November 9, 2013

A MUTILATED ECONOMY: FOOD STAMP CUTS


Leon Simmons of Charleston, S.C

PAUL KRUGMAN N.Y. TIMES

Five years and eleven months have now passed since the U.S. economy entered recession. Officially, that recession ended in the middle of 2009, but nobody would argue that we’ve had anything like a full recovery. Official unemployment remains high, and it would be much higher if so many people hadn’t dropped out of the labor force. Long-term unemployment — the number of people who have been out of work for six months or more — is four times what it was before the recession.

These dry numbers translate into millions of human tragedies — homes lost, careers destroyed, young people who can’t get their lives started. And many people have pleaded all along for policies that put job creation front and center. Their pleas have, however, been drowned out by the voices of conventional prudence. We can’t spend more money on jobs, say these voices, because that would mean more debt. We can’t even hire unemployed workers and put idle savings to work building roads, tunnels, schools. Never mind the short run, we have to think about the future!
The bitter irony, then, is that it turns out that by failing to address unemployment, we have, in fact, been sacrificing the future, too. What passes these days for sound policy is in fact a form of economic self-mutilation, which will cripple America for many years to come. Or so say researchers from the Federal Reserve, and I’m sorry to say that I believe them.
 
I’m actually writing this from the big research conference held each year by the International Monetary Fund. The theme of this year’s shindig is the causes and consequences of economic crises, and the presentations range in subject from the good (Latin America’s surprising stability in recent years) to the bad (the ongoing crisis in Europe). It’s pretty clear, however, that the blockbuster paper of the conference will be one that focuses on the truly ugly: the evidence that by tolerating high unemployment we have inflicted huge damage on our long-run prospects.
How so? According to the paper (with the unassuming title “Aggregate Supply in the United States: Recent Developments and Implications for the Conduct of Monetary Policy”), our seemingly endless slump has done long-term damage through multiple channels. The long-term unemployed eventually come to be seen as unemployable; business investment lags thanks to weak sales; new businesses don’t get started; and existing businesses skimp on research and development.

What’s more, the authors — one of whom is the Federal Reserve Board’s director of research and statistics, so we’re not talking about obscure academics — put a number to these effects, and it’s terrifying. They suggest that economic weakness has already reduced America’s economic potential by around 7 percent, which means that it makes us poorer to the tune of more than $1 trillion a year. And we’re not talking about just one year’s losses, we’re talking about long-term damage: $1 trillion a year for multiple years.
That estimate is the end product of some complex data-crunching, and you can quibble with the details. Hey, maybe we’re only losing $800 billion a year. But the evidence is overwhelming that by failing to respond effectively to mass unemployment — by not even making unemployment a major policy priority — we’ve done ourselves immense long-term damage.
And it is, as I said, a bitter irony, because one main reason we’ve done so little about unemployment is the preaching of deficit scolds, who have wrapped themselves in the mantle of long-run responsibility — which they have managed to get identified in the public mind almost entirely with holding down government debt.
 
This never made sense even in its own terms. As some of us have tried to explain, debt, while it can pose problems, doesn’t make the nation poorer, because it’s money we owe to ourselves. Anyone who talks about how we’re borrowing from our children just hasn’t done the math.
True, debt can indirectly make us poorer if deficits drive up interest rates and thereby discourage productive investment. But that hasn’t been happening. Instead, investment is low because of the economy’s weakness. And one of the main things keeping the economy weak is the depressing effect of cutbacks in public spending — especially, by the way, cuts in public investment — all justified in the name of protecting the future from the wildly exaggerated threat of excessive debt.
Is there any chance of reversing this damage? The Fed researchers are pessimistic, and, once again, I fear that they’re probably right. America will probably spend decades paying for the mistaken priorities of the past few years.
 
It’s really a terrible story: a tale of self-inflicted harm, made all the worse because it was done in the name of responsibility. And the damage continues as we speak.
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Bryan R. Smith for The New York Times

Ingrid Mock, center, at a food pantry in the Bronx on Monday. "I try to get most of the things my daughter eats because I can hold the hunger," she said.
 

N.Y. TIMES

For many, a $10 or $20 cut in the monthly food budget would be absorbed with little notice.
But for millions of poor Americans who rely on food stamps, reductions that began this month present awful choices. One gallon of milk for the kids instead of two. No fresh broccoli for dinner or snacks to take to school. Weeks of grits and margarine for breakfast.
And for many, it will mean turning to a food pantry or a soup kitchen by the middle of the month.
“I don’t need a whole lot to eat,” said Leon Simmons, 63, [above] who spends more than half of his monthly $832 Social Security income to rent a room in an East Charleston house. “But this month I know I’m not going to buy any meats.”
Mr. Simmons’s allotment from the federal Supplemental Nutrition Assistance Program, commonly called food stamps, has dropped $9. He has already spent the $33 he received for November.
 
The reduction in benefits has affected more than 47 million people like Mr. Simmons. It is the largest wholesale cut in the program since Congress passed the first Food Stamps Act in 1964 and touches about one in every seven Americans.
 
In 2009, people started getting as much as 13.6 percent more in food stamps as part of the federal economic stimulus package, but that increase has expired. The reduction will save the government about $5 billion next year.
Over all, the nation’s food stamps program cost a record $78.4 billion in the 2012 fiscal year, according to the Agriculture Department. Although the amount given to each household — a figure that can vary widely depending on a complex formula of income and the number of mouths to feed — has been dropping by small amounts for the past few years, the roster of people seeking assistance grew steadily through the recession.
In the 2010 fiscal year, 40.3 million people were enrolled. Two years later, that number jumped by 16 percent. Just over 45 percent of those getting food stamps are children, according to the Agriculture Department.
Food stamps are likely to be cut more in the coming years if Congress can agree on a new farm bill, which House and Senate negotiators began tackling this week. The Republican-controlled House has approved cutting as much as $40 billion from the program over 10 years by making it harder to qualify. The Democratic-controlled Senate is suggesting a $4 billion cut by making administrative changes.
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During lunch at the Neighborhood House soup kitchen in Charleston this week, discussions about how to cope with cuts to food stamps were not hard to find.
People said they felt desperate. Many stuffed extra bread or cake into their pockets for later in the day, and traded advice on which agencies might be handing out free groceries later in the month.
“People at this level of need are already going hungry,” said Sister Noreen Buttimer, a nun who works at the soup kitchen, a Catholic charity. “It’s frightening how we think about the poor.”