“For every dollar a person receives in food stamps, former House Speaker Nancy Pelosi said that $1.79 is put back into the economy.”
“It is the biggest bang for the buck when you do food stamps and unemployment insurance. The biggest bang for the buck,” she said
periods of economic downturn, not periods of sustained economic growth. Aside from ignoring the reduction that federal and state taxes take from such subsidies and the drag on economic development caused by reliance on government deficit financing, she ignores the costs of those ensnared by continual dependence on the government security net.
Politicians generally the support use of deficit financing to stimulate growth while simultaneously creating inflation to pay back creditors with cheaper dollars. So let’s take a look at their recent success. Since January 2009 when the Obama Administration took office, the Administration claims successful GDP growth has been driven primarily by massive government spending and deficits. In the first two years between January 2009 and January 2011,
the US Gross Domestic Product grew from ~$14 Trillion to ~$15 Trillion, displaying a seven percent increase. Between January 2009 and January 2011 the Obama Administration spent approximately $7.5 Trillion and incurred cumulative deficits of $2.7 Trillion (and plans another ~$3.7 Trillion in spending and ~$1.7 Trillion in deficits over 2011) with the deficits financed by increases in the publicly held debt. So explicitly over the two years, the Federal Government incurred spending of 53% of GDP (~26% annually) and annual budget deficits of 19% of GDP (~10% annually) to generate 7% growth in GDP and yet unemployment still climbed
So the return on Federal spending between 2009 and 2010 is about 14 cents on each dollar spent and about 40 cents on each dollar of total federal deficit financing. Furthermore, unemployment rose by 3 million people from 11.1 MM to 14.1 MM over the same period suggesting that for every $1MM of deficit financing we lost roughly one job. And yet Pelosi and Company can claim success from their faith in expansionary federal government fiscal and monetary policies based upon the July’s Consumer Price Index which increased by a rate of 3.6% over the preceding year. It certainly points to successful wealth distribution or perhaps more accurately the seizure of purchasing power from retirees and others who rely upon Treasury bonds, the unemployed, and those who’s wages have failed to keep pace with inflation.