May 29, 2022

Food Stamps For The Wealthy – Millionaires Meet Eligibility Requirements

Newt Gingrich started a food fight at the last Republican debate by calling Barrack Obama “The Food Stamp President” and suggesting that food stamps were creating dependence on the government.  Mr. Gingrich went on to say that he wanted to “help poor people learn how to get a job” so that they could get off the food stamp dole.

Although Mr. Gingrich’s pitch for individual self reliance and hard work resulted in a standing ovation from the Republican audience, the message may not play out as well across the broad spectrum of American society.

For decades, politicians have told the American public that they are entitled to all sorts of benefits and the public has grown to love them.  Promises of benefit cuts or austerity measures do not win elections. In this regard, Mr. Gingrich may lose more votes than he gains by trying to reduce the number of food stamp recipients.  (The food stamp program is now known as the Supplemental Nutrition Assistance Program or SNAP).

Courtesy: inquisitr.com

All well intentioned government entitlement programs expand exponentially over time.  The number of food stamp recipients has exploded to a record 44.7 million people and this is a voting bloc to be reckoned with.  Newt’s somewhat hostile message to food stamp constituents has probably lost him a considerable number of votes.

Mr. Gingrich, who has an incredible depth of knowledge on most topics, seems to be unaware that food stamps have become an entitlement not just for the poor, but also for many who are financially independent and chose not to work or have retired early.

Here’s an example I looked at for a married couple in Connecticut who both chose to retire at the age of 50 since they are financially independent with $5 million in liquid assets.  Since they will live off their savings until they start receiving pensions at age 60, the couple has no “earned income” and can therefore qualify for a decade’s worth of food stamp benefits.

Exactly how can multimillionaires qualify for food stamps?  The reasons lies in the lack of asset testing for SNAP eligibility.  Connecticut, like 34 other states, does not limit eligibility based on assets.  Most SNAP applicants, except for limited exceptions, do not have to report money in the bank, retirement assets, stocks or other assets.

According to the handy benefit calculator from the Connecticut Department of Social Services, the multimillionaire couple cited above are eligible for food stamps to the tune of $367.00 per month.

The food stamp program has grown not only due to tough economic times but to vastly widened eligibility guidelines.  The SNAP program costs the taxpayers over $75 billion per year.  Here’s a partial listing of who can qualify for food stamps.

  • Non-citizens
  • Unemployed
  • Retired social security recipients
  • Working people with low wages
  • Homeless
  • Legal immigrants
  • College students
  • Millionaires showing little or no earned income

The graph below from The Wall Street Journal shows the explosive growth in the SNAP program since 1970.

Courtesy: The Wall Street Journal

Mr. Gingrich drew some well deserved applause for trying to reassert the basic values of American free enterprise and self reliance.  However, based on the vast voting constituency that is now on the food dole, reducing or eliminating the food stamp program is a political impossibility.

More on this topic:

The Entitlement Society – Million Dollar Lottery Winner Feels Entitled To Food Stamps – “I have bills to pay.”

How Much Is A Trillion Dollars? – U.S. Debt Levels Exceed Comprehension

With little press coverage and no debate by Congress, the U.S. debt level is set to automatically increase by another $1.2 trillion in January.

The most remarkable aspect to the latest huge increase in U.S. debt is the manner in which the debt limit was implemented.   As part of last year’s budget agreement, even if Congress decided to vote against the debt increase, the President has the power to issue a veto.  In other words, the debt increase is a done deal – no debate, no discussion.

Massive deficit spending by the U.S. government was supposed to stimulate growth and bring us out of recession as it has in previous economic downturns.  This time, it’s simply not working and the debt levels have reached a tipping point at which economic growth slows as debt increases.

An impressive body of research covering eight centuries of government debt defaults (“This Time Is Different” by Carmen Reinhart and Kenneth Rogoff) resulted in ominously accurate predictions since its publication in 2009.  The collapse of the real estate bubble lead to a collapse of the banking industry which lead to massive government borrowings to bail failed banks and other institutions.

According to Reinhart and Rogoff, a slowdown in the economy leads to further government deficit spending which ultimately puts the solvency of sovereign governments into doubt, which is exactly what’s currently happening across Europe.

Meanwhile, as the U.S. approaches its own tipping point towards insolvency, Americans remain remarkably obliviously to the dangers of mortgaging our future.

How much is a trillion dollars of debt?  The number is so large that it is inconceivable for the average American to understand.  Deep down, the country has a foreboding of impending disaster from our crushing debt burden, but remains oblivious as to the real extent of the problem.

Here’s a visual to put things into perspective.

One Hundred Dollars $100 – Most counterfeited money denomination in the world.
Keeps the world moving.

One Billion Dollars $1,000,000,000 – You will need some help when robbing the bank.
Now we are getting serious!

One Trillion Dollars $1,000,000,000,000
When the U.S government speaks about a 1.7 trillion deficit – this is the volumes of cash the U.S. Government borrowed in 2010 to run itself.
Keep in mind it is double stacked pallets of $100 million dollars each, full of $100 dollar bills. You are going to need a lot of trucks to freight this around.

If you spent $1 million a day since Jesus was born, you would have not spent $1 trillion by now…but ~$700 billion- same amount the banks got during bailout.

15 Trillion Dollars – US GDP 2011 & Debt $15,064,816,000,000- The U.S. GDP in 2011. The debt as of Jan 1st, 2012 is 15,170,600,000,000. United States now owes more money than its yearly production (GDP).

Statue of Liberty seems rather worried as United States national debt soon to pass 20% of the entire world’s combined GDP (Gross Domestic Product).

114.5 Trillion Dollars $114,500,000,000,000. – US unfunded liabilities
To the right you can see the pillar of cold hard $100 bills that dwarfs the
WTC & Empire State Building – both at one point world’s tallest buildings.
If you look carefully you can see the Statue of Liberty.

The 114.5 Trillion dollar super-skyscraper is the amount of money the U.S. Government
knows it does not have to fully fund the Medicare, Medicare Prescription Drug Program,
Social Security, Military and civil servant pensions. It is the money USA knows it will not
have to pay all its bills.
If you live in USA this is also your personal credit card bill; you are responsible along with
everyone else to pay this back. The citizens of USA created the U.S. Government to serve
them, this is what the U.S. Government has done while serving The People.

The unfunded liability is calculated on current tax and funding inputs, and future demographic
shifts in US Population.

Note: On the above 114.5T image the size of the base of the money pile is half a trillion, not 1T as on 15T image.
The height is double. This was done to reflect the base of Empire State and WTC more closely.

Obama Jobs Plan Bad Joke For Both Employed and Unemployed

The long awaited and hugely hyped Obama “Jobs Solution Speech”, hastily crafted between rounds of golf on the Vineyard, is unlikely to help either the employed or  unemployed.

Obama’s calls his new proposals the “American Jobs Act” but it strongly resembles the $825 billion stimulus spending program of 2009 which was ineffective and failed to stimulate the economy or create new jobs.   Taxpayers will likely fail to see the logic of a $447 billion stimulus program working any better than a $825 billion stimulus program.

The latest proposals out of the White House appear to be another desperate Keynesian attempt to keep the economy on life support long enough to boost Obama’s chances in the presidential election race.  Expecting voters to buy into Obama’s new program pushes the bounds of credibility.  Why would a relatively small $447 billion program work any better than the $4 trillion in deficit financed spending since Obama came into office?

Telling voters that the new half trillion dollar program will be paid for from future mythical budget cuts isn’t likely to fly either after seeing the results of the latest fiasco on deficit reduction talks that lead to a downgrade of the US credit rating.

Half of $447 billion “Jobs Act” program consists of payroll tax cuts for both employers and employees.  While probably adding to aggregate spending, the tax cuts do not address the fundamental problems of unemployment and income stagnation over the past decade.

Why Payroll Tax Cuts Won’t Work

What business bases hiring decisions on a 2% drop in the social security (FICA) tax?  Any business man stupid enough to decide to hire new employees simply because his share of the FICA tax will be slightly lower is already out of business.  New employees are added by businesses when there is added demand for their products and when they are confident that a lasting economic recovery is underway.  Today, there is subdued demand and no confidence – a cut in the FICA tax does nothing to change this situation.

Regarding the payroll tax cut for employees, here’s how one Connecticut resident assessed the situation.

“I am currently making $80,600 per year.   The recent reduction of 2% in the FICA tax resulted in an increase of $31 per week to my paycheck.  Meanwhile, the State of Connecticut just passed the largest tax increase in history, retroactive to the first of the year, which results in paying $17 more per week.  My weekly deduction for medical insurance increased by $12 per week since last year and our employer has suspended pay increases.

My net benefit from the FICA tax reduction is $2 a week.  Meanwhile, the cost of gasoline, home heating, insurance and groceries has risen at least 6% over the past year.  Even if the FICA tax cut was made permanent, an extra $2 per week is certainly not going to motivate me to spend more.

My savings goals for college funding and retirement have been destroyed by a collapsing stock market and zero interest rates on savings.  I  have to cut current spending in order to meet my savings goals and any extra income would be saved, not spent.”

Did Obama talk to any “real people” outside of the group of Washington elites and millionaire celebrity pals he hangs around with?  I think not.

Did Obama talk to any “real businessmen” before coming out with his warmed over and effective stimulus plan?  I think not.

Did Obama talk to “Helicopter Bernanke” about how to spread out the $447 billion of borrowed money?  The government could simply spend the $447 billion by sending every household in America a check for $3,886 attached with a note telling the recipients to thank their grandchildren whose future has been mortgaged.

