Tag Archives: SNAP

The Session From Nowhere

Capitol DomeThe members of the 113th Congress have almost managed the impossible — to beat the Do-Nothing Congress of 1947-48, the one excoriated for enacting only 395 bits of legislation. [USAT]

Bills Enacted by session of Congress*the 113th Congress is still in session.

Not only is the last column in the graphic painfully small, but it becomes even more pathetic when we look at a graphic illustration of the number of bill which even made it to an up or down vote:

Bills up or down by Session 1973-2013Not only has the 113th Congress not enacted any legislation, it hasn’t even brought many bills to the floor for a vote.

It is one thing to crow about protecting the huddled masses from iniquitous laws, and quite another to simply obstruct the entire process by not even considering them.  From a technical perspective the Republican controlled 113th’s obstruction is a function of the misuse of the filibuster in the U.S. Senate and the absurd application of the ephemeral “Hastert Rule” in the House which asserts that legislation which doesn’t have the support of the majority party’s caucus will never reach the floor.  There is also the matter of legislation passing the House which has absolutely no chance in the Senate, and was never intended to have any life in that body, bills simply passed to pad the records or to make a display.  Witness the number of attempts to rescind Roe v. Wade.  The technical obstructionism of the Tea Party Republicans requires some heavy lifting in the justification department.

The previous “low” for Congressional enactment was the 112th Congress’s record of 284 bills to be sent to the White House, thus far by GovTrack’s count the 113th has managed only 56.   As the Nevada Progressive calls it, Less isn’t More.   What’s left on the table?

The Farm Bill – both houses have passed their own versions, and in the lovely but over-simplified “I’m Just A Bill On Capitol Hill” this should lead to a conference to hammer out a compromise bill which can be passed in both wings of the building.  The conference is in progress [WaPo] but there’s little progress to report.  “Competing House and Senate proposals remain tens of billions of dollars apart — the Senate proposes slashing about $4 billion in SNAP funding over the next decade, while the House would cut nearly $40 billion,” [WaPo] and the chasm remains.   For those who are unrepentant clock watchers, the House and Senate are facing a January 1 deadline.

ENDA – (Employee Non-Discrimination Act)  The Senate passed this bill, S. 815, on November 7, 2013 on a 64-32 vote. [rc 232] Even conservative Republican Senator Dean Heller (R-NV) assisted with passage in the Senate, however the bill may die in the House:

“The Speaker believes this legislation will increase frivolous litigation and cost American jobs, especially small business jobs,” Boehner’s spokesman Michael Steel said in an emailed statement. Other House Republicans have been outspoken against the bill, arguing that it imposes on the religious liberties of business owners and managers. Although, there is a religious exemption under the law that protects churches and other religious institutions from being penalized under ENDA.” [USNWR]

The “increase in frivolous litigation” argument is boilerplate language applied by the GOP to any and all legislation pertaining to human or civil rights.  The House version, H.R. 1755, with 200 co-sponsors, has made it as far as the House Subcommittee on the Constitution and Civil Justice [Thomas] to which it was assigned on June 14, 2013 — and no further.  Sub-Committee membership includes Chairman  Rep. Trent Franks (R-AZ),  Rep. Steve King (R-IA), and the memorable logician Rep. Louie Gohmert (R-Neverland), among the eight Republicans facing five Democrats. [USHSCCJ]  Hope that H.R. 1755 will emerge from this conglomeration of Tea Party favorites must be slim indeed.

Comprehensive Immigration Policy Reform – The Senate’s version, S. 744, passed the Senate on June 27, 2013 on a 68-32 vote. [Thomas] It, too, has entered the House of No Return.  There are 11 pieces of the measure, or bills related to the measure, in various stages of decay in the House.  [Thomas]

 Common Sense Gun Regulations –  Polling conducted by Pew Research in May 2013 showed 81% of Americans in favor of universal background checks for gun purchases.  Including 81% support among Republicans and 83% support from Democrats. [Pew]  Massive support notwithstanding – the bill was filibustered in the Senate.  [WaPo]   Senator Heller voted to support the GOP filibuster on April 17, 2013 [rc 97], one of the 46 members of that body who voted to kill the bill.

JOBS –  Let’s look at our infrastructure needs by drilling down to one bill as an example. Rep. Nick Rahall (D-WV) introduced the SAFE Bridges Act of 2013 (H.R. 2428) on June 19, 2013.  “Directs the Secretary of Transportation (DOT) to establish a program to assist states to rehabilitate or replace bridges found to be structurally deficient, functionally obsolete, or fracture critical. Requires states to use apportioned program funds for projects to rehabilitate and replace such bridges. Sets the federal share of project costs at 100%.”   Rehabilitating or replacing insubstantial or dysfunctional bridges would be a blessing for the stumbling construction sector.  It would also, indeed, make us safer.

One in nine of American bridges are rates structurally deficient by the ASCE. [Report Card pdf] And, some 200 million trips are taken every day in this country over deficient bridges in 102 American metropolitan regions.   At least we made it over the river (and through the woods) to Grandma’s house for Thanksgiving… now we have to do it again for Christmas?  The ASCE is clear that just because we’ve not worried about our infrastructure doesn’t mean we shouldn’t:

“Most of America’s infrastructure was built after WWII.  These investments of the 20th century spurred our nation’s economic boom and made us a global power. Today, quite simply, that tab is coming due. Australia currently spends 2.4% of GDP on capital investment, compared to 0.60% by the U.S.  Canada’s federal government investment in infrastructure is approximately 2.9% of GDP. And though our percentages of GDP spent on infrastructure are indeed comparable to Germany, in 2011, Germany adopted a five-year, $52 billion federal Framework Investment Plan for infrastructure. The question facing our country is are we going to maintain our 20th century foundation while making new investments for a prosperous 21st century. This is a unique challenge. America’s economy must lead the world, and as such, the foundation of that economy—our infrastructure—should lead the way. ” [ASCE]

The sputtering of conservative think tanks about the efficacy of public-private partnerships is singularly insufficient to address the massive infrastructure and transportation needs faced by this nation.   Meanwhile, Rep. Rahall’s bill sits in the House Subcommittee on Highways and Transit — and has done so since the day after it was introduced. [Thomas]

A more comprehensive bill, the American Jobs Act, was re-introduced by Representative Frederica Wilson (D-FL) in the 113th Congress [HuffPo]

“According to independent analysts including Moody’s Economy, the American Jobs Act would mean up to 1.9 million new jobs.  The bill would provide tax cuts to tens of millions of low- to moderate-income Americans and stop layoffs of teachers, firefighters, and other public workers.  To ensure that the bill does not add to the federal budget deficit, it includes a series of cost-saving changes to the taxation of hedge fund investment income as well as cuts to corporate subsidies.  In addition to the provisions from President Obama’s original bill, the new 2013 American Jobs Act includes a simple provision to cancel the reckless, across-the-board budget cuts known as Sequestration for the coming fiscal years.”  [Wilson]

H.R. 2821 was assigned to the appropriate House committees on July 24, 2013, and then went to the land of No Return.

It’s not like we don’t have enough to do … it’s just that there is a Congress, especially the House of Representatives, which has demonstrated its incapacity to address the issues which need to be discussed and faced rationally, and to work for the American people.  The House Calendar (pdf) for the 113th first session Congress is “pretty blank,” and the second session is even further reduced.  The problem of un-productivity is exacerbated by the lack of  work time allotted to actually Doing anything.

