The Magical Power of Food Stamps

Paul Krugman is complaining about the "war on food stamps."

Given that food stamp usage is at record highs, if such a war exists, it's the losingest war since Argentina realized that Margaret Thatcher wasn't just going to sit back and hand over the Falkland Islands.

Krugman (and other foodstamp advocates) like to extol a number from Moody Analytics, but when I searched Moody's site, I came up with just two articles, each of which features a chart listing the bang for the buck of foodstamps at variously $1.71 or $1.74 per dollar spent, with an attribution of only "Source: Moody Analytics" -- I guess we're just supposed to take their methodology for granted, as the search didn't turn up any source study.

I am mystified by the amazing wealth-generating power of food stamps. Indeed, one might think that if you just spent money on the items they list (see below) that generate more than a dollar of stimulus per dollar spent, there'd be no end of growth we could experience! None of the charts mention the obvious thought of  diminishing returns:

Fiscal Policy Multipliers

As of 2011Q2

Tax Cuts                                  Bang for the Buck

Refundable Lump-Sum Tax Rebate                        1.22

Nonrefundable Lump-Sum Tax Rebate                     1.01

Temporary Tax Cuts

Child Tax Credit, ARRA parameters                     1.38

Payroll Tax Holiday for Employees                     1.27

Earned Income Tax Credit, ARRA parameters             1.24

Job Tax Credit                                        1.20

Making Work Pay                                       1.19

Payroll Tax Holiday for Employers                     1.05

Across-the-Board Tax Cut                              0.98

Housing Tax Credit                                    0.82

Accelerated Depreciation                              0.29

Loss Carryback                                        0.25

Permanent Tax Cuts

Extend Alternative Minimum Tax Patch                  0.53

Make Dividend and Capital Gains Tax Cuts Permanent    0.39

Make Bush Income Tax Cuts Permanent                   0.35

Cut in Corporate Tax Rate                             0.32

spending increases

Temporary Increase in Food Stamps                     1.71

Temporary Federal Financing of Work-Share Programs    1.64

Extending Unemployment Insurance Benefits             1.55

Increased Infrastructure Spending                     1.44

General Aid to State Governments                      1.34

Low Income Home Energy Assistance Program (LIHEAP)    1.13

I'd love to see the methodology involved. I've been involved in these sort of exercises in private business, and deconstructed a few others in the path. Voodoo math tends to be the rule, not the exception.

It occurs to me that it's interesting that one of the papers was titled How the Great Recession Was Brought to an End, published July 27, 2010. Dear reader, think back to July 2010 (or a few months earlier as, hopefully, this paper wasn't researched and written overnight), were you feeling that the Great Recession was over? How about now? Everything's just peachy, right?