You will hear U.S. conservatives describe the Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps, as a “handout”. One hears the same from conservatives in other nations regarding various forms of welfare. Before I get into the subject of today’s discussion, let’s have a brief look at the history of food stamps in the United States.
Food stamps entered the picture in May of 1939 due to high unemployment and a large surplus of food that could not be sold during the depression. The reasoning was to provide a means for the surplus of food to be reduced, and the best way to do that was for poor people to consume it, since there were so many at the time. Note that there was a purpose behind the idea of food stamps (a food surplus that was unmarketable) which wasn’t to give handouts to poor, lazy “moochers”. As we shall see later in our discussion, the idea of SNAP/food stamps being “handouts” and recipients being “lazy moochers”, which is drummed into the people’s heads by conservative politicians is little more than the nonsensical, anti-government propaganda of neoliberalism.
The original conception of food stamps in the United States was much different than that of today. If you were on what was known back then as “relief”, you could purchase orange stamps that could be then used to purchase any type of food. For each dollar worth of orange stamps that you purchased, you would also get fifty-cents worth of blue stamps. These blue stamps could only purchase food that was on the Department of Agriculture’s surplus list.
The program eventually reached 20 million people over the course of four years at a cost of $262 million, before terminating in 1943, because, according to the USDA:
“…the conditions that brought the program into being (unmarketable food surpluses and widespread unemployment) ceased to exist.”
Note again, that the program terminated, not because people finally became fed up with all of the lazy moochers receiving handouts, but because the food surplus no longer existed.
From 1961-1964, food stamps were revived and tweaked a bit from the original concept. Recipients would still have to purchase them, but the idea of blue stamps for surplus foods was eliminated. Then, in 1964 came the Food Stamp Act.
With support from House Democrats, $75 million was appropriated for the program. With this new iteration of the program, again, the idea wasn’t to provide “handouts” to “lazy moochers”. There was a specific economic purpose to the program. The Food Stamp Act was one part of an overall larger initiative to raise price supports for wheat and cotton, and support for the Act came from lawmakers that represented rural communities who were interested in preserving farm subsidies. So, as we can see, “lazy moochers” didn’t enter the picture whatsoever.
When President Johnson demanded that food stamps become a permanent program, Republican House member, Bob Dole opposed the measure, not because the program would be giving millions of “lazy moochers” handouts (surprise, surprise!), but because eligibility standards weren’t strict and there were also clumsy requirements that recipients must purchase the stamps. Again, the intent of the program was mainly to boost agriculture. No “lazy moochers” excuses were heard.
Legislative changes to the program occurred throughout 1973-1977. However, the most significant overhaul was the Food Stamp Act of 1977. Republicans did not call for cutting off “lazy moochers” from food stamps, but, believe it or not, Republicans stressed that targeting benefits to the neediest was essential, while Democrats wanted a broader access to food stamps by eliminating the purchase requirement, as well as addressing abuse of the program.
Ronald Reagan came along and during the early 1980’s, some cuts to and trimming of the program were made, only to expand food stamps again by the mid and late 1980’s to address domestic hunger which was on the rise.
It was during this time when the food stamp program was employed as part of a larger initiative to address a problematic social issue, that a campaign to stigmatize food stamp recipients, which had been simmering for quite a while amongst more extreme conservative elements hell bent for neoliberal leather, took off in earnest.
The Republican Revolution of 1994
Bill Clinton was elected to office in 1992, claiming that he wasn’t your typical tax and spend liberal, but a “New Democrat”, which is a gentle euphemism for “neoliberal”.
Neoliberalism: A policy model of social studies and economics that transfers control of the economy from the public sector to the private sector.
Neoliberal: A person who seeks to transfer control of the economy from the public sector to the private sector.
