In the summer, I spend a lot of time in Grand Marais, MN. It’s the poorest county in Minnesota and also one of the oldest per capita. A lot of old people live up here. It gives me a pretty good taste of rural life in a remote place. The closest big city is Duluth, MN and if you want to have a baby, that’s where you go.
We used to have a local gravel/cement plant. Not anymore. The business couldn’t get people to drive trucks. Either they didn’t show up to work, or they weren’t sober enough. Want cement? It gets hauled two and a half hours away from Duluth.
I think a total overhaul of government programs by cutting them back would change economic incentives and the choices people make enabling rural places to enliven their local economies.
We have noticed that food prices up here are off the charts. Over the course of the past couple of years, they have really increased. The selection is also pretty terrible. You get to choose between broccoli, cauliflower, and other basic vegetables. The other day, they were charging $7 for a pack of celery. A study just came out that confirms my anecdote.
The agriculture lobby is the strongest lobby in Washington DC. Both sides of the aisle love Big Ag. Big Ag loves them.
Food stamps are one Big Ag program that they love. From Cato,
One cost is that federal and state food stamp administration consumes $12 billion a year.24 That means $12 billion going to government employees, not to SNAP recipients.
A second cost is deadweight losses stemming from funding the program with higher taxes on individuals and businesses. These economic losses result from higher taxes reducing productive activities such as working and investing. Economists have made various estimates of the size of deadweight losses. The Congressional Budget Office found that they “range from 20 cents to 60 cents over and above the revenue raised” per dollar of taxes, or about 40 cents on average.25 This year’s SNAP spending of $145 billion will thus impose a deadweight loss from raising the needed taxes of about $58 billion.26
A third cost stems from SNAP recipients reducing their work efforts. SNAP and other welfare programs phase out as income rises, creating an effect like a marginal tax rate that discourages earnings. When recipients work more hours or take higher‐paying jobs, they receive fewer benefits from SNAP, Medicaid, the earned income tax credit, and other programs. When combining this effect with income and payroll taxes, “some of the highest effective marginal tax rates on labor income fall upon low‐income earners, individuals making at or slightly above the poverty line.”27
When you think about the ethos of food stamps, they make sense for the poorest of the poor. We don’t want people starving. However, the program that started with a lot of compassion to help people has expanded into an albatross that is sapping our economy and soaking taxpayers. It’s become a transfer of wealth from taxpayers to Big Ag. Food stamps combined with other welfare programs disincentive work.
I had a good buddy that I traded with who was highly successful. Once he said, it’s a good thing that I didn’t know about all these programs when I was 18. I might have just gotten a trailer and a case of beer and hung out outside.
In the movie Caddyshack, Judge Smales told Danny that “the world needs ditch diggers too” and while that was a funny line designed to highlight a class divide, it’s true. The world does need people who work and don’t sit on the porch and collect a check, especially when they are able.
From the article,
“According to our research, boosting food-stamp benefits has caused 2.4 million Americans to leave work. Before the Biden expansion, these Americans held jobs that paid too much to receive the maximum food-stamp benefit, but now they can make more through welfare programs than through work.”
“Rolling back this higher spending would also rein in grocery inflation. In a separate August report, we found that higher food-stamp spending directly increased the price of groceries by about 15%. That is about two-thirds of the total increase in food prices since December 2019.”
But, try to cut that program or even roll it back. You will be accused of pulling food away from the poor.
It’s not just food stamps. It’s food subsidies. Try to get a Democratic or Republican farm state Senator or Representative to end the ethanol subsidies that are damaging our fuel supply and making gas prices higher.
Americans who back Trump and think his tariff program is a great idea should be disabused of that belief too. Tariffs on industries from other countries make American industry less competitive. For evidence, look at what the car industry has done since the 1970s when big tariffs were enacted on cheap Japanese car makers. Tariffs hurt American workers.
All Trump’s tariffs have done is shift the cost. They also threaten growing supply chains with countries like Vietnam since the Chinese just absorb them.
The better way to incentivize “Make America Great Again” is to change tax and regulatory policy so companies, both foreign and domestic, build manufacturing and warehousing here in the US. That means 0% corporate taxes, a lot less regulation on all fronts, and busting unions. It means getting rid of the IRS and our progressive tax system and enacting things like the Fair Tax.
The Inflation Reduction Act did anything but. Price ceilings put on drugs for example will make those drugs more scarce. Price supports create price disruptions in the market that mismatch supply and demand because we produce too much.
Democrats aren’t for that but many Republicans aren’t for that either. Getting rid of those things takes power away from them, and returns it to the people. Getting rid of those things also makes people accountable for their actions, and people don’t like that.
In the link below is a graph from a report produced by the Pennsylvania Secretary of Public Welfare in 2013. What it demonstrates are the private income threshold equivalents to the major welfare program benefits provided in the US, PA being the state in question as most benefit programs are managed at the state level. These include housing, utility bill assistance, food, medical, WIC, etc.
A single mother, in 2013, needed to earn $69,000 annually to replace the welfare benefits provided by the govt. The result is that idleness (not working) is incentivized, and certain so-called benefit cliffs discourage (penalize) enterprise beyond minimal efforts.
Due to link rot since 2013, I couldn't find the original PA report. Saved here with a brief summary.
https://www.commonwealthfoundation.org/2013/09/05/losing-the-war-on-poverty/
I think it's fair to say that with this crazy inflation people are having to choose between what benefits them at the moment, food or electricity, gas, taxes, etc.etc. Food wins out every time. I volunteer at a food bank here in NC and the numbers are growing exponentially. People are hurting.