President Harry Truman thought he had a problem with the 80th Congress when he spoke at a campaign stop in Elizabeth, New Jersey on October 7, 1948:

“Some people say I ought not to talk so much about the Republican 80th “do-nothing” Congress in this campaign.  I will tell you why I will talk about it.  If two-thirds of the people stay at home again on election day as they did in 1946, and if we get another Republican Congress like the 80th Congress, it will be controlled by the same men who controlled that 80th Congress–the Tabers and the Tafts, the Martins and the Hallecks–would be the bosses.  The same men would be the bosses, the same as those who passed the Taft-Hartley Act, and passed the rich man’s tax bill, and took Social Security away from a million workers.”  [SpeechesUSA]

Heaven bless him, he never had to work with the 113th lead by Representatives Boehner, Cantor, and the likes of Louie  Gohmert.

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Thank You For Your Service, sort of

VeteransThe CBPP estimates that 11,300 veterans — that’s Veterans — in households receiving SNAP (food stamp) benefits in Nevada will see benefits cut — that’s CUT — on November 1, 2013.

“The 2009 Recovery Act temporarily raised SNAP benefits as a form of effective economic stimulus and to reduce the hardship that low-income families faced during the recession.  This benefit increase is set to expire on November 1.  The coming benefit cut will reduce SNAP benefits, which are already modest, for all households by 7 percent on average, or about $10 per person per month.” [CBPP]

The assistance will drop back to less than about $1.40 per meal.  Again, the point remains that programs like SNAP are economic “automatic  stabilizers.”  At the risk of continual repetition, an automatic stabilizer is a financial augmentation in income designed to offset deflationary pressures during economic downturns.  In English, that would be money to offset income lost during recessions and depressions to keep the aggregate demand from succumbing to further contractions — leading to more contraction.  We know from analysis during the Great Recession of 2007-08 that those SNAP benefits created $1.73 in economic activity for every $1.00 expended.  [Moodys pdf]

And so now we have the Farm Bill stalled in conference between the House and Senate which would address SNAP related issues, and the two sides arguing about whether to cut yet another $35 billion from the food assistance program. [USAT]  This, in the face of the obvious point that the “Recovery” hasn’t been a general success for all levels of income earners.

“All told, average inflation-adjusted income per family climbed 6% between 2009 and 2012, the first years of the economic recovery. During that period, the top 1% saw their incomes climb 31.4% — or, 95% of the total gain — while the bottom 99% saw growth of 0.4%.”

Last year, the richest 10% received more than half of all income — 50.5%, or the largest share since such record-keeping began in 1917. Here is how the top earners break down: Top 1%: incomes above $394,000 in 2012; Top 5%: incomes between $161,000 and $394,000; Top 10%: incomes between $114,000 and $161,000.”  [Wall Street Journal]

The 1% have done very nicely, thank us all very much, while the remaining 99% — including those 11,300 Nevada veterans in low income brackets — have witnessed the income gap widen.  Thank you for your service…

The right wing response is generally, “Why don’tcha get off your lazy butt, get some job training, and find a better job?”  Well now, that might have been easier for some active duty military personnel had not the House/Senate GOP decided to shut down the federal government, including the office that processes military education benefits. [IHE]

The shutdown was a temporary tantrum, the Sequester (Budget Control Act) was more serious:

March 8, 2013: “Due to the current fiscal challenges, the Secretary of the Army has approved the suspension of Tuition Assistance (TA) effective 1700 EST Friday, 8 Mar 13. The suspension applies to all components and will remain effect until the fiscal situation matures.
Effective 1700 EST 8 Mar 13, Soldiers will no longer be permitted to submit new requests for Tuition Assistance through the GoArmyEd portal.”  [TDB]

There was sufficient outrage to move the Congress to reinstate Pentagon authority to restore the tuition assistance program by March 28, 2013. The U.S. military was ordered to find other areas in their budget to cut and to reopen enrollment in the TA program. [HuffPo]  Are we beginning to see a pattern here?

The Budget Blasters in the U.S. Congress are delighted to take very grand, or grandiose,  general positions like shutting down the government — but for Heaven’s Sake don’t shut down the World War II Memorial; and, cut all that fat from the federal budget — but for Heaven’s Sake don’t cut tuition assistance for members of the U.S. military.  A person could easily conclude that the Budget Blasters in Congress dislike federal spending on anything in general, but come to a screeching halt when we get down to the specifics in real federal functions.

The Senate Republicans successfully filibustered a bill in September 2012 to create a job training program for veterans which would have involved a relatively modest $1 billion in expenditures over a five year period.

“Sen. Tom Coburn (R-Okla.) said GOP concerns were about the $1 billion price tag for the program over five years. Republicans described the proposal as a political ploy of no practical value. “If, in fact, we want to help veterans get jobs, there are lots of ways to do it,” Coburn said on the floor before the vote. “We need to make sure the job training programs we have are working, and they’re not.” [WaPo]

There might have been “lots of ways” for veterans to find job training programs in 2012, except that the Budget Control Act which Senator Coburn and others referred when filibustering the 2012 bill to death also shaved funding from other job training programs:

“Federal money for the primary training program for dislocated workers is 18 percent lower in today’s dollars than it was in 2006, even though there are six million more people looking for work now. Funds used to provide basic job search services, like guidance on résumés and coaching for interviews, have fallen by 13 percent.” [NYT April 2012]

One year on, and the same squeeze was observed by the National Skills Coalition which issued its report on the impact of diminished support for job training programs in July 2013, including this conclusion:

“Over the past three years, Congress has cut funding to employment and job training programs by over $1 billion. Sequestration and spending caps will result in further cuts for the next decade. In addition, some in Congress are proposing additional, even deeper cuts that will worsen the existing skills gap and make it difficult for businesses to grow and compete globally.” [NSC]

Excuse the impertinent inquiry — but job training programs have already been cut by $1 billion as a result of Sequestration and spending caps, and the Congressional Republicans have blocked more targeted programs for training veterans, so exactly where are veterans supposed to go for help once they are home and trying to transition back into the civilian economy?  If Senator Coburn believes there are “lots of ways to do it” then perhaps he’d care to point out where the federal government is poised to give the assistance to veterans they need to improve their job skills?

“Thank you for your service” is a hollow bromide, with little more staying power than those cheap yellow ribbon car magnets, unless we are ready and willing as a nation to assist veterans with educational programs, job training skills, and some basic resources — like Food! — so that they can fully contribute to  our economy.

Meanwhile, some 11,300 Nevada low income veterans who are struggling to put food on the table are about to be hit with another blow from the authors of the great American con job, those espousing the notion that we can get everything we want, we just shouldn’t have to pay for it.  And the 1% keep rolling along…

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It Can Happen Here: Corporate Welfare and Nevada Jobs

NV Food Service Jobs WagesThe eligibility level for SNAP benefits for a family of four is estimated at 130% of the federal poverty level ($23,550).

“A household is defined as a person or a group of people living together, but not necessarily related, who purchase and prepare food together. Households, except those with elderly or disabled members, must have gross incomes below 130 percent of the poverty line. All households must have net incomes below 100 percent of poverty to be eligible. Most households may have up to $2,000 in countable resources (e.g., checking/savings account, cash, stocks/bonds). Households with at least one member who is age 60 or older or a member living with a disability may have up to $3,250 in resources.” [SNAP]

The median wage reports from NV-DETR should be interpreted to mean that half the employees in this job category fall below the annual income in the second column.

And the point of all this?

The point is quite simply, we don’t get to have it both ways.  We can’t continue to employ people at wages which make them eligible for public assistance and then expect not to have to pay for the public assistance to help (as in the case of SNAP) to put food on the table for their families.   The second point is that this isn’t a situation that occurs in some highly generalized national way — it’s right here in the Silver State.  Worse still, it’s happening in the most prominent sector of the Nevada economy — hospitality and food service.