We will also note that in 1997, Tony Blair in the U.K. rose to become Prime Minister under a similar banner of “New Labour”, which again, like “New Democrat” is nothing more than a gentle euphemism for “neoliberal”. Bill Clinton promised many reforms to government, because that’s what you do when business and banking is your concern and not sustained, indefinite full employment and the public purpose, including a scheme to privatize Social Security. But one promise that he failed to keep was welfare reform, and because Clinton seemed evasive on the subject, Republicans in Congress accused him of being nothing more than a tax and spend liberal from the old days, rather than the neoliberal that he claimed he was during his campaign. Clinton was and still is, in fact, a neoliberal, but the truth of the matter was that both he and his administration were inexperienced on the national stage and didn’t have a clear plan of action to implement all of the reforms Clinton had promised. Republicans gathered round the campfire with the intent of seizing control of Congress in 1994. Aided by much publicity in the media, including radio talk show host, Rush Limbaugh, the Republicans rallied around Newt Gingrich and six weeks prior to the mid-term elections, Republicans released their now infamous “Contract With America”, which was actually, for all intents and purposes, a “Contract on America”.
Republicans swept Congress in a landslide victory dubbed “The Republican Revolution” and set out to pressure Clinton to wipe away the last vestiges of common sense, decency and responsibility from the federal government.
The Contract on America was a hit piece designed around policies from the Heritage Foundation, a crackpot right-wing think tank, which detailed how the Republican Congress would go about restructuring American society, as well as reducing everyone but the rich to a life of struggle to make ends meet. Part of the hit on America involved hard welfare reform called “The Personal Responsibility Act”. The very name of the act demonstrates that the original intent of food stamps had become overshadowed by extremist neoliberal propaganda. Designed to turn the American people against food stamps, Republicans sought to encourage a hatred among the public towards food stamp and welfare recipients in their quest for free market glory. Clinton refused to sign the act. A few changes were made to the legislation, renamed “The Personal Responsibility and Work Opportunity Reconciliation Act of 1996”. Clinton signed the Act into law on August 22, 1996, proving conclusively that he was, in fact, the neoliberal that he claimed to be.
Fig. 1: Hillary Clinton’s husband, President Bill Clinton feeling everyone’s pain and smiling as he signs automatic stabilizer reform legislation, putting welfare recipients, as well as the US economy in a neo-liberal hurt locker.
The changes to food stamps made by the Clinton/Conservative partnership were:
1.) eliminating eligibility to food stamps of most legal immigrants who had been in the country less than five years;
2.) placing a time limit on food stamp receipt of three out of 36 months for Able-bodied Adults Without Dependents (ABAWDs), who are not working at least 20 hours a week or participating in a work program;
3.) reducing the maximum allotments to 100 percent of the change in the Thrifty Food Plan (TFP) from 103 percent of the change in the TFP;
4.) freezing the standard deduction, the vehicle limit, and the minimum benefit;
5.) setting the shelter cap at graduated specified levels up to $300 by fiscal year 2001, and allowing states to mandate the use of the standard utility allowance;
6.) revising provisions for disqualification, including comparable disqualification with other means-tested programs; and
7.) requiring states to implement EBT before October 1, 2002.
The social intent of the neoliberal initiative was a dramatic success as participation rates in the food stamp program plummeted. The economic intent to lower the floor in the fall of consumer demand, however, was never mentioned to the people. Were there to be a recession, the jobs of millions of middle class, skilled and educated persons would be jeopardized.
The latest major modification of the food stamp program occurred in 2008. The food stamp program was renamed the Supplemental Nutrition Assistance Program, or SNAP for short, as a measure to reduce the stigma of the phrase “food stamps”. The intent quite obviously failed. Another change was the conversion from actual stamps to the use of a debit card called the Electronic Benefit Transfer, or EBT. As a conclusion to the brief history section of our discussion, for those of you who enjoy memorizing interesting factoids, here are three that the USDA’s website provides concerning food stamps:
– The first food stamp recipient in the US was Mabel McFiggin of Rochester, New York
– The first retailer to redeem food stamps was Joseph Mutolo
– The first retailer caught violating the food stamp program was Nick Salzano in October 1939
Now, let’s concern ourselves with what SNAP actually is and understand why all SNAP recipients are employed.
