Tuesday, April 17, 2018

Could Repukes Wreck The Economy By Cutting Food Stamps? Quite Possibly!

No automatic alt text available.
One doesn't have to read too much in the center right media before encountering the clarion call that food stamps, as part of SNAP (Supplemental Nutrition Assistance Program) need to be cut, pared back.  One need look no further, indeed, than the recent (Apr. 13) WSJ Editorial ('Working on Food Stamps') which makes a series of outrageous and unrealistic claims that the SNAP benefit ought to be cut. (The editorial included the graphic shown, claiming food stamps had become an entitlement).  We read, for example:

"More Americans need assistance during recessions like 2008, but the question is why so many have stayed on food stamps even amid the long expansion."

That;s really a "Duh!" response -eliciting statement, given no one outside the upper 1 percent would make it. They'd be regarded as mentally deficient or incompetent. The obvious reason "so many" still need food stamps is that not everyone benefited equally from the so called expansion. Mostly, those at the top made out while the rest saw their wages stagnate so they were simply not enough to cut the mustard, often even working two jobs.

This is why the WSJ's other argument, i.e. "that too many Americans haven't returned to the labor force" is totally false. The "too many" Americans cited are actually children and elderly or retired people - not working people!  The incessant carping about "missing" Americans or the "low labor participation rate" is bollocks, because with an extremely low unemployment rate - sitting at barely 4%  that doesn't fly.

If there are "missing workers" in jobs it's mainly because the immigrants who might have picked up the slack are now in hiding  - thanks to Trump's ICE raids and assaults on sanctuary cities. The situation now so bad that many crops are rotting in the fields, e.g.

As for the "missing workers" in the other jobs well, blame that - if 'blame' is indeed the word -  on  the baby boomers currently retiring or retired (like yours truly). We have left gainful employment by the millions, well, because we saved and invested and now no longer need to work.  This is not some sudden revelation either. It's been known for years that a "labor crunch" from retiring boomers was imminent, but too many refused to believe it, preferring to imbibe the media jabber we'd all  need to work to 90.

The stupid thing which the clueless Trumpies have done is to make that retirement loss of workers much worse by cracking down on immigrants! Even the WSJ managed to get that right in an earlier editorial, 'The Vanishing Caravan'  (April  6, p. A14) underscoring the folly of the current immigration limits:

"Faster growth from tax reform and deregulation means a tighter labor market that attracts more migrants. Mr. Trump would be wise to trade border security for reform that allows more legal immigration to meet the economy's needs. Then he wouldn't have to pull stunts like hyping a band of poor migrants as an invading army."

The REAL question is why, with the current tight labor market the wages aren't rising faster to support families that need it- so they can get off food stamps! 

To answer this, back in January I cited a Denver Post Business column  (Jan. 7 p. 3K, 'Don't Get Your Hopes Up For A Raise') . Therein it was revealed by Paula Harvey, VP of Human Resources at Schulte Building Systems in Houston:

"Companies are really hesitant to give raises. When you give a raise, it's stuck in the pay system. It is something you're guaranteeing: it's becoming a fixed cost. "

She insists it's much better for companies to preserve "flexibility" so instead companies enact "variable pay". This can come in the form of one off bonuses - say on a per year basis- or if you are a stellar performer you can get a "bigger bump". It is also coming by having more workers work overtime, as opposed to hiring new  workers - either because they can't find them or don't want to pay higher wages. 

One also needs to be mindful -  as Andrew Gadomski, managing director of Aspen Advisors,   observed in the same piece -  that when companies lament they can't find workers to fill key openings, that is code for:

"I can find talent, I just don't want to pay them as much as they cost."

Well, ok, fair enough. But then the media and other whiners can't bitch because more lower wage  - or stagnant wage workers living in high cost areas (like Denver) -resort to food stamps.

This is exactly why Colorado is now experiencing an exodus of many thousands of people from other states, who'd originally moved here to chase the gold ring. They soon learned their new job wages were  inadequate to cover their new location's housing costs. (Trulia recently estimated that only 29 percent of homes listed on the metro Denver market are affordable, and that was to those workers earning at least $70, 790 in 2015.  This from The Denver Post, April, 8, p. 10B)

The median listing price for homes on the Denver market now is:   $529,000

The average teacher and cop wages are significantly less than the $70-k figure, and with rents running nearly $1,500 a month for a typical Denver area apartment, it doesn't take a math genius or Mensa member to run the numbers to see that after accounting for a domicile (whether rent or mortgage) and utilities, food - say to feed a family of 4 - there will be scant disposable income left. Hence, the need to supplement via food stamps.