And so, we get stories reporting a McDonald’s employee being advised to seek public assistance by her employee resource hotline. [BusinessInsider] A study finds that over one half of Wal-Mart’s employees make less than $25,000 per year. [BusinessWeek] It’s already been reported that one Wal-Mart in Wisconsin could cost taxpayers some $900,000 including such “subsidies” as Medicaid, home heating assistance, reduced price school lunches, and Section 8 housing assistance. [HuffPo]  These and other stories led one columnist to call Wal-Mart the new “Welfare King.” [Salon]

Why Do The Welfare Kings Worry?

Inflation.  There is nothing a lender (banker) likes less than inflation. Even the prospect of inflation causes the vapors.   Thus, the banker’s political allies offer such bromides as the following:

“Where would the money come from to pay minimum wage workers a higher rate of pay? It would come from the customers of those businesses. When the cost of doing business rises, those businesses have to raise the prices of their products. This happens across industries and across the economy. The end result is inflation. Workers are making more money, but that money is only buying what their former wage purchased.”

Sounds right, but … the issue at the present is that wages aren’t keeping up with current levels of inflation, much less drive any inflation.  [CSMonitor] Even if we calculate that the full cost of the wage increase is passed along to customers, the research doesn’t support the contention that a wage-price spiral will ensue from improving the minimum wage:

“Past research on how business costs rise with minimum wage hikes indicates that a 10-percent minimum wage hike can be expected to produce a cost increase for the average business of less than one-tenth of one percent of their sales revenue. This cost figure includes three components. First, mandated raises: the raises employers must give their workers to meet the new wage floor. Second, “ripple-effect” raises: the raises employers give some workers to put their pay rates a bit above the new minimum in order to preserve the same wage hierarchy before and after minimum wage hike. And third, the higher payroll taxes employers must pay on their now-larger wage bill. If the average businesses wanted to completely cover the cost increase from a 10-percent minimum wage hike through higher prices, they would need to raise their prices by less than 0.1 percent.” [BTFE]

However, nothing seems to alleviate the never-ending terror of the financial sector (banks) that something will cause the dollars they lent to customers will be repaid in dollars of slightly less value (inflation).

…even if this costs us more to sustain the individuals and their families hired at current minimum wage levels. Out of Our pockets.  Not to put too fine a point to it, but American taxpayers — including Nevadans — are being asked to subsidize corporations which do not pay living wages to their employees, at the same time those corporations and banks are demanding that the federal government reduce its expenditures for social safety net programs.

If lower income workers are feeling like they are in a Grand Bind — it’s because they are.

*Annual median wages are not included because the levels of wages do not include earnings from tips.  The Nevada minimum wage for tipped employees is $8.25 per hour.

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What the Heck? SNAP go his arguments

Joe HeckWe can update statistics on the SNAP (food stamp) program in Nevada by referring to the Caseload Summary of the DWSS, (pdf).  For FY 2012 there were 187,896 adults and 163,969 children receiving SNAP benefits. Of these, 143,115 adults and 124,890 children lived in Clark County, and 24,834 adults and 21,672 children lived in Washoe County. (p.45)  In sum there were  351,865 receiving food assistance.

The average value of the benefits statewide per case in FY 2012 was $258.56, per month, and per person averaged to $122.70. [DWSSpdf]

And, yes there are more people participating in the SNAP program in Nevada, as indicated by the following chart:

NV SNAP participation per 1000

This trend is in line with the employment (unemployment) trends in Nevada since FY 2003.   Nevada’s highest unemployment rate was 14.0% in October 2010, and was lowest (3.8%) in April, 2000.  [BLS] Nevada’s current unemployment rate of 9.5% earns the Silver State the dubious honor of being 50th in the ranking of state unemployment rates as of August 2013. [BLS]

NV Unemployment 3There’s good and bad news herein.  As DETR explains:

“Service-providing industries are expected to create 100,500 jobs in the ten-year forecast horizon. A lot of the growth in the service-providing industries is a reflection of increasing population and consumption over a decade. Leisure and hospitality industry is projected to have 36,100 more jobs by 2020, the largest employment gain in jobs among all industries. Most of the gain is anticipated to be generated in the accommodation and food services sector.” (pdf)

The number of jobs is increasing — but, as we discover from the BLS tables of average hourly wages and weekly earnings — the average hourly wage in the leisure and hospitality sector is $13.54 per hour, with an average weekly wage of $352.04.  This is the lowest rate of all the sectors in the tables, the next lowest rate being $16.67 in “retail trade.”

Thus, we have a situation in which the unemployment rate which drives a significant portion of the SNAP applications is decreasing, but the kinds of jobs increasingly available are in the lowest wage categories.   With the highest unemployment rate in the nation, and jobs increasing predominantly in the lowest wage sector, Nevada will be hard pressed to find ways to reduce family poverty.

Representative Joe Heck (R-NV) explained his vote on the continuing resolution, with dramatic cuts to the SNAP program, in a statement which doesn’t square with the reality of employment projections in Nevada:

“Every able-bodied American that does not have dependents should be required to meet the work requirements … the reforms put in place by this bill ensure that only those that meet the income guidelines receive the assistance they need,” Heck said in a statement. “The best thing we can do to help those on SNAP and other forms of federal assistance is create an economic environment where the private sector can grow and create more good-paying jobs.”

Instead of pragmatic assistance to those employed in low wage jobs, Heck offers verbiage: “create an economic environment….”  Pure GOP speak for Business Subsidy Good; People Assistance Bad.  The advice is singularly unattached to the reality that the jobs actually being created tend NOT to be “good paying.”

What Representative Heck asserts, but does not substantiate, is that any of the 351,865 receiving food assistance in Nevada do NOT meet the income guidelines.   The issue to which Representative Heck may be applying his penchant for generalities is the BBCE guidelines.

In fiscal year 2010, GAO estimates that 2.6 percent (473,000) of households that received Supplemental Nutrition Assistance Program (SNAP) benefits would not have been eligible for the program without broad-based categorical eligibility (BBCE) because their incomes were over the federal SNAP eligibility limits.  [GAO]

However, what Representative Heck isn’t including is another segment of the GAO Report on SNAP:

GAO estimates that BBCE increased SNAP benefit costs, which are borne by the federal government, by less than 1 percent in fiscal year 2010. In that year, total SNAP benefits provided to households that, without BBCE, would not have been eligible for the program because their incomes were over the federal SNAP eligibility limits were an estimated $38 million monthly or about $460 million for the year. These households received an estimated average monthly SNAP benefit of $81 compared to $293 for other households. BBCE’s effect on SNAP administrative costs, which are shared by the federal and state governments, is unclear, in part because of other recent changes that affect this spending, such as state budget and staffing reductions in the recent recession.  (emphasis added)

In short, one can argue that the broad based categorical eligibility did increase the cost of SNAP — but it cannot be seriously asserted that these were the “budget busting” increases cited by those who object to funding the program.

However, there’s always that fall back position: Generalizing about “waste, fraud, and abuse.”  The USDA defines welfare fraud as (1) exchanging SNAP benefits for cash; (2) an application who is dishonest on his or her application; and (3) a retailer who has been disqualified for past abuse lies on an application to be restored to the program.

Further, the USDA has taken serious (and effective) steps to reduce SNAP abuse:  “Due to increased oversight and improvements to program management by USDA, the trafficking rate has fallen significantly over the last two decades, from about 4 cents on the dollar in 1993 to about 1 cent in 2006-08 (most recent data available).”