Fig. 2: Here we see a guy named Bill, who hosts some type of time-wasting, valueless talk show and has no idea what he’s talking about when it comes to food stamps.
Clearly, Bill is an enthusiastic purveyor of the nonsensical idea that food stamps are “handouts”. Bill maintains this ludicrous opinion, because he doesn’t understand anything about macroeconomics or the purpose of food stamps in the macroeconomy. Let’s talk about what SNAP actually is and try to understand its important role in the US economy.
SNAP’s Purpose is to Function as an Automatic Stabilizer for the US Economy
Most nations these days operate some form of what we call “automatic stabilizers” to prevent a large drop in aggregate demand when the economy heads south. An automatic stabilizer creates a floor in aggregate demand, so consumer spending cannot fall through it and also, it creates a ceiling in aggregate demand when the economy is doing well. In the US, SNAP is one of these stabilizers. The actual macroeconomic purpose of SNAP is not to provide handouts to “lazy moochers” as this Bill person wants you to believe, but to prevent a large drop in consumer spending on food, which in turn, prevents the economy from sinking further into a downturn. The function is automatic. When the economy stalls or recesses, jobs are lost, and so, applications for SNAP increase as more people need help to supplement the loss of income. Today, low wage jobs and underemployment are commonplace. Therefore, we derive a valuable insight as to why so many people are on SNAP. In today’s job market, the lowest income distribution cannot afford to pay bills and buy groceries when wages are so low and work is mostly part-time. And no, I’m sorry, but George W. Bush was wrong: Working three jobs to make ends meet might be “American” in the sense of how poorly the United States operates its economy, but it isn’t desirable, nor is it patriotic, an act of responsibility, or a healthy thing to do. Frankly, it’s irresponsible, foolish and pure evil to force people into such a needless situation.
What we are told today is that wages are mere costs. If wages go up, unemployment will soar majestically like a bald eagle over the Grand Canyon. Of course, such an assertion is an outright lie. The truth is that wages contain both a cost element and a demand element and you cannot ignore the demand component. If you do and then claim that wages are just costs, then you are asking everyone to assume that workers never spend their paychecks. Insisting that workers just hoard their income is pure nonsense. Yet, this is what the media, politicians and certain elements in the academic world ask us to believe.
The fundamental rule in macroeconomics, which is ignored by the mainstream, is that somebody’s spending is somebody’s income. If you give me $30,000 for my car, you get my car and I get your $30,000. That $30,000 is my income. That $30,000 was your spending. If Walmart pays a worker $500, that $500 is Walmart’s spending and it is the employee’s income. If the employee then spends $5 of his income at Walmart on some apples, that $5 is the employee’s spending and it is Walmart’s income. So, when business pays wages, that is the workers’ income and the workers, in turn, spend their income, thus providing business with an income. Wages are both a cost for business and a source of demand.
Believe it or not, there was a time when business understood that good wages were a stable means to ensure that what we produced as a nation got sold to consumers. Today, partly because of the mantra “wages are a cost”, wages are now low and lowered even further with a reliance on part-time work. Suppressing wages causes a redistribution of GDP to profits, away from worker’s share. And no, this is not a political statement by any means. It is macroeconomic reality and it should concern all of you Joe and Jane Citizens, both conservative and liberal alike. I’m going to demonstrate this reality to you, so put on your math caps. I won’t ask you to calculate anything. I’m simply going to show you why GDP redistribution is bad.
