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Home Publications Blogs Beat the Press More Context for Republican Proposal to Cut Food Stamps

More Context for Republican Proposal to Cut Food Stamps

Saturday, 28 September 2013 14:48

Last week I blamed the media in general and the New York Times in particular for the battle over the Republican proposal to cut food stamps. The logic is that the media routinely report that the Republicans want to cut $4 billion from the program. Undoubtedly many people hearing this number believe that it constitutes a major expense for the federal government.

The proposed cut to the program is actually equal to just 0.086 percent of federal spending. In other words, it could make a big difference to the people directly affected, but it makes almost no difference in terms of the overall budget. Very few people understand this fact because $4 billion sounds like a lot of money. The media could help to clear up this confusion by reporting the number as a share of the budget, but they don't do that because -- I don't know. 

Anyhow, for those who would like some further context for this proposed cut to the food stamp program we can consider the impact of raising wages on food stamp spending, specifically the wages of Walmart workers. The pay of many Walmart workers is not much above the minimum wage. As a result, a large percentage of Walmart workers qualify for government benefits like food stamps.

By contrast, if the wages of workers at the bottom end of the labor market had kept pace with productivity growth over the last 45 years it would be almost $17.00 an hour today. In that situation, very few Walmart workers would qualify for government benefits.

Earlier this year, the Democratic staff of the House Committee on Education and the Workforce put together calculations for the range of costs to the government through various programs of a Walmart superstore in Wisconsin that employs 300 workers.  They put a range for the cost of food stamp benefits for a single store at between $96,000 and $219,500.

According to Fortune Magazine, Walmart has 2.1 million employees nationwide, which means that we should multiply these numbers by 7,000 to get a national total. That puts the annual cost of food stamps for the families of Walmart workers at between $670 million and $1.54 billion. The figure below shows the potential savings to taxpayers from raising the wages of Walmart workers to a level where they don't qualify for food stamps with the savings from the Republicans' proposed cuts to the program.


In short, if the goal is to save taxpayers money on food stamps there are different ways of achieving it. One is to cut benefits, as the Republicans have proposed. The other is to increase wages for low-paid workers so that they no longer qualify for benefits like food stamps.

Comments (9)Add Comment
Raising Minimum Wage Also Would Reduce the Earned Income Tax Credit
written by Robert Salzberg, September 28, 2013 5:06
According to Bruce Bartlett: "Ronald Reagan and George H.W. Bush also favored raising the EITC as a better way of helping the poor than increasing the minimum wage."

So part of the reason the minimum wage hasn't kept pace is that Republicans deliberately chose having the government directly subsidize companies to pay people too little rather than raising the minimum wage.
written by watermelonpunch, September 28, 2013 6:51

And that's JUST Wal-Mart workers making a higher wage. Not including other big companies who pay right around or just above minimum wage.

And that's JUST the savings in food stamps. Not including all the other low income assistance programs many struggling families of wal-mart workers would no longer need to depend upon. Like EITC, Medicaid, CHIP, housing assistance, heating assistance.

And that's not counting how much more Wal-Mart employees would be paying into Social Security and Medicare.

Not to be a demanding fuss budget, but those are some graphs I think would be interesting for people to put their peepers on.
Walmart Screwdrivers on Sale: One for the Price of Two
written by Last Mover, September 28, 2013 8:37

Who knew? The famous least-cost supply chain of Walmart has evolved into a sham dependent on government handouts.

Walmart could pass the savings on to customers with lower prices since it has no intention of raising wages.

Oh wait. That's what Walmart does when it enters a market. Lower prices to drive out competitors. Then when they're gone, oops, right back up go the prices.

Double oops. When prices go back up, and when costs go down even further with government subsidies, guess who keeps the gains?

If you guessed Walmart greeters you'd be wrong because they're getting cut back too. To reap more gains. At the expense of desperate customers forced to go through the day without a paid smile and hello as they make their way to the pharma counter for some great depression medication.

Let's hear it for those great screwdrivers in the tool aisle of Walmart, shall we? First screw the competitors with predatory prices. Then screw the customers with high prices. Then screw the taxpayers with high taxes. Then screw the workers with low wages.

Wake up America. Screwdrivers are not what they used to be.
Democrats support SNAP cuts as well
written by Tom Allen, September 29, 2013 7:31
The Senate farm bill, passed primarily by Democratic votes, contained cuts to SNAP about 1/10 the size of those currently proposed by the GOP. I'd presume that the negotiation now isn't about whether to cut, but how much. (It's the usual shtick -- GOP wants to cut off an arm, Dems a finger, and they'll settle on lopping off your hand.)


Rep. Debbie Wasserman Schultz of Florida, chairwoman of the Democratic National Committee, told USA TODAY's Capital Download on Thursday that Democrats are not opposed to food stamp cuts.

