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One aspect of Obama Stimulus plan working well. Food Stamps.

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July 06, 2009 – Comments (8)

 Early in my January 2009 post I wrote on why the I thought the Stimulus plan contained some good aspects that would do more for improving the economy than equivalent spending through tax cutting.  One of the large portions of the Obama Stimulus was aid through food stamps.  Food stamp benefits, as shown by the Moody's table of dollar growth in GDP / dollar government spending - had the highest benefit/cost ratio of 1.73.  This was higher than the benefit from infrastructure spending per dollar, and way higher than tax cuts.  Permanent tax cuts had a lower than 1 benefit to cost ratio, showing that these would have been wasted spending.

 Now, as tax revenues for state and federal government are shrinking - it is becoming quite apparent that if the government would have focused only in the direction of tax cutting, it would have had terrible effects on the fiscal health of the US government and state budgets.  I think Obama should be praised for this, for if we would have had a Ron Paul or a McCain in the government - tax cutting most likely would have been their major plan - without the spending in the form of unemployment benefits, food stamps, and backing up ailing state budgets.

 Today the Wall Street Journal has a nice article on the benefits being seen in the food stamp program expansion.  In Iowa, small farmers at local farmer's markets are seeing increased support as more people bring in their food stamps and buy locally grown food.  The increase in food stamps has increased some struggling family food budgets by about $80 more a month.  The result has been families eating better food (vegetables, fruit) that they wouldn't be able to afford before, and the local economies seeing increases in spending through farmer's markets, and grocery stores.

 That's the nice thing about increasing food stamp benefits - it can quickly go into the economy as stimulus, the spending from individuals has to be local, resulting in indirect economic benefits for the towns and surrounding communities.  Its a much better stimulus than a tax rebate - which more often then not goes to pay down debt, or buy a new TV.

 Another aspect of the stimulus that had immediate and positive benefits was the temporary expansion of research funding.  Here at the university I work at, I've seen techs hired because of this spending, and increased purchasing of equipment (from US companies).  Those are nice positive effects.

 Much of the remaining parts of the stimulus have yet to kick in, but if the economy is starting to level out / begin to improve (See car sales, see the recent manufacturing ISM report, etc) - this government spending cut help on the rise back up.  From what little I've heard about how stimulus spending is supposed to work - this is the best case scenario.  You spend during the time period of economic recovery, and speed the growth. Spending during the recession just goes into a black hole.  The economy just needs an extra kick in the butt to get it up the hill.

 

 -Rof 

8 Comments – Post Your Own

#1) On July 07, 2009 at 12:07 AM, davejh23 (< 20) wrote:

I've also seen positive, yet temporary, effects of the stimulus spending. Thousands have been put to work on local road construction projects. However, I fear that the stimulus is not creating any permanent jobs, and could lead to more pain down the road. The food stamp benefits may be necessary, and provide an immediate stimulus, but they can also not be permanent. I'm not so sure that "the economy just needs an extra kick in the butt to get it up the hill"...maybe this spending will wind up kicking the economy down a hill. The President didn't come up with the current stimulus bill on his own...we would have gotten the same thing out of Congress whether Ron Paul, Hillary Clinton, or McCain had become President.

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#2) On July 07, 2009 at 12:24 AM, AnAmateur (< 20) wrote:

i can't afford to buy the greatest food - why am i taxed so other people can use my money to buy that food?

i would eat healthier too, too bad i don't qualify for food stamps. seems like you need to be a fat black woman with 4 kids to get a nice food tamp card - the ones who of course benefit this most to the country.

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#3) On July 07, 2009 at 5:02 AM, kaskoosek (63.40) wrote:

Taxes are important to sustain some form of social semblance.

 

If we relied soley on free markets, inequilities would be huge.

However the government is sooooo corrupt, that free markets is a much better choice. 

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#4) On July 07, 2009 at 9:15 AM, rofgile (99.25) wrote:

AnAmateur:

 How much do you spend on food a month?  How much do you make a month?

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#5) On July 07, 2009 at 10:26 AM, lemoneater (78.10) wrote:

I can understand AnAmateur's feelings about the inequity one often sees in food stamps use. Living in WV as a child, it was not uncommon to see someone go through the grocery line with food stamps and get better meat and more of it, and nicer vegetables and then take a couple of 20's and go buy lotto tickets. I tend to think that they would have played the lotto anyway even without the food stamps, but maybe not. (I oppose the lottery. Those who can least afford it are those who often get addicted. Any business that preys on the vices of the poor has my contempt.) 

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#6) On July 07, 2009 at 12:16 PM, CharlesEasting (< 20) wrote:

It is obvious that our fellow citizens who receive increased buying power from their food stamps will benefit from what we are discussing here (at least in the short term). Aside from this financial boost to a limited number of us, however, I believe that the positive effects are not only temporary but quite illusory when carefully scrutinized.

 

Let us consider the benefits specific to the food stamp element of the most recent Stimulus Package. I will point out that only those businesses related to the production, delivery, sale, et cetera, of foodstuffs will realize increased earnings/spending power. Obviously the remainder of us who make our earnings by other means will not enjoy such benefits. In fact, we all lose income when one considers that the process by which the temporary programs are instituted is akin to a hidden tax upon every citizen - even those benefiting from the extra food stamps.

  

In order to pay for these programs the Federal government relies upon our Central Bank, the Federal Reserve, to inflate the currency supply. This will inevitably create higher prices, which should be obviously self-defeating. By increasing a citizen's food stamps we also (eventually) increase the price of the food he or she buys. Likewise, rising prices increase the cost to produce, deliver, et cetera, foodstuffs for all of us.  

 

We must also remain cognizant of the fact that these programs are temporary, and after the food stamp benefits end our citizens who rely upon them will be in a similar position as those of us who do not - living with less purchasing power due to an inflated currency in a nation of high prices. 

 

Among the most damaging consequences of the inflationary policies of our Federal government and its spending enabler the Federal Reserve is the effects upon those of us living on fixed incomes. For example, citizens who have retired and must rely upon their pensions will see their purchasing power significantly decrease as prices rise above their monthly incomes. Even those of us who were hard working and frugal who planned well for our "golden years", unless wealthy, will suffer through no fault of our own.  

 

Best regards, 

 

Charles

 

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#7) On July 08, 2009 at 1:57 PM, lucas1985 (< 20) wrote:

@AnAmateur,
"i can't afford to buy the greatest food - why am i taxed so other people can use my money to buy that food?"
You can afford fresh, tasty and healty food if you choose to do some research and foreplanning before going to the grocery store.

"seems like you need to be a fat black woman with 4 kids to get a nice food tamp card - the ones who of course benefit this most to the country."
Yep, those welfare queens rip you off.

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#8) On July 23, 2009 at 7:11 AM, jhenry2307 (< 20) wrote:

so if you have two or more clunkers at your house you cannot trade both of them for one car. The program is for one per
person.


Jhenry
Blogger
www.cashforclunkersfacts.info
http://www.cashforclunkersfacts.info

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