Voters are rightfully disgusted by the rapid decline in their standard of living, the debasement of the US currency and the self serving dealings of the ruling Washington elites.  To pull out an old campaign slogan, “It’s time for a change”.

There are no easy answers to pulling a debt laden economy out of depression, but increasing transfer payments, small tax cuts, massively increased regulatory burdens, trillions in stimulus spending and zero interest rates have not worked.  Maybe the Washington elites should simply step aside, stop micro managing the $14 trillion dollar US economy and allow the creative forces of capitalism to work

Latest Government Scheme For Growth – The Invisible Tax Cut

Pulling forward future demand to stimulate economic growth didn’t work with the cash for clunkers program or housing tax credits.   Car and home sales collapsed after consumers who were going to buy cars or houses anyways bought today instead of tomorrow.  Past stimulus programs have increased government deficits without improving long term economic fundamentals.

Undeterred by previous failures the government is again attempting to pull forward demand, this time with accelerated write offs for new plant and equipment spending.

The new Obama tax break proposals are likely to be even more ineffective than previous stimulus attempts.  To “offset” the revenue loss of accelerated deductions, other taxes would be raised, effectively muting the net stimulus that the plan attempts to provide. 

NYT –  In a speech in Cleveland on Wednesday, Mr. Obama will also make a case for the package of roughly $180 billion in expanded business tax cuts and infrastructure spending disclosed by the White House in bits and pieces over the past few days. He would offset the cost by closing other tax breaks for multinational corporations, oil and gas companies and others.

The “tax cuts” for increased business investment merely accelerate the existing tax write off for business investments that are presently written off over a period of years.  If other taxes are raised to “offset” the accelerated tax deductions, the net effect of the plan would be to effectively increase taxes on businesses.

The lure of accelerated tax cuts (which increase cash flow) is not likely to affect decisions on investment spending since corporate America is already sitting on a record amount of cash.  Accelerating depreciation deductions will merely pull demand forward from companies that had already planned spending increases for plant and equipment. 

Rational consumers and businessmen do not base long term spending decisions on tax deductions.  Increased spending by businesses is based on an increase in forecast demand.   Consumer spending is ultimately based on confidence in the prospect for increases in future incomes.  

For good reasons, neither businesses nor individuals are confident about the future and there is deep skepticism that additional stimulus programs will do little more than increase the government deficit.  The latest stimulus plan is conceptually vacuous and likely to decrease public confidence in the government’s ability to formulate a plan for long term economic recovery.

Mr Obama, Please Don’t Read This

US Companies Build Massive Cash Reserves Based on Economic Worries

Wall Street Journal – U.S. companies are holding more cash in the bank than at any point on record, underscoring persistent worries about financial markets and about the sustainability of the economic recovery.

The Federal Reserve reported Thursday that nonfinancial companies had socked away $1.84 trillion in cash and other liquid assets as of the end of March, up 26% from a year earlier and the largest-ever increase in records going back to 1952.

Idle cash of almost $2 trillion is a massive amount, but let’s put that into perspective by comparing that to the spending habits of the U.S. Government.  If the U.S. Government expropriated every dollar of cash held by U.S. companies, it would barely cover 16 months of U.S. deficits.   The entire $1.84 trillion of cash held by U.S. companies would pay for a mere 6 months of U.S government spending.

In the government’s last fiscal year, receipts were $2.1 trillion and spending totaled $3.5 trillion for a deficit on $1.415 trillion.   Latest figures from the U.S. Treasury indicate that the current fiscal year’s deficit will exceed last year’s deficit – here are the numbers month by month.

FISCAL 2010           RECEIPTS        OUTLAYS            DEFICIT

$MILLIONS

OCTOBER……………..135,294              311,657             176,363

NOVEMBER…………..133,564              253,851             120,287

DECEMBER…………….218,918              310,628              91,410

JANUARY………………205,240              247,874              42,634

FEBRUARY…………….107,520              328,429            220,909

MARCH……………………153,358             218,745              65,387

APRIL………………………245,260             327,950              82,689

MAY…………………………146,795             282,722            135,927

YEAR TO DATE      1,345,950          2,281,566            935,606

Graphical Representation of Looming Disaster

Government spending is now almost twice total receipts.   How long can any entity continue at this pace before hitting an economic brick wall?

chart

Source: Department of the Treasury

Fed Chairman Bernanke recently warned that unless deficits are reduced, the U.S. could become the next Greece, but the economy is currently too fragile to initiate deficit reductions.  Translation – we are facing social and economic disaster from out of control deficit spending, but we can’t do anything about it right now.  Conclusion – the government will need trillions every year for the foreseeable future to cover the gap between receipts and spending.

Let’s hope the President doesn’t connect the dots here – $trillions needed by the government while companies are sitting on $trillions that they are not investing, spending or paying to shareholders – not very patriotic!   After having already proposed a plethora of tax increases on everything possible, “idle corporate cash” could easily become a very tempting target.   Let’s hope Mr. Obama does not read this post.