax cut lifting growth and incomes – and thereby making us all better off — is perniciously weaving its way into the discourse. On January 27, the New York Times ran a lead article about the coincidence of economic growth across all major global economies. At the very outset, the article asserts that U.S. economic growth “has been propelled by government spending unleashed during the previous administration, plus a recent $1.5 trillion shot of tax cuts.” Incredibly (that’s correct, it is not credible), the Republican tax cut has boosted U.S. economic growth within weeks after taking effect.

Last week I argued that the Republicans might just win their bet that their tax cut will yield political gains, however heavily the benefits are skewed towards corporations and the wealthy, and however grave the long-term damage to the health of the U.S. economy and polity. Evidence in favor of this hypothesis is already mounting.

As an example of the narrative, the Associated Press on February 1 reported that the tax cut is “beginning to deliver bigger paychecks to workers,” citing cases of struggling middle class Americans: a managed care worker, a secretary at a public school and a couple of teachers.

The January 22 release of the International Monetary Fund’s updated World Economic Outlook feeds directly into the narrative.  The Outlook projects faster near-term U.S. economic growth, attributed substantially to the tax cut. The IMF report has been widely cited and celebrated although the forecast predicts a negative impact on growth beginning in 2022, and says nothing about consequences for wages and economic inequality other than to note that benefits are particularly focused on upper income households. Buried toward the end of the IMF’s document is the guidance that fiscal policy be shifted toward improving the quality of public health and education and protecting the vulnerable. This is precisely the opposite of what is now taking place, and these are policy directions that have become LESS likely because of the tax cut rather than more possible.

A Monmouth University poll released on January 31 offered evidence of the rising popularity of the tax cut. A month ago, just over a quarter of respondents approved of the tax bill, and nearly half disapproved. The public is now divided evenly, with 44% each approving and disapproving. The data revealed an important motive for the shift in sentiment: fewer people now expect their taxes to rise as a consequence of the tax bill.

Meanwhile, corporations have embarked on public relations campaigns to explicitly link bonuses and wage increases to the tax bill. In announcing bonuses and an increase in their minimum wage, Wells Fargo asserted that “we believe tax reform is good for our U.S. economy.” Yes, it’s nice to extol the virtues of fresh fruit while you allow an acquaintance to sample a grape as you unwrap your gourmet Harrod’s fruit basket.

The good fortune for the Republicans who gave us the tax cut is that to the extent economic growth continues and there is evidence of wage gains, it will be easy for them to credit the tax bill for the good news. Of course, deeper analyses have found evidence that some wage increases explicitly linked to the tax bill in corporate press releases have little or nothing to do with the tax cut at all, as with the Los Angeles Times report on Wells Fargo’s increase in their minimum wage to $15 per hour. Last January, operating in a tight labor market, Wells Fargo increased its minimum wage to $13.50. The company is headquartered in California, which has mandated an increase in the minimum wage to $10.50 an hour for 2017, rising to $15 per hour by 2022. It is entirely likely that the announced wage increase would have taken place without the tax bill.

In fact, eighteen states increased minimum wages effective January 1, 2018, and minimum wage movements and in some cases union bargaining efforts have had some successes in an environment of high corporate earnings. However, with the discourse of tax bill benefits firmly implanted, media accounts will by default attribute wage gains and worker bonuses to the tax bill, reinforcing the shift in public perceptions.

Ironically, corporations have not only a political incentive to announce bonuses in the immediate wake of the tax bill; they have a financial incentive as well. By announcing the bonuses in 2017, they can deduct the expense at the current 35% corporate rate rather than new rate of 21% effective in 2018. AT&T, for example, will by this means save $28 million.

The deep unfairness of the tax bill notwithstanding, citizens struggling to stretch their budgets appear to base their views of the bill on this straightforward question: “Have my taxes gone up or down”? Policy makers are responsible for safeguarding the longer-term interests of the national economy; the tragedy of tax bill discourse is the questions they are NOT asking. Instead of “How is $1.5 trillion of revenue best utilized?” or “How can we use our resources most effectively to strengthen social cohesion and the well-being of citizens?” they have asked “what is the minimum price necessary to buy popular acceptance of a vast giveaway of resources to political supporters?” Good politics, but disastrous policy.