News and Society Blog-Economics: Cuts to the Income Security ...

Cuts to the Supplemental Nutrition Assistance Program (also known as Food Stamps) may be coming soon thanks to our congress. Both Democrats and Republicans have included some form of cuts in recent bills that failed to pass but that doesn't mean some cuts will not be forthcoming. The problem is, can we as a country really say to the poor, "no, we will not feed you" and is it the best thing for our country at this time.

Clearly no government has unlimited funds to bestow on its citizens and the rate of spending of our government will have to be pulled back. Arguments by our nation's top economists all have valid points but none of them agree. Economics is a science of: How people decide to spend their money (resources). It is a social science and it is partially determined by the underlining suppositions taken by the economist; which is why no two economists agree.

Some argue we need to cut back spending now to sustainable levels, which will reduce one of the three major inputs to our economy (the three are: consumer spending, government spending and investments). But economists accurately point out that reduce government spending at this time may be enough to drop the economy into another recession.

Then the other option is to increase taxes to pay for the spending, which is how a household would view their options, if they can not cut spending, and then they need more income. Problem here is the "income" comes from taxpayers, these taxpayers are equally strapped financially and increased taxes will mean less spending in the market place. Consumer spending is the largest segment of the three determining our economy

Consumers are barely making it financially, having lost large portions of their net worth in housing and retirement accounts, any shock could cause a large drop in spending which would negatively effect our economy, possibly leading to job losses and reduced actually tax income for the government.

The last possible option for a household is to string it out a little longer hoping for a positive change. If the household could use their credit cards to put food on the table and worry about how to pay it back latter, they probably would. Especially if they had children to worry about, this is a bad situation but one that many families in the past five years have found themselves. Strangely, it appears this is where our government finds itself.

The government does not want to use the word depression, and it has been said that a depression is just a really bad recession. Economists do not have a clear cut definition but history does. You see the great depression was marked by the start of a recession, the recession last only 18 months. However the damage to the American People lasted until the start of WWII.

There were 135 million Americans in 1930 and unemployment was 25% with underemployment running to 50%. Our country was not good about keeping statistics of its citizens at that time, so some things are guesstimates by scholars. One of those guesstimates is of the number of people who needed the soup lines. I have seen estimates as low as 3000 to numbers as high as 30 million. My guess, based on my reading is 17-18 million or about 12.9% to 13.6% of the population.

Today we have $44.6 million people on food stamps, in a country of 305 million. This means about 14.6% of our population would likely be standing in soup lines today if we did not have food stamps.

"Poverty is spreading at record levels across many groups, from underemployed workers and suburban families to the poorest poor. More discouraged workers are giving up on the job market, leaving them vulnerable as unemploymnet aid begins to run out." ( http://news.yahoo.com/us-poverty-track-rise-highest-since-1960s-112946547--finance.html )

In fiscal year 2005 we had 24.5 million using the food stamp program. It is hardly fathomable that 20 million more people are struggling just to have their basic needs met. (www.fns.usda.gov/ora/menu/Published/snap/FILES/Participation/Trends1999-2005)

Our food stamp program was started as a temporary insurance for our citizens to allow them the use of their income to change their situation. Clearly a majority of these recipients were harmed by the housing bubble and subsequent recession.

To simplify a complex situation, our government is like a household that can not cover all of its obligations. Economists are saying it is a bad idea to cut back its budget and that increasing its income is equally bad idea. Leaving a very poor idea of stringing things along in the hope things will change for the better.

Mean while they get pressure to do something, and to do nothing mean that our government representatives will see the unemployment line (something they want to avoid).

A yahoo article, Republicans may delay House bill to cut food stamps (Thu, Jul 12, 2012), starts out naming the republicans for proposing cuts to the food stamp program but later states that the democrats are also looking to cut the program.

Clearly there is not enough money to cover all the spending programs our country has, yet there is no good answer for the situation our country is in today. Investments need to be encouraged, since that area by itself could bring our economy back on track.

I find myself thinking of who I would want to pay for this, myself or my kids and there is no debate here. If it means a better future for them, tax me now. Yes I know it increases my costs, yes it risks my financial well being because the economy is likely to contract, but let's pay this bill now, in a responsible manner (no blank checks). Hopefully making it a brighter future for our children and feeding the needy today.

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Source: http://newsandsocietyblog-economics.blogspot.com/2012/10/cuts-to-income-security-programs-need.html

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