Friday, June 6, 2014

Larry Summers Is Right: We Need the Gov't to Dispense MORE Food Stamps!

 If one carefully tracks the increase in food stamp distribution as shown in the accompanying graph, it will be found that the steepest positive gradients occur when the aggregate demand is lowest.  It should also be no surprise that of all the federal government's infusions, food stamps are among the most critically important - not only for feeding workers paid too low wages to make ends meet, but also for the health of the economy. We know that for every food stamp benefit dollar released, nearly 1.3 are returned. It is one instance where hoarding isn't remotely 'on'.

Lawrence Summers, in a visit to Denver on Tuesday echoed a similar refrain, even though he didn't specifically mention food stamps. What he did say is that "as the economy is configured, we have difficulty generating demand."

He noted a parlous combination of factors, but especially technological innovations (such as self-checkouts at groceries, and airline ticket kiosks that replace workers) that are displacing jobs and drastically lowering demand. This lack of demand for labor, in turn, crimps consumer demand for goods and services - putting downward pressure on wages and limiting job creation.

The Federal Reserve's "solution" to the economic miasma is to pump more money into the economy by buying bonds at a ferocious rate - nearly $80b a month. This is called quantitative easing but in Barbados they call it by "printing money" - which is what the Bim Central Bank is doing there: issuing fiat bonds that are replacing actual National Insurance monies at a rate of $44m a month. When we exchanged some U.S. money to get Barbados dollars while there, we even commented on how it looked like "monopoly money".

Summers' point is that the monetarist solutions don't work. In his own parlance, he asserted that "fiscal stimulus is more effective at generating growth than monetary stimulus and less prone to creating asset bubbles that are harmful to the economy".  Indeed, he is spot on, because the only ones profiting from the Fed's ongoing cheap money policy are the Wall Street speculators and their ilk, Why do you think the DOW is in stratosphere territory? Because of all the cheap money 'crack' the Fed has pumped into the system. Meanwhile, conservative savers, like elderly pensioners, are sucking shit....excuse me, salt.

The solution then is to stop the stupid asset inflation via QE, and demand the gov't issue more FOOD STAMPS! (Ok, we need to send letters, emails by the millions to demand the Repuke House to let loose of the budget strings - where they'd rather give a billion or two to the Ukraine fascists, and instead give them to hurting families here)

As I noted, food stamps is the most efficient and expeditious way to really increase aggregate demand without increasing the probability of asset bubbles popping. (Watch the DOW when the Fed suddenly halts its QE foolishness and raised interest rates by 1% instead - as the Bank of England plans to do).

To put more of a fix on the numbers and why a massive  food stamp increase is needed: the U.S. economy last year generated 42 percent more output than it did in 1998 BUT did so  with the SAME number of labor hours: 194 billion, according to a report last week from the U.S. Bureau of Labor Statistics.

Anything wrong with this picture? Yes! Because if the labor hours are the same but the output is 42 percent more, it means human labor has been a casualty- and machines have increased the productivity in tandem with cutting workers and making fewer people do the same jobs. (Likely translating into fewer hours with family).

So we have two extremes: the relatively few with jobs and overworked, and the relatively many with either no jobs or only part time work. It doesn't take a calculus background to grasp that the latter group won't be able to purchase the goods, services on which our GDP depends. (70 percent of GDP is based on consumer demand.)

Another stark factor that often escapes notice because the media doesn't deal with it: In those 15 years the country has added 40 million people.  Again, it doesn't take a calculus background to see that if you're constantly adding people - i.e. WORKERS, you are never going to catch up in the jobs numbers monthly report game.  You will always be behind, and the jobs actually created will be vastly less than the number needed. The difference is what we call the "surplus labor pool" and capitalists love it because it means their capital trumps labor value.

They also love it because the Simon Legre Business owners can demand any kind of hours they want, even overtime with no pay, because so many more are standing in line waiting to work - and are totally desperate.

All this is why we need to be aiming at cutting our population, not increasing it.  Dianne Sawyer on a news spot three days ago chirped about the "good news" of 4,000 odd babies born this year - the first time new births have been "added" since the great recession, i.e.  exceeding the deaths. But that news isn't exactly good if one considers the numbers represent 4,000 new jobs that will now have to be created - on top of the 40 million jobs needed to support the population added in the past 15 years. People need to get a reality grip.

This population impact in creating a surplus labor pool is not only responsible for our chronic under employment and unemployment, but also kept wages stagnating. It has also effectively kept the minimum wage excessively low because too many people are competing for the dwindling pool of  jobs available - so the skinflint employers can basically pay whatever they want. If the population growth was halved or more then we wouldn't be in such a position.

The only way to address the gap between population growth of workers and available jobs is to have fiscal stimulus on a massive scale - and that means food stamps (which can help 48-55 million people) not new wars (which will only help 1bout 1 million )

The math is there, Summers basically put the word out, now it's time for our congress critters to get off their asses and act. They can start by replacing the $9 b in food stamps that they cut from that Farm Bill five months ago!

See also:

No comments: