Foodstamps And The Broken Window Fallacy.

An opinion piece by Lisa Levenstein and Jennifer Mittelstad in the Baltimore Sun caught our eye yesterday. The article, entitled “Food stamps are good for us,” had us pulling our hair out at the lack of critical thinking by two college professors.

The subtitle of the piece is:

Nutrition program helps recipients, helps retailers and boosts the economy, so what’s the big deal?

What’s the big deal? Plenty.

We’ll skip the idea the program “helps recipients” until later in our post. First, we want to look at the that food stamps “helps retailers and boosts the economy.”

Levenstein and Mittelstad write:

Food stamp redemptions are good for retailers. In 2009, they pumped $50 billion into the economy. And, according to a 2008 U.S. Department of Agriculture publication, the benefits extend beyond stores: “Every $5 in new food stamp benefits generates a total of $9.20 in community spending,” and each “$1 billion of retail food demand by food stamp recipients generates 3,300 farm jobs.”

For the record, the authors do not cite the actual publication they claim supports their contention. We have always been skeptical of any serious writing which fails to source the support for its major claims. However, in this case, one does not even have to look at the source to see what is wrong. In short, the error is in what is called “the broken window fallacy.”

The “broken window fallacy” is based on economic theory that when something is broken – a window for example – the resulting spending to fix the window is good for the economy. In the parable which illustrates this, a bakery’s window is broken by someone throwing a rock or stone through it. The citizens of the town gather around the window and begin to think the destruction of the window may not be a bad thing. After all, the baker has to contract someone to fix the window. When the baker pays the glazier, the glazier can use the money to buy a new suit of clothes. When the tailor gets money for the suit, he can buy bread from the grocer. When the grocer gets the money for the bread, he buys more from the baker.

It seems that everyone makes money when the window is destroyed.

But that is not the case.

As the video above explains, the money the baker was forced to spend on the window could have been used to buy something else such as a new stove. The same economic benefits of his purchase of the stove would still be felt and flow through the community. Now, however, because he had to replace the window, he is back to where he was prior to the window being broken. Instead of having a window and a stove, he now only has the window.

Levenstein and Mittelstad are putting a similar argument forth here. They believe the money spent through food stamps adds money to the economy.

It does no such thing.

The money for food stamps comes from people like you and me – those who pay taxes. The increase in taxes means we don’t have the money in our pockets to spend on what we want. We could spend it on more food. We could spend it on cars, appliances or other goods. But the fact of the matter is the claim “food stamps add to the economy” is foolish, naive and wrong.

In fact, it is easily disproven outside of the “broken window fallacy” by simply asking “if food stamps are such a benefit to the economy, why don’t we all simply go on the food stamp program? How would that work out?

But it gets worse.

With the broken window fallacy, the assumption is the baker and the glazier’s money has the same value. If the baker buys the same suit as the suit as the glazier, the dollar they spend is of the same value.

With food stamps, the dollar spent by the food stamp recipient is not the same as the dollar spent by the taxpayer. When the taxpayer takes a dollar out of his pocket for a loaf of bread, all of that dollar goes to the bread. When the government takes a dollar from the taxpayer, before it gets to the recipient, it has to go through the IRS. Costs are incurred in printing the foods stamps (or electronic transfer cards) plus the administration of the food stamp program. All these costs come out of that dollar taken from the taxpayer. By the time the money from the taxpayer gets to the food stamp recipient, the taxpayer’s dollar is no longer a dollar to the food stamp recipient. Some money has been taken out to pay for the administration, collection, etc.

The devaluation of the taxpayer dollar as it travels through the governments hands also does not include the waste and fraud within the food stamp system:

Inefficiency in the food stamp program spending is costing taxpayers billions. Of the $64.7 billion spent on the program last year (a record high that is only slated to increase), an overall $2.5 billion was spent on improper food stamp payments.

Another recent audit by the Department of Agriculture on the state of Kansas showed three major sources of inefficiency in the distribution of food stamp funds. While many recipients had invalid Social Security numbers and were double-dipping between federal and state programs, many of the recipients also happened to be dead. This has become a pervasive problem in the realm of government benefits.

On the economic side of this, both Levenstein and Mittelstad are clearly wrong.

Of course, being good liberals, Levenstein and Mittelstad can’t avoid pulling out the race card on the issue of food stamps:

And Republican presidential candidate Newt Gingrich has said that “the African American community should demand paychecks and not be satisfied with food stamps.” (This, despite the fact that only 22 percent of food stamp recipients are black.)

Being college professors, one would think Levenstein and Mittelstad could see the problem here. Alas, they cannot. Yes, blacks make up 22% of those on food stamps, but according to the US Census Bureau, blacks are only 12.6% of the population. Somehow Levenstein and Mittelstad are embracing the fact that blacks are on food stamps at a rate that is almost double the population percentage of blacks in the US.

Gingrich and the Republicans are right to attack this from the perspective of getting more blacks and more people employed in order to get people off of food stamps. Whether Levenstein and Mittelstad want to recognize this or not, blacks are clearly over represented on the food stamp rolls of the country. Their defense of that fact is reprehensible.

Levenstein and Mittelstad also take a shot at the idea that food stamps and other programs increase dependence on the government saying:

The conservative Heritage Foundation has reprised the false charges once leveled at welfare, suggesting that food stamps may make recipients “dependent on government.”

Why the two authors believe this is a “false charge” is beyond us. The Heritage Foundation report highlights the fact, figures and influences on being dependent upon the government. With child care assistance, food stamp assistance, housing assistance, utilities assistance, etc, it is hard not to see how the Heritage Foundation is right. (Over half of the food recipients of food stamps have been on the rolls for over 8.5 years. Apparently in the eyes of Levenstein and Mittelstad, that is not “dependence.”)

It is a matter of “who are you going to believe? Facts and figures or two professors who don’t have any economic background and whose assertion is simply the charge is ‘false’?”

The authors clearly hope you forget the aptly labeled “cycle of poverty.” The theory is that once within the levels of what is deemed “poverty,” it takes at least three generations to climb out of that poverty. While the reasons for remaining in poverty are many, one reason is the adopted morals and beliefs of those in poverty. It is inescapable that part of those morals and beliefs is an acceptance of government assistance without great thought to ending that assistance.

It is Levenstein’s and Mittelstad’s contention that food stamps helps recipients. Just to be clear, one receives food stamps because they are below a certain income level. While food stamps may be a good as a short term gap measure, remaining on food stamp rolls for long cannot be a good thing. One cannot assert with a straight face that relying on the government for food is a “benefit” as opposed to buying your food with your own, hard earned money.

Levenstein and Mittelstad are simply people who live in academia and who cannot understand life in the real world.

Conservatives are trying to smear Barack Obama by dubbing him the “food stamp president.” He should not run from the label but embrace it, positioning himself as a defender of American retailers and a protector of the security and integrity of all U.S. households.

Food stamp distribution under Obama has risen to heights never seen before. Somehow Levenstein and Mittelstad believe the policies of Obama driving more people than ever onto the food stamp rolls is a good thing. They believe that more people living at an economic level where people are eligible for food stamps is a point in Obama’s favor. Clearly they believe that policies which make people poorer and more dependent upon the government should be hailed and seen as a success.

We have long given up trying to figure out how people like this think.

It’s impossible.

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