Monday, January 12, 2009

The Department of Food Stamps and Ag...

Farmers have always loudly pointed out how much of the USDA budget does not go to farmers, but those crocodile tears have long been discounted, since old ladies on the street know the farm program wouldn't make it past the first House subcommittee without some reason for urban Congressman to give hoot.

As economists are looking for the "biggest bang" for the stimulus buck - AKA "the multiplier" - guess what pops up at the top of the list?      
Tax Cuts   
 Nonrefundable Lump-Sum Tax Rebate 1.02  
 Refundable Lump-Sum Tax Rebate 1.26  
 Temporary Tax Cuts   
  Payroll Tax Holiday 1.29  
  Across the Board Tax Cut 1.03  
  Accelerated Depreciation 0.27  
 Permanent Tax Cuts   
  Extend Alternative Minimum Tax Patch 0.48  
  Make Bush Income Tax Cuts Permanent 0.29  
  Make Dividend and Capital Gains Tax Cuts Permanent 0.37  
  Cut Corporate Tax Rate 0.30  
Spending Increases   
 Extend Unemployment Insurance Benefits 1.64  
 Temporarily Increase Food Stamps 1.73  
 Issue General Aid to State Governments 1.36  
 Increase Infrastructure Spending 1.59  
      Source: Moody's 

Of course, these estimates are highly debatable.
The catch here is that when you’re dealing with giant numbers, these multiplier estimates are going to break down. Food stamps gives you great bang for your buck. But just because $1 billion in increased food stamp spending might generate $1.7 billion in GDP doesn’t mean we could spend $1 trillion in extra food stamps and generate $1.7 trillion in extra GDP—there are only so many poor people and they can only eat so much! Much the same is true with infrastructure spending. The general idea of spending-side stimulus is to put idle assets to work doing things. We have a fair number of idle people. But to build new infrastructure you machines and so forth and we only have so many on hand. And of course you need the right people—the guys who got laid off from Lehman Brothers aren’t the engineers we need to build the Purple Line. [More]
In addition, the idea of two-decimal place accuracy is amusing, but the power of stats like this in the current environment could result in an even more lopsided ag budget split.  A significant increase in food stamp spending looks inevitable to me.

Is this bad news? I don't think so, since it could help to slow the erosion of demand for meats and other higher end foodstuffs. Lord knows we need all the feed demand we can get now.

The bigger hope is the size of the food stamp budget will make it susceptible to reform efforts to move it to say, HHS, consolidating all welfare payments together.

Except ours, of course.

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