I am currently reading Return to Prosperity by Phd economist Arthur Laffer and I’ll review the book as usual after I finish it, but a recent statement by President Obama’s Agriculture Secretary had me referring to the “Econ 1” phrase Dr. Laffer uses frequently when describing politicians lack of knowledge that is taught in a basic economics class. Secretary Vilsack appeared on MSNBC’s Morning Joe to tout the benefits of the Supplemental Nutrition Assistance Program (“SNAP” or Food Stamps as we used to call it). Vilsack called SNAP the “most direct stimulus you can get into the economy during these tough times.” I guess that he also considers the fact that America has vastly increased the number of people “stimulating” the economy as 1 in 7 people are in the program. Let that sink in…NEARLY 15 PERCENT OF OUR FELLOW AMERICANS GET FOOD FROM THE GOVERNMENT!
What ever happened to the desire to teach a man to fish rather than giving him a fish? Vilsack was not satisfied with his statement about the “stimulating” effects of enslaving our fellow citizens with handouts and added this gem,
“Obviously it’s putting people to work. Every dollar of SNAP benefits generates $1.84 in the economy . . . If people are able to buy a little bit more in the grocery store and then someone’s got to stock it, shelve it, package it, process it, ship it, all of those are jobs.”
That convinced me! For every dollar of SNAP government money an additional 84 cents is generated! His number was so exact; down to the penny therefore it must be true! This is perhaps the greatest economic discovery on Earth! Why don’t we give EVERYBODY SNAP benefits? Think how fast the economy will recover if everyone got free food. This is exciting for me! (you can see how excited I ambecause I am using so many exclamation marks! – see I did it again) I ran some rough numbers using Mr. Vilsacks ratio of one dollar generates $1.84 into the economy to see how much free food needs to be given away to fix the economy:
- Our debt is around $14 trillion
- A Harvard University study determined that we pay approximately 23 percent in federal taxes (that’s income tax, fuel taxes, corporate taxes passed on to the consumer, other hidden taxes, etc.)
- In order to get $14 trillion in revenue we need to “stimulate” the economy using the Vilsack Plan by around $56 trillion dollars (that’s $14 trillion divided by the tax rate – I rounded to 25%) or esenntially we need to have $56 trillion income to put $14 trillion in the Treasury.
- Since the Vilsack Plan pays $1.84 for every dollar infused into the economy we only have to give out $30 trillion dollars in free food to fix the economy! (that’s $54 trillion divided by 1.84).
In order to simplify the calculations I ignored the administrative costs associated with the SNAP program and assumed that all the folks who help administer the program do it for free. Simple and yet effective. I would suggest to Mr. Vilsack that if the tax rates were increased to 100 percent we would not have to spend as much money to fix the economy. We’d only need $7.5 trillion in free food give aways. No wonder these brilliant folks are in charge of the economy. They are so smart.
A nagging question keeps popping up from the back of my mind. I should push it back down, but sometimes logic and Econ 1 principles just cannot be ignored. So Mr. Vilsack where did you get the money to give away under SNAP? Did you not have to first take money away from some other citizen who earned the money in order to give to another person (we’re not even sure they are all citizens)? Why is better to take money away from someone who earned it? Could they not have spent the money themselves and generated the same result? Are you not taking the purchasing power away from one person and giving it to another who did not earn it? At what point will the wage earner figure out the scam and decide to go for SNAP instead of working or go Galt?
There is still one nagging question that I have. Why won’t anyone, just once, ask one of these guys where their numbers come from.