GDP is the Gross Domestic Product, which is also known as the National Income. Workers and capital share in GDP. To get any useful insight into this redistribution of GDP to capital, we need to be able to know what we call “the wage share”. The wage share is expressed as:
Where wage share equals total labor costs (W.L) divided by real GDP valued by the price level (P.GDP). We can rearrange the expression (W.L)/P.GDP as:
Where (W/P) is the Real Wage and (GDP/L) is Labor Productivity.
So, then, (W/P)/(GDP/L) is equivalent to a concept that we call “Real Unit Labor Costs” which is the ratio of real wages to productivity. When the ratio falls, workers have a smaller share of GDP and capital has a greater share. Therefore, when growth in productivity rises faster than real wages, national income, or GDP, most often moves away from workers, redistributing to capital. In other words, all of our national income moves away from you, both liberal and conservative alike and into the pockets of the 1%. This redistribution of GDP, if left unchecked by government policy, results in vast income inequality. Why is income inequality important?
Because, as we’ve discussed, wages contain both a cost and a demand element. When wages are low, demand will drop and unemployment will rise. The US government controls the level of aggregate demand through deficits (cutting/raising taxes, or net spending greater than that of taxation). If the deficit is too small, unemployment results. However, what do you do when wages are low and the US government is slashing the deficit? Well, you need to fill the spending gap to ensure that production is sold, or you will get a downturn. So, you rely on bank credit to fill that gap. This means a private debt build-up in the private sector. As the level of private debt expands, demand increases. But then, when the private sector cannot take on any more debt, without government intervention, spending will contract. When that happens, demand drops, unemployment increases, SNAP applications increase and along with that, the federal deficit automatically increases.
Please note: the federal deficit automatically increases without any input from Congress. SNAP, like other forms of welfare and unemployment insurance, is an automatic stabilizer for the economy, ensuring that there is a floor in the drop of aggregate demand. The deficit rises automatically and consumer spending on food is maintained to some level, and afterwards, that spending then translates to paychecks and further spending on non-food items. Now then, what happens to the economy when politicians cut SNAP benefits to stop these “lazy moochers” from “mooching”? They end up harming poor people, yes, but also, they harm the middle class, companies like Walmart and the entire economy. Everyone takes a hit.
Let us suppose politicians succeed in getting cuts to SNAP during a downturn. The first thing that occurs is spending on food will drop. SNAP recipients will begin to make some hard choices and what they used to buy, will now be reduced to the essentials. As this situation progresses, companies like Walmart will notice that income is dropping (because somebody’s spending is somebody’s income) and they will begin to lay off workers to attenuate the fall in income. As unemployment then rises, those who used to work at companies like Walmart experience an income drop and so, they not only spend less on food, they spend far less on gasoline, clothing, electronics, Tylenol, utensils, power tools, oil changes, appliances, lawn mowers, paint, pencils, pens, paper, printer ink, artwork, music, picture frames, carpet, curtains, etc. So, companies that make and/or sell food, gasoline, clothing, electronics, Tylenol, utensils, power tools, oil changes, appliances, lawn mowers, paint, pencils, pens, paper, printer ink, artwork, music, picture frames, carpet, curtains, etc., experience a drop in income and begin laying off workers. The end result of cutting SNAP in a downturn is that politicians will only deepen the downturn as aggregate demand falls lower to the new floor that was set when they cut SNAP. The jobs of the middle class, skilled and the educated begin evaporating and some of these people also find themselves in the unemployment line.
So, SNAP isn’t about providing handouts to “lazy moochers”. It’s an automatic stabilizer for the economy that protects both you and business alike. Those of you who aren’t on SNAP should really think twice at this point. Furthermore, SNAP/food stamps is not a handout of any kind. Let’s define the word “handout” so that we can know what we’re talking about.
Handout: (noun) Something (such as food, clothing, or money) that is given freely to someone who is poor.
In other words, a handout is money given to someone, without expecting anything in return from the recipient. As we will now learn, SNAP/food stamps are not handouts as Bill, Donald Trump, and most conservatives would have you believe. They are actually paychecks.