"I'm certain that we could embrace as House Democrats some measure of cuts," she said. "I mean, every program can benefit from some savings."

written by skeptonomist, September 29, 2013 8:56
It is doubtful that much support for Republicans' drive to cut SNAP is based on the $4B total. The number that counts in this propaganda war is probably the almost 48 million people who are on the program. Republicans can point to the large increase in this number since 2009. Apparently no Republicans are among that number and they resent having to support others, especially those of a different race or religion. It has never really been about economy in government. If you want to find out about this, see what Fox News is saying, not the NY Times.
Making Money for the Walton Family
written by H. S. Rockwood III, September 29, 2013 9:01
Stores such as Walmart get big tax subsidies from local and/or state government, yet many of their employees get paid so little that they have to get food stamps, Medicaid, and free or reduced meal prices for children in school. We taxpayers are paying for that welfare so that the Walmart family can get richer! (I read recently that the members of the family owning Walmart have the same amount of wealth as the lower 40% of American citizens!) Any business with a significant percentage of employees on welfare should, first of all, get no subsidies, be required to have a certain percentage of employees on full time, and if any of those employees requires welfare in addition to their pay, the employer should be taxed for that amount and the cost of its administration.

written by watermelonpunch, September 30, 2013 2:27
I can't help but take a crack at this one.

written by isomorphismes, September 29, 2013 10:43
I have been hearing the line about wage increases not tracking productivity increases. Recently I found this counterargument: http://research.stlouisfed.org...ES0707.pdf which just says once you include total compensation the wages do track.

What ordinary average workers get a lot of bonuses, stock options, & profit sharing?
A lot of ordinary average workers these days don't even get health insurance with their full time positions.

Seems to me that this "alternate" way of tracking wages & productivity is just additional proof demonstrating the upward redistribution of the gains of productivity going to the highly compensated upper tier of workers, far away from the likes of those toiling at Wal-Mart in part-time & temp positions receiving no fringe benefits, and are lucky to have variable pay in the form of a nickel raise instead of a cut in hours for their increased productivity.

This alternate way of tracking wages, therefore, IMHO, does little to capture an accurate portrait of wages in relation to productivity for a lot of ordinary folks.
And if we're talking about average working folks, isn't that who we want an accurate picture of for tracking productivity gains?

And that paper is pretty up front about noting the skew, but it trots out all the usual clap trap about some kind of "skills bias" in the labor market.
Basically it's saying that nurses, who are not likely to get a lot of big bonuses like AIG executives, are somehow less skilled these days? And that Wall Street types are a lot more productive than plumbers & garbage collectors compared to the past?

So these people who caused financial havoc 5 years ago that persists today, deserve all those productivity gains the rest of us don't?

And yeah, that paper is that offensive:
Finally, increasing reliance on variable pay also perhaps is a type of risk-sharing arrangement between businesses and workers. If the recent productivity trend slows, reducing or curtailing variable pay may be less offensive to professional workers than reductions in base

So we're saying that for banks, let's talk about... if banks pay their executives heavily in variable pay of bonuses, they will be less likely to balk at a reduction to those bonuses?

It also occurs to me that if health insurance is included in this alternate compensation tracking... (it wasn't explicitly stated in that paper, it merely said "employee benefits", and health insurance is one that would probably come to mind for the average middle class or working class person...)

Well, in that case it brings to mind Dean Baker's heavily repeated statement on health insurance ... It goes a little something like this -- the U.S. pays so much for it's healthcare, in comparison to other wealthy countries...

In other words, don't tell me I've gotten my productivity raise in the form of distorted inflation of one fringe benefit as the result of political & economic policies that benefit the profit making of the entities that provide that benefit.

Definitely don't tell me I've gotten my productivity raise in the form of an inflated fringe benefit I'm not even getting with my job, and now can't even afford to buy on my own.
written by Lafayette, October 11, 2013 4:21
{... if the wages of workers at the bottom end of the labor market had kept pace with productivity growth over the last 45 years it would be almost $17.00 an hour today. In that situation, very few Wal-Mart workers would qualify for government benefits.}

In terms of equitability, the labor market rates need keep pace with productivity. The rates should keep pace with a suitable CPI. So the comparison, in this context, is absurd.

{They put a range for the cost of food stamp benefits for a single [Wal-Mart] store at between $96,000 and $219,500.}

Interesting ... the American taxpayer is subsidizing Wal-Mart workers who receive the minimum wage. Which means what?

It means that either that (1) the minimum wage is insufficiently low, or (2) the regulatory usage of food-stamps is abnormally high for the American family living of the minimum wage.

The minimum wage was intended to guaranty a household its ability to cope with a standard-of-living that is decent. Evidently, if the minimum wage cannot pay all the bills, it is indecent and needs to be raised.

Wal-Mart and all other retailers will simply impute the increased cost in its pricing structure, which the American public will be obliged to pay.

Where is the fault in that logic?

Moreover, there are other reasons for relooking at food-stamps, the purpose of which is a duality. That is, they were intended as an indirect farm-subsidy to boost or maintain agricultural production. Whether that is needed nowadays by BigAggie - mostly conglomerated - is a good question.

They were also intended to provide low-income families the ability to sustain their nourishment needs. Nourishment in our daily diet is mostly dependent upon proteins and carbohydrates. And given the Obesity Pandemic (as officially designated by the CDC), it is difficult to imagine why the tax-payer should be subsidizing the production of carbohydrates (mainly in the form of sweetener additives). So, why not make them pertain only to meats, breads, cereals and paste-products (like spaghetti and pizzas) - and avoid all sugar-based products whether drinks or foods.

Carbohydrate-based paste-products are lower cost, which is why they are more in demand as nourishment. But, any balanced diet would not want them in any high content.

Why the point about obesity. Because, given its derivative illnesses (which are a great many), it is not acceptable that food-stamps be employed to promote obesity. The result will only impact health-care costs, which are already (per capita) the highest of any developed country.
written by Lafayette, October 11, 2013 4:29
Typo: In terms of equitability, the labor market rates need keep pace with productivity.

Should read: In terms of equitability, the labor market rates need not keep pace with productivity.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.