Those who oppose the SNAP program are more likely to cite stories of “dead people getting SNAP debit cards.”   For example, an audit in Nevada found cards issued to 27 deceased persons. [LVRJ]  This from a total of 351,865 recipients — see what your calculator returns when you divide 27 by 351,865.

Calculator

This news was followed by the following opinion statement:

About 2,400 people were in both databases, and 749 of the deceased were not shown as deceased in the Welfare Division database. Auditors then reviewed 50 of these cases and found that 27 cards had been used after the cardholder had died. Because the sampling number was so low, it is likely that far more than the 27 cards of dead people still are being used. [LVRJ]

It could be.  At the same time it could also be true that the small sample size tended to make the problem look as though we were viewing the heavens with binoculars.  Larger issues may be suggested but the details are extremely hard to determine.   Phrased more elegantly: “A study with low statistical power has a reduced chance of detecting a true effect, but it is less well appreciated that low power also reduces the likelihood that a statistically significant result reflects a true effect.” [NCBI]  The comparison of Vital Statistics databases with SNAP rolls is obviously a desirable thing; however the extrapolation that this “proves”  serious fraud is a step too far.

There is no substantiation for the allegation that the broad based categorical eligibility (BBCE) guidelines for SNAP added an unbearable burden to the federal coffers.  There is no evidence that SNAP is beset by waste, fraud, and abuse — indeed the level of abuse has been reduced in recent years from 4% to 1% (and note not all the fraud is on the part of the recipient).

“Over 99 percent of those receiving SNAP benefits are eligible and payment accuracy was 96.20 percent in 2011 –a historic high. Payment errors are less than half what they were 10 years ago, which has reduced improper payments by $3.67 billion in 2011.” [USDA]

And here comes the kicker — the reason that SNAP benefits were audited for comparison to Vital Statistics?  The federal government directed this:

USDA publishing a final rule in August 2012 that requires States to cross check against the Social Security Master Death File, Social Security’s Prisoner Verification System, and FNS’s Electronic Disqualified Recipient System, prior to certifying individuals for the program, to ensure that no ineligible people receive benefits.”

It really doesn’t quite do to cite an example of an audit to “demonstrate” fraud and abuse, when the intention of the agency conducting the audit was part of an on-going effort to reduce that self-same  fraud and abuse.

If Representative Heck can’t cite any rationale for his desire to “reform” SNAP other than to berate the BBCE — not a significant part of the poverty reduction problem — and to bemoan “abuse and fraud” also not a significant problem, then his objections are hollow ideology at the expense of those recipients who find themselves seeking employment in a land of low wage jobs.

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Blood Stained Bandits Fleecing Sheep

Jefferson AirplaneRemember Jefferson Airplane?  Remember this?

If you want to get to heaven
Over on the other shore
Stay out of the way of the blood-stained bandit
Oh good shepherd
Feed my sheep” [traditional/Kaukonen]

Now, take a click over to the Nevada Rural Democratic Caucus website and look at the letter from Representative Mark Amodei (R-NV2).  And, what are Representative Amodei’s concerns about the SNAP program?

#1. He believes it “imperative” to be a “good steward” of “taxpayer dollars.”  Any good steward of taxpayer dollars would have recognized by now that for every $1.00 spent on SNAP benefits approximately $1.73 is generated for the U.S. economy.  Sounds like a good ‘bang for the buck’ to me.   If he’d been paying attention since the January 2008 release  of the Moody’s Analytics report by Mark M. Zandi (pdf) he’d have been aware of this.  A GOOD steward should seek ways to make those taxpayer dollars stretch.  Instead, Representative says of the program: “At this rate the CBO predicts by 2022 the SNAP program will be among the highest non-health related federal support programs for low income families.”

Here’s the portion of the CBO Report he chooses to repeat:

“By fiscal year 2022, CBO projects, 34 million people (or about one in 10 U.S. residents) will receive SNAP benefits each month (roughly the same number as in 2009), and SNAP expenditures, at about $73 billion, will be among the highest of all non-health-related federal support programs for low-income households.”

Here’s the part he left out:  (pdf)  Outlays for 2012 are set at $80,993,000.  While program outlays for 2022 are projected as $72,642,000.  Speaking of the actual benefits as a program component we find that the 2012 the cost is $74,849,000 and the projected total benefits cost is $54,912,000.   That’s right — the total program costs were projected to be LOWER  in 2022.

Grab a calculator the arithmetic is easy, if the Moody’s calculations are adopted, that $64,912,000 in benefits could mean $125,280,160 generated in the American economy.   Evidently, Representative isn’t really all that interested in boosting the U.S. economy.

What he gives every appearance of meaning to convey is that the SNAP program is Big Government for Low Income Households … and we can guess what message his constituents will make of that.  Does he presume they will have images of Welfare Queens dancing in their heads?   Perhaps, because here’s more information he omitted:

“In 2010, about three out of four SNAP households included a child, a person age 60 or older, or a disabled person. Most people who received SNAP benefits lived in households with very low income, about $8,800 per year on average in that year. The average monthly SNAP benefit per household was $287, or $4.30 per person per day. On average, SNAP benefits boosted gross monthly income by 39 percent for all participating households and by 45 percent for households with children.” [CBO] (emphasis added)

Not only do the House Republicans want to slash some $39 billion out of the SNAP program, they’re doing at a time when the commodities markets are predicting about a 3% to 4% increases in grocery prices in the next year. [Navigator] And, allow me to beat this horse one more time:  Most grocery stores operate on a profit margin ranging from 1% to 4% per year.  Now, take the 10% of their receipts which come from SNAP benefit redemptions out of their calculations and see how good the GOP is at “helping small businesses.”

There’s no way to be a “good steward” of those sacred tax dollars and advocate cutting a program which boosts the economy at the same time.   There’s no way to argue that cutting a program benefits us when the result is lower revenues for retailers, who must then pass on cost increases to middle class customers.   No, in this instance it is not rationale to look for “reasonable ways to cut costs to federal programs, including SNAP.” (Amodei)

#2.  Amodei: “I also agree that it is important for American families to make their own healthy diet choices, which will reduce their health care costs and grocery bills and will improve their quality of life.”   What are we to make of this Amodei-ism?

Let’s accept the obvious — the SNAP program is supplemental, and the benefits do not cover all food related expenses for a family. Further, that food purchases constitute a higher percentage of very low income family resources than would be the case in  middle or upper class families.   A USDA in-depth study (pdf) issued in March, 2013 points out:

“The fundamental reality of most SNAP recipients’ lives is that expenses often outstrip income. SNAP households experience both recurring and episodic financial strain that is eased but not alleviated in full by participation in the SNAP program. SNAP allows families to set aside more easily a portion of their resources—SNAP—for food, and to prioritize a healthier, more consistent diet without compromising as much on obligations such as rent, utilities, transportation, and other basic needs. Families in this study often build their monthly budgets around SNAP, allocating their fungible cash resources toward their bills and other, often urgent, financial needs…” (emphasis added)

Bottom line: If families are to have the resources to make those “healthy diet choices” Representative Amodei promotes, then they have to have the resources to do that without fudging the budget on heat, electricity, rent, loan repayments, water bills, and the like.  The recipients find their financial situations “eased” but NOT “alleviated” by the SNAP benefits.  Thus the imagery of the “welfare bum” slouched on the front stoop, with all his “hunger” needs provided for by those sacred taxpayer dollars is just that — imagery.  Imagination, mythology, and down-right mean-spiritedness.