Contrary to Popular Belief, All SNAP Recipients Are Employed
SNAP isn’t a handout, because the US government expects something from SNAP recipients in return for the money given to them. SNAP is a job that the federal government offers to people who qualify for the job. Just like any private sector job where one must qualify to be a store manager, an accountant, a mechanic, a data processor, a graphic artist, a doctor, or a lawyer, the US government defines the qualifications needed to be employed as an automatic stabilizer for the US economy. The major qualification is that the person’s income be low. If a person meets that qualification, they are encouraged to apply for employment as an automatic stabilizer.
The application process is very similar to any other job application. The name of the person is taken, address, phone, social security number and various other pieces of information concerning household size, etc. Once the application is complete, a decision is made whether or not to employ the person. If the person is offered the job as an automatic stabilizer, a decision is made as to how large the person’s paycheck will be and the date is set as to when the person can expect a paycheck each month. From that point, the person is employed as an automatic stabilizer. Their job is pretty straight-forward: Buy food and protect consumer spending. Every so often, just like any other job, the SNAP recipient is given a review where a decision to give the person a raise or to lower their paycheck is made. Also, just like an employee at any other job, a SNAP recipient can lose their job.
The job is not very desirable for two reasons. Firstly, it pays less than minimum wage and secondly, the person’s paycheck can only be spent on food. Whether or not a SNAP recipient has a typical private sector job, or is traditionally unemployed, that SNAP recipient is still employed. If a SNAP recipient has a job at Walmart, then being a SNAP recipient (employed as an automatic stabilizer by the government) is their second job. As long as the person receives SNAP payments, the US government expects them to buy food and protect consumer demand. Every SNAP recipient is employed by the government in a vital, but grossly underpaid job. To summarize, the reality is:
1.) SNAP isn’t a handout. Recipients are employed as stabilizers to prevent a collapse in consumer demand.
2.) A SNAP recipient is paid less than minimum wage to be employed by the government as an automatic stabilizer.
3.) Like any worker, SNAP recipients applied to be employed as stabilizers, and can also lose that employment.
Arguably, SNAP recipients would be far better off were the US government to simply offer them a job at decent pay through a Job Guarantee where, again, they would be employed as automatic stabilizers, but could also be employed building nature trails, cleaning up urban blight and other useful, productive social jobs, plus they could spend their pay on any good or service, not just food. In conjunction with a basic income guarantee, the ability to afford food would no longer be an issue. So, while SNAP is a clunky, outdated and inefficient program, it still performs a vital function for the US economy, providing a necessary floor in consumer spending. Without recipients receiving and spending SNAP benefits, the US economy would lose an important stabilizer. Were we to initiate a federal Job Guarantee, we could simply exchange SNAP for the basic income guarantee and roll the administration costs of the former SNAP program into Social Security.
So, this Bill guy clearly has an axe to grind with food stamp recipients. But now we understand that his gripe is both personal and ideological, and has nothing to do with reality whatsoever. What is Bill’s gripe? His gripe with SNAP recipients is twofold.
First, he doesn’t like the fact that the US government pays SNAP recipients, not with anyone’s tax dollars, but by manufacturing new US Dollars, while private sector workers have to rely on business being able to afford to pay their wages.
Second, and most importantly, jealousy: Bill doesn’t like the fact that SNAP recipients work from home for extremely low pay, which they can only spend on food, while most people have to go to a place of employment and work for higher pay, which they can spend on any goods and services.
Thus, Bill tells us that he would love to work from home, living in poverty, being paid less than minimum wage, only allowed to spend his paychecks on food. Bill is envious of a SNAP recipient’s job and lifestyle, because the US government won’t hire him as an automatic stabilizer. Bill is unqualified for the job and he’s pretty darned upset.
Why you would envy such a situation is quite beyond me. In light of reality, Bill doesn’t make a whole lot of sense, does he?