“We must remember for every dollar spent by a SNAP recipient, the economy is stimulated by $1.50.”
This line was shared more than once in a recent Congressional hearing on the future of the federal government’s largest feeding program, SNAP (Supplemental Nutrition Assistance Program, or food stamp benefits).
It was one of the many arguments to support SNAP’s sustained expansion after the 15 percent increase in benefits that came with the recent passage of the American Rescue Plan Act and before the American Family Plan that intends to expand SNAP even further for kids and ex-felons.
I was the only witness of five at the hearing who testified in opposition. After repeatedly hearing the economic stimulus justification, I texted the Deputy Staff Director for the House Committee on Agriculture, “Has no one heard of The Broken Window fallacy?”
Frederic Bastiat, a French economist, published an 1850 essay titled, “That Which is Seen and That which is Not Seen”, reminding readers that the difference between a good economist and a bad one is that the latter only takes into account the effects that are seen, but the good economist considers those effects that are both seen and unseen. To illustrate this, he penned the parable of The Broken Window, in which a shop owner’s window is broken by a careless boy. The bystanders hardly feel sorry for the shop owner, explaining that though he will be out the money for the window, the window repairman is dependent on such accidents for a job. The fixer gains pay, and the shop owner gains a new window. All is well, until Bastiat points out the unseen—that the shop owner’s dollars might have been spent on a pair of new shoes which would have satisfied both the need of the shop owner and employment of that unseen third person, the shoemaker.
It’s not hard to see how the food stamp program has some effect of economic stimulation. One government report explains that for every billion dollars in SNAP benefits, GDP grows by $1.54 billion and creates 13,560 jobs.
While government-mandated remedies simply move money around, we know the human creativity of the market creates real growth
The jobs created in the particular sectors outlined in the report result in an average annual salary of just under $52,000, leaving the good economist to wonder at the waste of spending a billion dollars to create 13,560 jobs. That breaks down to a cost of almost $74,000 per job.
“But people are fed,” some may contend; and that is correct—about 42 million of them through the program currently. That is what is seen.
However, there are yet other unseen misfortunes that stem from this welfare program. A young homeless man, Terry, who entered the long-term work ready program at our homeless mission, spoke candidly with me when I asked him about his previous use of food stamps. “What would you have done if they had not been available to you?” I asked. He paused before chuckling, “I probably would have gotten me a job.”
According to one DC-based policy think tank, Terry is one of more than a million. Specifically, they estimate that work requirements for able-bodied adults without dependents (ABAWDs) would have put 1.3 million people at risk of losing their SNAP benefits. In my state of Missouri, when work requirements were enforced in 2016, more than 85% of ABAWDs like Terry who were dependent on SNAP dropped off the welfare role and their incomes more than doubled through more work and new jobs.
“Well, at least the government is doing something to help people,” many will counter.
Let’s consider again the unseen. One supporter of our privately funded nonprofit wrote to me last month, “I no longer plan on giving to charities… If you need funding, please contact your city government as the federal government has given them more money than they know what to do with.” SNAP or other public programs that disburse resources to help the poor routinely and quietly crowd out the private sector.
Many applaud food stamps as if the national GDP depends on ever-increasing levels of hunger.
One study discovered that for every dollar injected into the economy by the government, churches reduce their spending to address the same social need by at least $0.50. Considering the well-established likelihood of local donors becoming volunteers and interacting with those in need, the very relationships crucial to help any person out of poverty are also crowded-out when government steps in with assistance.
As the spectators in Bastiat’s parable realized the benefit of the broken window, they joined the window repairman in blessing the child for his carelessness and shrugged at the seemingly inevitable destruction.
Today, many politicians do the same. Unable to address the real causes of poverty, they applaud food stamps as if the national GDP depends on ever-increasing levels of hunger.
While government-mandated remedies simply move money around, we know the human creativity of the market creates real growth. Let's stop settling for broken windows and begin searching for real solutions.