House Republicans who voted to add about $20 billion to the Defense Department budget in their CR, while slashing the SNAP program missed the lyrics:

Can’t you hear my lambs a’callin
Oh good shepherd
Feed my sheep

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Who Shouldn’t Be Eating?

The right wing is fond of this verse: “For even when we were with you, this we commanded you, that if any would not work, neither should he eat.”  2 Thessalonians 3:10

So, …..

Congress UnproductivePew Research full article.

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And they did it to the least of their brothers…

CharityAccording to the USDA, as of June 2013 there were 362,203 persons in Nevada receiving Supplemental Nutrition Assistance (food stamps).  That would be 362,203 out of a total state population of 2,758,931.    The population of the state increased by about 2.2% from April 2010 to April 2012.  So, the 13.1% of Nevadans currents receiving SNAP help is in line with the 12.9% reported by the Census as living below the poverty line between 2007 and 2010.

The Food Research & Action Center compiled such county statistics as it could in 2009 and reported the following numbers for Nevada counties.  (pdf)  Lyon County had 3,153  SNAP recipients, (6% of the total population), and 9,095 of its population having incomes 125% under the federal poverty level.  Douglas County had 1,575 recipients,  4,207  people in the county were living on less than 125% of the FPL.  Washoe County shows 29,018 receiving SNAP assistance, and  59,569 earning less than 125% of the FPL.   Elko County had 2,210 recipients, and  4,286 living on 125% under the FPL.  Carson City had 5,004 recipients, and  9,153 below 125% of the FPL.  Nye County added 6,085  recipients to the rolls, and  8,838 living at below 125% of the FPL.  Churchill County had 2,429 recipients, and  3,485 living below 125% of the FPL.  In Clark County there were 163,806 recipients, and  260,772 living under 125% of the FPL.

These numbers are people, real people who are eligible for SNAP assistance, and the eligibility and benefits  shake out as follows:

“SNAP eligibility is limited to households with gross income of no more than 130% of the federal poverty guideline, but the majority of households have income well below the maximum: 83% of SNAP households have gross income at or below 100% of the poverty guideline ($19,530 for a family of 3 in 2013), and these households receive about 91% of all benefits. 61% of SNAP households have gross income at or below 75% of the poverty guideline ($14,648 for a family of 3 in 2013).” [FeedingAm]

The average monthly SNAP benefit per person is $133.85, or less than $1.50 per person, per meal.  Only 57% of food insecure individuals are income-eligible for SNAP, and 26% are not income-eligible for any federal food assistance.  [FeedingAm]

If these sound like “large” numbers getting public assistance to put food on the table, consider that Nevada has a low participation rate to begin with, as of December 2012, the USDA reported:

“Some States had consistently low participation rates relative to other States. California, Colorado, New Jersey, Nevada, Texas, and Wyoming had significantly lower rates than two-thirds of the States in all 3 fiscal years.” [USDA pdf]

So, there are about 362,203 recipients of food assistance in Nevada, not nearly the number who might be in need of help.  They are getting about $1.50 per person per meal, and many people who need more help putting nutritious food on the family table don’t meet the stringent income requirements for eligibility.

Who are these people — other than numbers on spreadsheets?  The USDA reports characteristics of the recipients in its latest report (pdf).

“Seventy six percent of SNAP households included either a child or an elderly or disabled person, and these households received 84 percent of all benefits. Households with children received a relatively large average monthly SNAP benefit ($419), reflecting their larger household size. The average household with children had 3.3 people compared with an average of 1.1 people for households without children. A majority (56 percent) of SNAP households with children were single adult households.” (emphasis added)

If we extrapolate this to the Nevada participation figures, we have approximately 275,274  SNAP recipients in families with a child, a disabled, and/or an elderly person, and these families would receive 84% of all the benefits allocated.

We might also want to consider veterans and members of military families.  First, there are far too many young military families whose financial circumstance make them eligible:

“The base pay of most recent enlistees — from corporals on down — is at or below the $23,050 poverty rate for a family of four. The military, which counts housing allowances, tax advantages and bonuses in its own accounting of pay, estimates the average junior enlisted member earns about $43,000.

HuffPost looked at data provided by the Defense Commissary Agency — which serves a wide range of military members, including retirees — and concluded that commissary customers have redeemed $101 million worth of food stamps since June 2011.” [HuffPo]  (emphasis added)

Secondly, Census data estimates that there are 1.5 million households nation-wide in which a veteran is receiving SNAP benefits.

And so, at 6:07 p.m. in Washington, D.C. the roll was called in the House of Representatives on H.R. 3102, the deceptively titled “Nutrition Reform and Work Opportunity Act” which lobbed some $39 billion from the SNAP program.

Who was concerned about those 362,203 Nevadans?  Not Representatives Amodei (R-NV2) and Heck (R-NV3)they both voted in favor of the draconian cuts in the nutrition assistance program.  [roll call 476] Representatives Horsford (D-NV4) and Titus (D-NV1) voted against this assault on those families with children, the elderly, and the disabled.

There are no reasons for Amodei or Heck’s votes — there are only rationalizations and excuses.  Perhaps they’d like to beat the old “too much trafficking” in the SNAP program long debunked horse laugh.

The fact is: “Due to increased oversight and improvements to program management by USDA, the trafficking rate has fallen significantly over the last two decades, from about 4 cents on the dollar in 1993 to about 1 cent in 2006-08.”

Perhaps they’ve adopted the specious argument that public assistance makes people dependent on Big Government.  This argument only works IF it is underpinned by the notion that people are lazy by nature, and willing to be “takers” from the “makers.”   Reminder: Ayn Rand wrote FICTION.   Most people living in poverty now are WORKING at low or minimum wage jobs.  Really want to cut the number of persons eligible for SNAP participation? — then enact a Living Wage Act.

But, but, but … what about those Small Business Owners who need relief from taxation (and social safety net programs)?  Well, consider the owner of a grocery store.  As of May 2012 approximately 10% of national grocery store revenue was coming in the form of SNAP benefit redemptions.  [FoodPolicy]  In an economic sector in which the profit margin ranges from 4.8% in the best locations and times, and more often approaches 1%, this is no small consideration.   Thus much for supporting small business.

No, there aren’t any reasons for supporting H.R. 3102 — only the narrow, constricted, selfish, and self-obsessed perspective of those who have forgotten that government is our way of helping the “neighbors we don’t know.”  Those who have rather completely forgotten:

“Then the righteous will answer him, ‘Lord, when did we see you hungry and feed you, or thirsty and give you something to drink? 38 When did we see you a stranger and invite you in, or needing clothes and clothe you? 39 When did we see you sick or in prison and go to visit you?’  40 “The King will reply, ‘Truly I tell you, whatever you did for one of the least of these brothers and sisters of mine, you did for me.’”  [Matthew 25]

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Bon Fire of the Inanities: Nevada Welfare and the Cato Study

Welfare spending NevadaThings we should probably fix — the fact that Nevada is one of 20 states in the union which allow private interest lobbyists to participate in the state pension system. [RGJ]  The fact that Nevada ranks last in per capita spending on welfare and human services.

