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Editorial
Keep
Vermont Green: Send Money
By Martin Harris
 One
of the many Vermont NGO’s (non-governmental-organizations) which I hadn’t
heard of until, somehow, one of its press releases fell onto my (electronic)
desk is VTCECH, an un-pronounceable acronym which stands for Vermont Campaign
to End Childhood Hunger. Like most such NGO’s, it’s partially taxpayer-funded-but-never-voted
(who knew?) to the tune of some 16% of its budget (see the website at vtnohunger.org)
but this column isn’t about "taxation without representation" or "your-tax-dollars-at-work"
arguments, it’s about an assertion within the press release which states
that "each Food Stamp dollar that is allocated to a recipient generates
$1.84 in economic activity". That assertion assumes it’s actually spent
for food, and not sold for cash, as in, say, Chicago, but I digress; let
me return to the "multiplier effect" which, all you former Econ 101-attenders
will recall, occurs when wealth created and money earned in an economy,
say from the conversion of sunlight into wheat, is then spent and re-spent
multiple times through the various non-primary sectors. In agriculture,
the green-eye-shade folks who analyze such things now report, the multiplier
for wealth created in that primary sector is 7. For a government entitlement,
we’re now told by VTCECH, it’s 1.84.
Like the present tense of
the verb "to be" (older high school grads will recognize "is") that claim
needs a little Clintonian parsing, because, again as you Econ 101-attenders
will recall, the true multiplier effect of governmental transfer payments
is 1: a dollar in, a dollar out. Here’s the appropriate paragraph from
an Econ 1 Handout, UCal-Berkeley. You can check it out on the web.
"To stimulate the
economy, while maintaining a balanced budget, the government can increase
spending and increase taxes by an equal amount. This pays for the spending
increase by raising taxes. The economy will grow, but by less than either
government spending or tax multipliers. With balanced-budget fiscal policy,
real GDP will increase by the amount of the balanced-budget spending increase.
The value of the balanced-budget multiplier is one." (Emphasis added.)
You can see the logic of this:
whatever government spends in one area boosts the economy to exactly the
same extent that the tax-collection to fund the spending does to depress
the economy everywhere else. Thus, if you accept the notion of an extra
84 cents pumped into the Vermont economy for each dollar of Food Stamp
spending, you ought to (some folks with a political agenda won’t) accept
the other half of the equation: that the economy has been shrunk by 84
cents per dollar wherever taxes have been collected for Food Stamps, and
that presumably includes Vermont. Net result: a zero-zilch-nichevo impact
on the national economy. The only way the Vermont economy can come out
ahead on Food Stamps is to encourage moreintra-State stamp use while shifting
the cost-tax burden to other states, which is what VTCECH seems to be advocating
in its press release: "We need to get the word out that using Food Stamps
not only helps stabilize the family food budget, but they are also one
of the most effective means of increasing the flow of federal dollars into
Vermont communities during an economic downturn". Yes, indeed: Keep Vermont
Green, Send Money. OPM or Other Peoples’ Money.
Since this is an opinion
column, here’s my opinion: self-serving advocacy statements like these
(after all, as Food Stamp go, so go VTCECH and the jobs of its staff) reveal
a disregard for moral clarity which, perhaps naively, I find unsettling.
Quoting again from the Clinton’s, it requires a willing suspension of disbelief
to accept that the reasonably sophisticated VTCECH leadership, specifically
CEO Robert Dostis, doesn’t understand the absence of a multiplier effect
when tax-and-spend transfer payments are involved, and that VTCECH leadership
sincerely believes that Food Stamps legitimately stimulate economic activity,
just like any private-sector wealth-creating activity. I suspect they know
better but make the argument anyway. What the heck, it might fly.
Martin Harris is a former
Chairman of Citizens for Property Rights
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