Remember Whitehouse press secretary Jay Carney and his ridiculous statement about paying the unemployed and how that “stimulated” the economy? Well, agriculture secretary Tom Vilsack tried to one-up Mr. Carney earlier today. Watch this video (and try not to roll your eyes. I dare you):
Ok, so now food stamps are the most direct way to stimulate the economy. Apparently, unemployment insurance just doesn’t cut it anymore. Sorry Jay. But the truth is no different with food stamps than it was with unemployment insurance: wealth transfers don’t stimulate the economy. Let me repeat. Taking from some (who earned it) and giving to others (who did not earn it) does not, in any way, create wealth. It does not matter what the wealth transfer vehicle is – food stamps or cash – the result remains the same.
The Keynesian story that both Jay Carney and Tom Vilsack tell is nothing more than a half truth. They both focus on what is seen. Some people “spending” on items they might not have purchased without the stolen loot they were given by Daddy Government. In their minds, these purchases spur economic growth and hiring. Put more specifically, in the Keynesian story, these purchases spur economic growth and hiring with no offsetting costs. And that’s where the story ultimately fails. It only considers one side of the equation. The side that is seen. The side that they neglect to mention is the important “unseen” side – all of the costs associated with the redistribution program.
If told this Keynesian fairy tale, an intelligent lay person might wonder where the money came from to give some people food stamps to spend and to give others cash to spend. This is the million dollar question. To answer this question reveals the unseen costs these programs incur. By taking money from productive people, either now or in the future, the government is skewing the incentives in a few important ways. First, the productive people (including business owners) who are targeted for the government shakedowns have a disincentive to keep producing wealth and earning more money. Why keep earning more money if you can’t keep all of it? After a certain point, the take home percentage becomes small enough where the entrepreneur is better off just enjoying some leisure. Secondly, the unemployed who are being paid to remain jobless have the incentive to, now stay with me here… remain jobless. If the government is paying you because you don’t have a job, why would you get a job that could potentially pay you less than you earn sitting on your couch? Finally, the employers who are paying higher taxes in order to give jobless people money and food stamps could have used the money taken from them to hire productive people. These wealth transfers are realized in the higher costs of doing business for employers. Last I checked, it’s employers who hire and create wealth. How about we refrain from taking their money so they can more easily hire employees.
Even if we accept the Keynesian notion of a world with no costs, the whole food stamp scheme still doesn’t make any sense. If it did, then we could create more wealth and prosperity by simply adding more people to the food stamp rolls. Why stop at a few million people here and there? Why not put the whole country on food stamps? Clearly, wealth doesn’t come from buying food with food stamps. It comes from production. Food stamps, oddly enough, are not production.
I don’t want to place all of the blame on Tom Vilsack though. Remember Colorado Springs Gazette reporter Emily Wilkins? She made the same disastrous case for food stamps and their magical stimulus powers in this Gazette article. You’ll recall that Ms. Wilkins lamented the fact that only around 40% of Coloradans eligible for food stamps actually apply for them. She thought it was a shame. I think it’s a shame that economic ignorance is pervasive among bureaucrats in Washington and even some journalists in great newspapers like the Gazette. After all, it doesn’t take a rocket scientist to see through these stimulus scams. The results are all around us. $11 trillion in stimulus money spent since George W. Bush – and look where that got us.