On one hand we’re subsidizing the retirement of some individuals who have spent long hours in the Legislative Building arguing against spending “precious taxpayer dollars” on services to taxpayers — as in every Nevada resident who pays sales taxes, and on the other we have members of our communities who are struggling financially, and who are definitely not feeling “entitled” as described by the most recent faulty pseudo-study of welfare spending in America from the folks at the Cato HQ. [Moyers]

Talking about what constitutes welfare all too often provides an object lesson in how apples, oranges, nectarines, grapefruit, and bananas can be combined and compared.   Taken to the ultra-right extreme, “welfare” incorporates educational benefits to veterans, Social Security, Medicare, Medicaid, public schools, public libraries, public parks and recreation, medical services, in short anything not spent on the military, the promotion of private business, and the judiciary and police.   The consequences of this distorted political philosophy are visible in our under-investment in infrastructure and the disconnect between the elitist entitlement of the 1% and the reality of the 99%. [Burnett]

So, Nevada spends $855.13 per capita on social welfare services, compared to $1021.89 in Georgia, and $1190.11 in Texas.  No doubt there are those who find this a cheerful note.   We spend $55,228,000 on income assistance, $1,654,577,000 on payments to vendors, and “other assistance” amounts to $636,316,000 from state and local sources. [Census, xl download]  One particularly parsimonious perspective delights in these statistics, pointing out that if Nevada payments are low then potential welfare recipients won’t come to the Silver State.  The fact that this keeps those receiving income assistance who are already living here in dire straits is, evidently, of little consequence.

The other distortion of income and living assistance expenditures comes when right wing think tanks like the Heritage Foundation or the Cato Institute remind us that “welfare is better than working.”  There’s nothing really new here, the same type of report came out in 1995 — with essentially the same errors.  CBPP summarizes:

“The claim behind these critiques is clear: federal spending on entitlements and other mandatory programs through which individuals receive benefits is promoting laziness, creating a dependent class of Americans who are losing the desire to work and would rather collect government benefits than find a job.”

The basis for the right wing analysis assumes that every welfare recipient receives every form of assistance available — even those to which they are not eligible.

“Federal budget and Census data show that, in 2010, 91 percent of the benefit dollars from entitlement and other mandatory programs went to the elderly (people 65 and over), the seriously disabled, and members of working households.  People who are neither elderly nor disabled — and do not live in a working household — received only 9 percent of the benefits.”

In short, most support programs are provided to individuals who are either not in the workforce (elderly/disabled) or to people who are in the workforce but are not earning a living wage.  Thus much for the “too smart to work” argument advanced by the right.   That “typical welfare family” cited in the recent Cato publication is anything but typical.  One of the best breakdowns of Cato’s flawed analysis of TANF and Medicaid assistance comes from Scientopia.Org:

“Nationwide, in Fiscal Year 2010, there were a total of 1,847,155 households with active TANF cases. In the same fiscal year, 18,618,436 households received SNAP (food stamp) benefits, and another 65,989,147 individuals (~25,577,188 households based on the census 2.58 individuals/household) received medicaid benefits. According to the Cato report’s own definitions, households on both of those programs should be “welfare families.” With less than 10% of SNAP households also receiving TANF, and less than 3% of Medicaid households receiving SNAP, it’s easy to see that Cato’s “typical welfare family” is actually based on an extreme case, not on anything that any of us would consider to be an “average.” [Scientopia.Org]*

If the same scrutiny is applied to housing assistance, the results are the same — a really “typical” family is worse off financially on public assistance than when at least one member is earning the minimum wage.  Not in Nevada, not in California, not in Washington, D.C. Not anywhere in this country.   Unfortunately, no recitation of statistics from the Reality Sphere will offset the conservative narrative which clings to their imaginary welfare queens and stoop sitting guzzlers who exist solely to reinforce the notion that the rich should be able to retain all their riches –and accumulate ever more, that markets are self correcting — 2008 anyone (?), and “government is the problem.”

So, if not the poor, who does feel entitled?  Not surprisingly, it’s the top 1% of American income earners.   There’s a study on this too:

“According to a new study published in Personality and Social Psychology Bulletin this month, wealth tends to increase a person’s sense of entitlement, which in turn can lead to narcissistic behaviors.

Paul Piff of the University of California at Berkeley told PsyPost “there is something about wealth that gives rise to a sense of entitlement, a sense that one deserves more good things in life than others, which in turn gives rise to an increased or inflated sense of self-importance, vanity, grandiosity, and omnipotence (narcissism).”

Not to put too fine a point to it, but the more one has the more one feels he or she is entitled to have.  Tom Wolfe summed up the type in The Bon Fire of the Vanities:

“He lived on Park Avenue, the street of dreams! He worked on Wall Street, fifty floors up, for the legendary Pierce & Pierce, overlooking the world! He was at the wheel of a $48,000 roadster with one of the most beautiful women in New York—no Comp. Lit. scholar, perhaps, but gorgeous—beside him! A frisky young animal! He was of that breed whose natural destiny it was…to have what they wanted!”

It is all well and good to aspire to having what one wants, it becomes problematic when those with a well developed sense of entitlement pursue politics which yield fewer and fewer prospects and opportunities for the remainder of the population. Yet more dispiriting for our society and its political institutions when they issue “reports” purporting to substantiate the fantasies they harbor about the entitlement of others to secure basic needs — food, shelter, and medical care.

*There are several informative rejoinders to the Heritage/Cato narrative on the relative merits of public assistance and working wages.  See Dunford at Scientopia,  Moyers and Company on the Think Tank Report,  Brad DeLong on Josh Barro’s analysis.  Slate analysis of the MacDougal WSJ misleading OP-Ed.  CBPP “Cato’s fundamentally flawed analysis.”

 

 

 

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Okun’s Law and Sequestration

GDP formula

This isn’t rocket science.  For anyone wondering why Austerity doesn’t produce Prosperity, the answer lies in this simple formula.  We measure our economic growth in terms of the gross domestic product, the GDP.

Investopedia explains:

“GDP is commonly used as an indicator of the economic health of a country, as well as to gauge a country’s standard of living. Critics of using GDP as an economic measure say the statistic does not take into account the underground economy – transactions that, for whatever reason, are not reported to the government. Others say that GDP is not intended to gauge material well-being, but serves as a measure of a nation’s productivity, which is unrelated.”

In short, we can critique the use of the GDP as a measure of our economic well being for not including bartered transactions, or private sales in which sales taxes aren’t applied, or we can note that the notions of productivity and economic health aren’t necessarily related.  However,  what we can’t do is dismiss the utility of the formula, nor can we argue it isn’t one of the most commonly used (and understood) metrics applied as an economic description.

So, why is this formula plastered on this blog for the umpteenth time?  Because when Uncle Fester brashly opines that “We’ve got to cut government spending and get the economy back on track,” he’s offering up a classic demonstration of his ignorance about how we measure our economic situation.

Consumers buy things.  That’s the C in the formula. Companies and corporations buy things.  That’s the I in the formula.  Governments buy things. That’s the G in the formula.  We sell things to other countries, and we buy things from other countries. Those are the X and the M in the formula.  The greater the DEMAND for goods and services (aggregate demand in some explanations) the more wealth is generated.