But here's the issue now, with this new Farm Bill, the GOP is determined to kill the goose that laid the supposed "golden egg" via more growth with their stupendous tax bill.  The reason is they want to cut food stamps by nearly $130 billion over a decade  (WSJ, 'Food Aid Cuts Would Hurt Grocers' p. B1. April 7-8).   That represents a "20 percent reduction of its current annual allotment of $63 billion"  and moreover, "could constitute one of the biggest yearly reductions in program sponsored purchases for retailers since the recession."

How serious is it? According to Alex Baloga,chief executive of the Pennsylvania Food Merchants Association, quoted in the article:

"It's well known that the food industry operates on a 1 percent profit margin. So there's no way to absorb any kind of decrease in sales, It's just that simple. It would be devastating."

SO we are clear, that cut in SNAP would therefore  deliver a major hit to aggregate demand. Recall as per my posts during and after the 2008 recession, that ) Aggregate Demand or AD is the total demand for final goods and services in an economy at a given time. It specifies the amounts of goods and services that will be purchased at all possible price levels. This is the demand for the gross domestic product  GDP) of a country..

Clearly if the grocery sector is clobbered by this Farm Bill, via cuts to SNAP, there'd be a measurable hit to the GDP (estimated of up to 0.4% per year) given some  16 million households would no longer receive all their benefits on cards. (Instead they'd get meager benefits from food "boxes" with oats, canned beans, potatoes, rice, etc delivered to them - via food purchased wholesale by the government.

In other words, Trump's government would cut the national grocers entirely out of the purchase-demand loop, and little wonder grocers and trade groups have criticized this diversion. (ibid., p. B2)  Let's also note, for reference here, that if the grocery sector's  1 percent profit margins are cut or eliminated  they will have no choice other than to lay off workers.  Given the PA Food Merchants Assoc.  alone represents  3,500 grocery and convenience stores, and if an average of 10 workers are laid off from each, that is 35,000 more dependents who'd almost surely be needing food stamps.

Are the Trumpkins and GOP not bright enough to see this? That their SNAP cuts will likely crash their "golden economy" and lead to another recession? I doubt it, because the Right's ideologues - bent on austerity for the masses (who voted for Trump in droves) -  aren't invested in reality.

The reality is how these economic misfits incessantly yap about fiscal discipline and exploding deficits, yet when they're in power, inevitably pig out. The most recent episode of fiscal "gluttony" was their tax bill which promised to deliver huge benefits to corporations and ordinary workers alike.  But the corporations just used their largesse to buy back their own shares, thereby increasing stock valuations even further  '"making it even more difficult for stocks to absorb bad news without falling further". (WSJ, April 11, p. B14)

As for ordinary blokes, well, they aren't spending as the Reeps expected. (WSJ, today, 'Despite Tax Cuts, Consumers Shy From Spending',  p. A3). And why is this? According to Susan Sterne, president of Economic Analysis Associates:

"It's an old recovery, people just don't need as much."

But this isn't too surprising given for a $40,000 a year primary wage earner, the tax cut amounts to a total of barely $300 for a year. In which case  6- odd bucks a week wouldn't even be visible on their pay stubs. But they will most likely need food stamps, given their wages are stagnating while corporations would rather buy back shares than give decent pay.  So the tax cut bill's payoff is....drumbeat!  Zilch, zero, while digging us into $1 trillion-plus added deficits.

And then, lastly, we beheld insult being added to injury as today's WSJ editorial ('Crowding Out K-12 Education') lambasted striking teachers in Oklahoma and Kentucky.  In the case of the Okie teachers, they were too greedy given they were already to receive a $6,100//yr raise (By gasp! raising taxes on oil and gas) and besides "Oklahoma educators' mean annual pay only lags $1,000 - 3,000 behind the overall state mean of $43,340".  In other words, once that $6,100 is tacked on, they're above the state mean so there shouldn't be any more complaints.  As for the striking Kentucky teachers, they failed to appreciate poor little Gubernator Matt Bevin was just trying to make state "pension reform" a priority  - especially preventing greedy teachers from "gaming the system", i.e. "cashing in on accrued sick days at the end of their careers."

NO mention of how these OK and KY teachers have often had to also work Walmart jobs to make ends meet for their families. But that's the way the elites in this country roll.

The WSJ's  editors/ and business elite's hand wringing over food stamps  and Medicaid expansion - as well as striking teachers' greed-   is not to be taken seriously until and unless the GOP and its minions follow their own advice about fiscal responsibility. In the meantime, their best play is leaving the SNAP as it is, unless they plan to increase benefits! Oh, and giving those striking teachers the pay raises they deserve so they also don't have to resort to food stamps.

See also:


No comments: