We are Delivered: Reflections on the Food Stamp Challenge (post written by Dan)

Dan enjoying a dinner Republicans would be irate about (if paid for with SNAP benefits)
Steak, potatoes, green beans, and of course, alcohol!

It's now been a while since the end of our Foodstamp Challenge, and you see here the celebratory mood that attended our first meal "off of Foodstamps".  I'd like to say that the reason we haven't been heard from for days was the alcohol- and red meat-fueled three-day bender that we went on once we were released (and we did feel like it was a release!), but that's not exactly accurate (though after our martinis & a bottle of wine, we did forget to feed the cat his wet food before we went to bed.

Gorky is not amused.

The truth is we've been packing up for our move.  We leave town in just two days, and have been hemming and hawing over what books we should put in storage, and which ones to bring to Charlottesville (will I really get around to going all the way through The Brothers Karamazov in Virginia?  Or am I just kidding myself?).

I want to reflect on our experience of the Foostamp challenge, but it will probably take a few posts to really think seriously about it.

The one thing I'll say now is that being on Foodstamps, that is limiting all of our consumption the way we did, really did feel like a kind of culinary imprisonment.  Now, we could have drunk wine or beer, and had a cocktail or two throughout the Foodstamp challenge; there is no regulation or oversight of SNAP that actually prohibits these or any other kinds of treats while on Foodstamps, if you have some cash to pay for them, not just your EBT card.

But a lot of voices on the right exhort the moral wrongness of anybody on SNAP affording themselves any physical or emotional comforts beyond the basic needs of human survival.  There are arguments about using "taxpayer dollars" to pay not just for the virtuous consumption of the four foodgroups, but the unvirtuous consumption that extends beyond them.  Some forms of consumption are moral, and others deserve opprobrium.

Of course, there is little complaint from the right when the wealthy buy alcohol, tattoos, cigarettes, or other morally problematic products (and indeed, there's even a double-standard for the poor & the rich on illegal drugs).  But somehow, wealthy people's consumption decisions are morally unassailable.  Personal freedom of choice somehow entitles people to any choices they want--if they are wealthy.

An argument for the justification of policing poor people's consumption choices goes like this: "it's not their money; it's taxpayer money!  So we should get to exert control over, or at least pass moral judgment on what people on Foodstamps buy."

But poor people pay taxes, too!  15.2% payroll taxes from the first dollar of employment, plus income taxes, plus sales taxes that often add up to far higher percentages of their income than the wealthy investor classes (they mostly get to pay just 15% on investment income, even if it runs into the hundreds of thousands of dollars, or 20% once it gets to half a million or more).  So that "taxpayer money" is poor people's money, too!

Moreover, where is the outrage at other morally problematic expenditures, of far larger amounts of "taxpayer money"?  Somehow it cannot be found--at least not on the right.  There exists a great desire in certain halls of conservatism to morally judge and control poor people's behavior--and that desire has found increasing expression in American government policy for a long time in a way that privileged people like me & Jasmine rarely feel.

Well, we got a feel for it while we did the Foodstamp challenge, and it feels terrible.  It does not feel like freedom; it does not feel like opportunity; it does not feel like America.  The minuscule taste we got showed me that to be poor in this country is to be unfree, to be watched, judged, controlled, and bereft of true choice in one's life, much as life is for people who live under totalitarian or theocratic dictatorships.

We're glad to be done with the Foodstamp challenge.  It feels like we live back in America again.

The US Economy: Why Anemia is the new normal

August 19, 2015

The US economy continues to grow slowly, to add jobs without driving wages higher, to see increased profits from businesses without spurring new business investment.  Year after year, quarter after quarter, 75% or more of corporations report profits that beat estimates, but instead of raising salaries or hiring workers fast enough to bid up wages due to competition, they instead issue dividends or buy back their own stocks to increase Earnings Per Share (by reducing the denominator of that indicator--the number of shares).  Companies mostly borrow (issue bonds) at very cheap interest rates to do this.  And if regular people (not corporations) have any savings, the interest rates they get on these are incredibly low, too.