Now let’s bring this down to Uncle Fester’s level by considering the life of the lowly paper clip.  Consumers buy paper clips, which are mostly used to hold sheets of paper together, or may find themselves altered to perform other tasks like being poked in the little hole in the electronic gadget to “reset” the thing, or to hang Christmas ornaments, or whatever a person might think to do with a piece of bent wire.  Businesses buy paper clips.  And, yes, various levels of government purchase paper clips.  In fact, there are about 11 billion paper clips sold in the U.S. every year.  [WSJ]

Now, imagine the impact of taking one part of the formula out of the whole.  What if government cut backs caused agencies to scale back on the purchase of office supplies?  This is the point at which the artificial demarcation between enterprise and government breaks down.  If the government manufactured it’s own paper clips there would be no need to put the G in the formula, but it doesn’t.  The federal government, like the consumers and the companies, gets its paper clips from one of two domestic producers of bent wire clips. [WSJ]

Here comes the obvious.  When the government scales back purchase orders for office supplies (like our lowly paper clip) that represents a decline in demand.  And, guess what! The formula for Aggregate Demand is exactly like the formula for the GDP.  [Investopedia]

“The total amount of goods and services demanded in the economy at a given overall price level and in a given time period. It is represented by the aggregate-demand curve, which describes the relationship between price levels and the quantity of output that firms are willing to provide. Normally there is a negative relationship between aggregate demand and the price level. Also known as “total spending”.  [Investopedia]

To see an example of the classic aggregate demand (AD) curve click here.   The FRED graph for our GDP to date looks like this:

GDP Chart to 2012

The gray area shown on the chart is the recent Recession.  The blue line graphs the trajectory of our GDP to date, and the thinner red line is more technical. It’s the “Nominal potential gross domestic product,” [CBO 2001 pdf]  which assumes that the line would show what happens if everyone who wanted a job had one, and all resources were being used efficiently.  [See also: KCFED, pdf] Frankly, this one is a bit technical for Uncle Fester, so let’s keep it simple.

If the demand for paper clips is reduced, when consumers, businesses, and governments stop purchasing, the micro-graph for the subcategory of office supplies and the sub-classification of paper clips,  would mirror the overall aggregate demand.  And, the bottom line?  That which reduces the aggregate demand also reduces the GDP.

This simple, but basic, proposition from classical economics is precisely why austerity measures never produce prosperity — which we measure by using the gross domestic product.

If we can hold Uncle Fester’s attention this long, perhaps we can introduce Okun’s Law.   Okun’s Law observes that for every 1% decline in unemployment there’s a 3% increase in the GDP.  There are some issues with the “law” the first of which is that it’s not really a law, but an observable component of the United States’ economy; and, it’s a bit funky when we add in some other variables like productivity.   That said, for all its imperfections, when we reduce unemployment in the United States the GDP moves up.   This isn’t just common sense — it’s an observable and quantifiable fact.

Now we get to the meaty part.  If Uncle Fester is adamant about reducing federal spending because it’s a drag on the U.S. economy, then we can respond by saying if we lose 700,000 jobs as a result of the sequestration austerity measures, then according to Okun’s Law we will see a reduction in the U.S. gross national product.

A reduction in federal purchasing means a reduction in demand for goods and services.  Each decrease in demand means layoffs or reduction in production or offering of services and in turn means a reduction in the gross national product.   This is probably the point at which Uncle Fester will want to change the subject to something like “wasteful government spending.”

This recitation doesn’t assume that all government spending is productive.  The Pentagon has already said it doesn’t want some items Congress is enthusiastic about procuring.

“In February, the Pentagon released a budget that began the process to cut at least $487 billion in defense spending over the next 10 years. This included terminating the Global Hawk, which the military estimated would save $2.5 billion over five years; the C-27J, at a savings of $400 million; M1 Abrams updates, saving hundreds of millions of dollars; and cutting roughly 5,000 positions from the Air National Guard and reducing that agency’s budget about $300 million.”  [Military.com]

Since the cutbacks in these examples would come from Ohio, it’s predictable that Ohio representatives in Congress would revert to Okun’s Law and decry the loss of jobs in their districts.

“The budget is expected to be finalized after the November election, though the struggle over continued funding could extend long beyond that. Grant Neeley, professor of political science at University of Dayton, called this a “collective action problem.”

“(Legislators) need to cut the budget but (won’t) take those jobs in our state. Especially in an election year in a battleground state,” he said. “They’re going to provide rationale, but at the end of the day, it’s about protecting jobs in their district. If they have the choice between making a cut in their district and making a cut somewhere else, which one do you think they’re going to choose?” [Military.com]

What we can’t do is proclaim austerity begets prosperity calling for wider and deeper cuts in government spending — which turns the aggregate demand, the GDP measurements, and Okun’s Law upside down — while at the same time demanding that jobs not be cut from corporations and businesses within Congressional districts because of what will happen to aggregate demand and the local GDP and assuming Okun’s Law is still applicable.

Let’s guess that this is the point at which Uncle Fester pontificates that 25% of our federal budget goes to foreign aid.  In the fact based universe this isn’t the case: “Since the 1970s, aid spending has hovered around 1 percent of the federal budget. International assistance programs were close to 5 percent of the budget under Lyndon B. Johnson during the war in Vietnam, but have dropped since.”  [WaPo] OK, it’s not foreign aid, then it has to be “welfare.”

The total spending for Temporary Assistance to Needy Families program uses up a grand total of o.7% of our entire federal budget. [Klein]  “But, but, but,” squeals Uncle Fester, “There are more Takers than Makers…” whatever that means.  What it doesn’t mean is that there is an upward trend in the number of people participating in the TANF program.

tanf participitation

Nor does it mean there’s an upward trend in Food Stamp program participation and costs.  (SNAP)

SNAP

In our factually based universe, all federal programs for those in poverty comprise about 7% of the total federal budget. [MJ]  Yes, this is where Uncle Fester breaks in with the anecdote that he saw someone at the Food Bank who was driving a newer pickup than his.

However, all the mis-information, mis-conceptions, and anecdotal observations don’t repeal the basic rules of capitalism, and its basic understanding of Supply and Demand.  Nor, do they discredit the veracity of Okun’s Law.

We do need to reduce unnecessary spending, and we do need to increase revenue by closing loopholes which only serve to place more of the taxation burden on the middle class for the benefit of the top 0.1%.  What we do not need to do is torture the rules of American capitalism into a contortion which renders them risible and unrecognizable.  Okun’s Law is still functional, and as we see from the unfortunate examples in the Eurozone, austerity doth not begat prosperity.

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Yes, We Could Be Having A Serious Deficit Reduction Discussion?

Tea Party FlagAt some point in the ongoing discussion about federal debts and budget deficits everyone needs to get serious.  Serious, that is, about doing that which will reduce our federal deficit spending.  Really serious, not as in “let’s wave a Debt Crisis Flag every three months to advance an agenda including the privatization of Social Security and the voucherization of the Medicare program.”

Let’s start with the obviousSocial Security doesn’t add a dime to the national debt.  If the words of a progressive blogger won’t suffice, how about listening to former President Ronald Reagan?  (video here)  So, discussing “reforms” to the self funded Social Security program as a means to reduce the national debt is extraneous to any serious deficit reduction discussion.

One way to approach the privatization of Social Security is to change the frame of reference, such as altering the connotation of “entitlement” from some earned benefit to which we are entitled because we paid for it, to one which has a tinge of “welfare” about it.  Social Security is not a welfare program — it is an earned benefit.  People who have paid into it all their working lives have every right to expect to be getting something back.  Social Security is not a retirement program.  It is a program which seeks to prevent abject poverty for elders.   Nothing in the Social Security program prevents anyone from maintaining a self-contributory retirement account of any shape or form.   Indeed, the benefits from Social Security are low enough that retirement to the Gated Golf Paradise Of Your Choice can only happen if you have a self-contributory retirement savings program. Anyone suggesting that “entitlements” such as Social Security “have to be reformed” to ease the burden on the federal debt (1) doesn’t have a clue what they are talking about, and (2) is regurgitating anti-safety net talking points from radicals who want to privatize all retirement income programs to the benefit of Wall Street investment firms.

