Sat, 09 Dec 2006

Economic Stimulus

There's a letter to the editor of the Watertown Daily Times written by Susan Bouchard, which says, in part, this:

Increasing participation in the Food Stamp Program makes sense for our community by bringing federal dollars in the form of benefits, which are redeemed by food stamp participants at local stores. These benefits ripple throughout the economies of our community.

For example, every $5 in new food stamp benefits generates $9.20 in total community spending. By generating business at local grocery stores, new food stamp benefits trigger labor and production demand, ultimately increasing household income and triggering additional spending.

There are two economic errors being made here. One is specific and the other general. Specifically, Bouchard blithely presumes that the total benefit of the FSP is positive. She presumes that more federal dollars are being brought into the community than are being removed by federal income taxes. It's quite possible that the Food Stamp Program actually hurts the North Country when all is counted.

The general economic error she's making is to praise the benefits of federal taxation, but to fail to condemn the harms created by taxation. If it's a good thing that tax dollars are taken from some and given to others, then it's a bad thing for the some. For example, every $5 in taxation destroys $9.20 in total community spending. If federal spending is an economic stimulus, then federal taxation is economic destruction.

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