NEGATIVE IMPACT OF FOOD STAMP CUTS ON OVERALL ECONOMY

You might be aware of substantial cuts in Food Stamps (actually S. N. A. P.), which are really impacting Families with Children, the Elderly, Disabled Persons and many who do work, but for the Minimum Wage (roughly $7.25 per hour).  Without getting into the pros and cons of SNAP, let’s look at the impact of these cuts on the overall Economy.

I had previously written about the Multiplier Effect–money that is spent, over and over, can create more and more jobs.  Let’s say, for instance, that 1,000 people spend $1,000 more ($1 Million Total), in a small town, during the third quarter of any year. That provides more revenue for stores, restaurants, hair salons, etc.  And, say that continues each quarter.  Well, with the up-tick in the local economy, some of those establishments might hire more employees or provide more hours for current employees to work.  That could, in turn, generate more business for local stores as these people shop, see movies, dine-out, etc.  Also, the effect is for an increase in tax revenue and a reduction in safety-net requirements.

People toward the bottom of the economic “food chain” tend to spend more of their money, since they do not have the luxury of investing, looking for tax-shelters or otherwise parking their money outside of the locale where they live.  Well, here’s where the Food Stamp cuts contribute to the Nation’s Economic Problem.

Today, I saw that Kellogg is reducing its work force by seven percent.  Now, this doesn’t necessarily mean that SNAP cuts caused this; however, Kellogg’s is a major producer of cereal–among other products.  Inflation has continued to be quite low; but, perhaps the raw materials, such as corn, rice, sugar, sodium, cardboard (for the boxes), has an impact. Sequestration surely has probably also contributed.  Successful corporations, however, tend to be forward-looking.  The handwriting is on the wall: customers paying with Food Stamps will have less to spend, and cereals are a major component of their daily diets.  And, multiply this through other companies, as well.

So, the basic idea behind cutting SNAP is to trim the Federal Budget; but, just consider the real consequences: tax revenues will drop; safety-net demands will increase; the poor visit Emergency Rooms; hungry students don’t progress as well in school; increased unemployment means more crime on the streets and people in jail.  This is perhaps the greatest example of: Penny-Wise, and Pound-Foolish.

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