Medicare does have some issues.  The first, and most readily apparent, is that the Medicare Part D (prescription drug) segment is, and always has been, underfunded.  However, the really big monster under the Medicare bed is the increasing cost of health care in America.  When private health care corporations started buying up religious organization/private, state, and locally supported hospitals the profit motive surged in the sector.  Health care must now generate a profit.  Savings, which were once achieved for the purpose of reducing costs for local tax payers or donors to religiously based institutions, now accrue to the corporate bottom line — not to taxpayers, donors, or patients.

The second factor is technology.  We do have the best medical treatment providers in the world.  However, best often translates into “most expensive.” We have all manner of devices and gadgets and equipment and gear to save or sustain lives.  Our hospitals take it as their mission to save or sustain life, which is all well and good until the emotional meets the economical.  There are “death panels” in this country, but they aren’t governmental — they are familial, with families making ‘end of life’ decisions which horrifically in some instances are based on what the family can afford.   Frankly speaking, we don’t do a very good job of educating our citizens about advance directives.  Some conservatives set up a howl when they noticed the Affordable Care Act provided for paying physicians or other medical professionals who provided ‘end of life’ counseling for their patients — however, a little counseling might go a long way toward reducing the anxiety of hospital personnel and the trepidations of family members.  It could also provide some savings in the long run.

Returning to the Big Problem — the Medicare Part D component; we knew in 2003 that the Part D segment would  cost approximately $534 billion.  [Foster pdf] Simply put, “the drug benefit had no dedicated financing, no offsets and no revenue-raisers; 100% of the cost simply added to the federal budget deficit,..” [Forbes]  The part about “dedicated financing” is important.  While the Social Security trust funds have dedicated financing (payroll taxes) there were no provisions to increase the revenues available to finance the Part D enhancement.   There is something unappealingly ironic about the current GOP insistence on “entitlement reform” because “Medicare is broken,” when it was the GOP majority in 2003 that Broke the Program.

Ways to ‘reform’ the Medicare program have been suggested which do not require “voucherizing” the entire thing and sending seniors back to pounding pavement in order to find affordable health insurance plans.  We could consider means testing for the prescription drug benefit.  We might take under advisement lifting the earnings cap for payroll taxes from the current $110,000 level and dedicating a portion of the revenues toward the Part D program.  We could allow the Department of Health and Human Services to negotiate for prescription drug prices the way the Veterans Administration bargains for prescription drugs for VA hospitals and clinics.

If we are REALLY REALLY SERIOUS about ‘reforming’ Medicare then it would be helpful to get past the silly voucherization proposals, referred to as “structural reform” in Speaker Boehner’s response to the President, [Boehner pdf]  and get to the core of what makes health care expensive — we could talk about health care cost containment, dedicated financing for Medicare, and lifting the earnings cap.   We might also want to take a deep breath and see if the Affordable Care Act’s provisions, such as eliminating tax payer subsidies for profitable private Medicare Advantage insurance policies, could achieve some savings over the next decade.

However, it’s getting relatively obvious that the Republicans aren’t terribly serious about deficit (debt) reduction when their offers are strictly ideological (privatize and voucherize) and the proposals don’t address the monster of their own creation — the lack of financing for Medicare Part D.

Buzz Words and Generalities.   Speaker Boehner is offering (pdf) “pro-growth tax reform that closes loopholes and deductions while lowering rates.”   This phrasing is coming perilously close to the older verbiage: Waste, Fraud, and Abuse.  As if we could make up any gaps in program funding by simply cutting out the WFA.  Most anti-tax advocates cite the WFA as some massive potential figure which if reduced could cure all our fiscal woes.  When pressed to provide total figures associated with the largely mythical WFA these advocates provide outlier examples of welfare fraud, some particularly egregious Pentagon payments to contractors, and perhaps a bit of information from Internet e-mail chain letters.  The WFA numbers have yet to yield up the level of financing needed to close budget gaps in the Pentagon or any other government activity.

The arithmetic from “loopholes and deductions” doesn’t add up either.  The same sort of fantastical thinking is required to equate the WFA savings and the L&D revenues.  These mythological creatures are based on the same gossamer upon which anti-tax advocates conjure up the notion that an inordinate amount of the U.S. budget is allocated to foreign aid.  The average American has come to believe that foreign aid takes up 10% of the federal budget, when if fact it consumes only 1%. [NYM]

The Republicans also appear to be consuming their own rhetoric on savings associated with reductions in federal employee compensation.

“Cutting pensions and benefits for government workers is popular, but once again most Americans overestimate how much that costs the government. On average, Americans think the federal government spent 10 percent of its 2010 budget on pensions and retiree benefits; the OMB figures indicate the real number is about 3.5 percent.” [CNN]

The moral of this story is that if the amounts of spending on pensions and benefits, or the amounts that can be retrieved by closing loopholes and eliminating deductions, are grossly inflated, then the resulting policy and budget decisions will be widely off the mark.

Unfortunately, the same type of ideologically based proposals which are the core of Speaker Boehner’s “structural reforms” i.e. voucherization and privatization of Medicare appear to inform his suggestions about federal employee compensation, and another favorite GOP target, SNAP (food stamps.)

The program is already under assault from all sides, considering the appropriations being entertained in the agriculture bill.

The Senate’s version of the farm bill would reduce overall funding by $23 billion, with a reduction in food stamps of $4.5 billion over five years. The House Agriculture Committee is proposing to cut funding by $35 billion — with nearly half the overall cut coming from reductions in food stamps by $16 billion over five years. [Atlantic]

But there’s a problem here.  Food stamps have a beneficial effect on the national economy.

“Those who believe in cutting SNAP funding as a cost-saving measure should know that food stamps boost the economy — not put a strain on it. Supporters of federal food benefits programs including President George W. Bush understood this, and proved the economic value of SNAP by sanctioning a USDA study that found that $1 in SNAP benefits generates $1.84 in gross domestic product (GDP). Mark Zandi, of Moody’s Economy.com, confirmed the economic boost in an independent study that found that every SNAP dollar spent generates $1.73 in real GDP increase. “Expanding food stamps,” the study read, “is the most effective way to prime the economy’s pump.” [Atlantic]

If the object of the game is to increase federal revenues by generating a higher GDP along the formula proposing that a growing economy produces jobs, and more jobs yield more taxable income, and more taxable income means more revenue — then the GOP has the SNAP portion of the argument exactly backwards.  They are proposing to cut a program which actually generates more economic growth.   If one seriously believes that economic growth means more revenue and hence less indebtedness, then one can’t seriously advocate cutting programs which elevate levels of economic growth.

All Pain and No Gain.  The two sides don’t seem to be speaking to the same fiscal slope, cliff, gully, whatever.  From the Republican perspective the damage to the economy might be done by The Specter of Rising Taxes.  Those legendary Job Creators — who are now seeing record corporate profits while wages continue to stagnate — might not invest, and hence there will be no economic growth.  This is fundamental Supply Side Hoax thinking.  That it has been, and still is, a hoax is demonstrated neatly by this graph from the Federal Reserve Bank of St. Louis:

Corporate Profits Low Wages

The blue line represents wages, the red line corporate profits.  If corporate well being were the driver of overall economic growth and  well being then why has the blue line been trending downward since 1970?  The answer is simplicity itself: Supply Side Economics is a Hoax of the First Water.

A deficit reduction plan predicated on ideology, urban legends, misunderstandings, and economic illiteracy isn’t SERIOUS.   That conclusion further advances the argument that the Republicans aren’t really serious about debt or deficit reduction, but merely see the issue as a flag to be waved in the van of their attack on the social safety net, a banner of privatization signaling their allegiance to Tea Party politics.

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Filed under Economy, Health Care, health insurance, income tax, Medicaid, Medicare, national debt, Social Security