Changes reportedly made last night in the stimulus package would reduce its effectiveness as stimulus. Although the package includes a reasonably designed tax rebate, the two most targeted and economically effective measures under consideration — a temporary extension of unemployment benefits and a temporary boost in food stamp benefits — were zeroed out, apparently at the insistence of House Republican leaders.Greg Mankiw last week argued "no" at first, ...
Some of the proposals on the table strike me as particularly odd. For example: a temporary increase in food stamp benefits.... but then seemed to relent, only partially, after reading interesting responses from his readers.
In standard macroeconomic theory, the business cycle is symmetric. That is, stimulating an economy that is suffering from insufficient aggregate demand should be the opposite of cooling off an overheated economy to reduce inflationary pressures. Would anyone seriously propose a temporary cut in food stamp benefits in an overheated economy? I don't think so. Food stamps seem the wrong tool to address the business cycle.
Marty Feldstein may well be right that those on food stamps have a higher-than-average marginal propensity to consume. Nonetheless, I wonder if we really want to target such cyclical measures on the poorest members of society. That is, for any mean level of food stamps, wouldn't the poor be better off with a constant stream of benefits than with a benefit that fluctuates over the business cycle? Using food stamps as a cyclical tool seems to risk destabilizing some families' food consumption in an attempt to stabilize the overall business cycle.Megan McArdle argued that more food stamps aren't needed because poor people are obese, and food insecurity is not [a problem] "except for people who are too screwed up to get food stamps (because they don't have an address)". (Paul Beard from A Crank's Progress sent me the link). TBogg responds to McArdle's post, so I don't have to waste time with it. I'll defer a more thoughtful post about food assistance and risk of overweight and obesity until a later date. But a quick look in the U.S. Food Policy archives offers some useful facts, which might serve to temper this argument. USDA research suggests the gap in risk of overweight between food stamp participants and nonparticipants is shrinking anyway, at least for some demographic categories, because Americans from all walks of life are increasingly becoming overweight.