Many observers have been waiting for interest rates to go up, but they've been near zero for years now.  As we approach the seventh anniversary of the collapse of Lehman Brothers (the match that lit the 2008 recession), why do we continue to have such low interest rates, low wages, and low business investment, even as corporations prosper and the number of jobs rises?

It's because inflation is too low--so low that our economy is actually close to a much scarier phenomenon: deflation.  Month after month there are new reports of inflation being too low.  This is why the Federal Reserve has refused to raise interest rates for the past several years.  A rise in interest rates that might help people's savings accounts would send the already anemic economy into a new recession, as borrowing & spending slowed ground to a halt.

The Federal Reserve has kept interest rates at near zero for years, and spent many years (until last fall) engaged in "Quantitative Easing," shoveling huge amounts of money "out the door" of the Fed in order to buy bonds, increasing the total supply of money in the economy.  Why haven't these huge increases in the money supply caused inflation.  Even with the supply of dollars up, and easy terms to borrow more dollars, the cost of products & services hasn't gone up--in fact, gas, oil, and some foods have dropped!

Moreover, internationally the demand for dollars has been outstripping supply.  The number of euros, Chinese yuan, Brazilian reais, Russian rubles, and other currencies it takes to buy a dollar has gone up--the dollar is more expensive, and stronger than its been in a decade.  If the Fed has kept the supply of dollars up, the "price" of dollars in other currency should have come down, but the opposite has happened.  And now, with a new devaluation of the Chinese yuan last week, it takes even more yuan to buy a dollar.  This means that Chinese products are about to become even cheaper in the United States.  American producers will have to lower their prices in order to compete with such products--when prices come down across the board, this is the definition of deflation (and leads to shrinking profit-margins, laid-off workers, and less consumer spending: a downward spiral).

In general, despite everything the Fed has done to try to get inflation up to a healthy level (2% is deemed by the Fed, the IMF, the Bank of England, the European Central Bank, and most economics to be far enough from zero to avoid the threat of a deflationary death-spiral, the like of which the United States and the whole world experienced in the 1930s), nothing seems to work.  Monetary policy seems incapable of returning the dollar to an appropriate rate of inflation that could tolerate a normal set of interest rates, where you'd make a decent return on a Certificate of Deposit or other reliable means of savings.  Why?

The answer is Fiscal Policy.  If Monetary Policy has to do with interest rates and the impact that a central bank (ie, the Fed) has on the supply of money in the economy, Fiscal Policy has to do with the government budget's impact.  Across the country, states have been "tightening their belts" for almost a decade, firing teachers, other government employees, cutting spending in response to the aftermath of the 2008-09 recession.  By cutting the number of dollars they emit into the economy, governments are shrinking the money supply that the Fed has been trying to maintain.

But state governments' spending is tiny compared to that of the Federal Government.  And it has had a huge negative effect on the money supply.  This is because every year since 2009, the US government has been reducing the (net) amount of money that it puts out into the overall money supply.  The US government puts money into overall money supply every year by spending more money than it takes in in taxes--running a budget deficit.  It does not do this all the time (for example, at the end of Bill Clinton's presidency, the US ran a surplus for several years: it was actually taking money out of the money supply, instead of adding it--but during that period, inflation was rising, so it fit in exactly with the goals of macroeconomic management).  But the US has run a budget deficit in all but four years since 1970, meaning the budget is a major factor contributing to the money supply--a budget in deficit increases the money supply, and can help avoid deflation.

But while the US budget deficit spiked in 2009 from about $450 billion to over $1.4 trillion ($1,400 billion), beginning in 2010, the budget deficit has been cut every year, and in 2015 it's projected to be just $425 billion.  By cutting the budget deficit every year, the US government has been gradually closing the tap on its contribution to the money supply, working directly cross purposes with the Federal Reserve's efforts to return inflation to a normal level where it can safely hike interest rates.  The continued voracious appetite for budget-cutting in the US Congress will certainly exacerbate this situation in the future, and doom us to a new normal of economic anemia.

Until the Congress ceases stymieing the Federal Reserve's efforts to manage inflation, interest rates, and the money supply, we are in for low inflation, low interest rates, continued wage stagnation, and businesses continuing to return cash to investors, instead of investing it in new production.