Social-Net Cuts Endanger Middle Class


Somebody call Paul Ryan and tell him that his job is done. Not done completely like the passenger pigeon and the dodo, more like the American bison or the black-footed ferret, or maybe the New York oyster. It’s not that the American middle class is extinct, but as biologists will tell you, when you have too few individuals, there’s a loss of genetic diversity. In biology, loss of genetic diversity leads to inbreeding, and that lowers individual fitness, and that in turn leads to reduced chances of species survival. We’re on our way. You can argue that it started during the Clinton administration with reduced regulation and free trade agreements, but when President Bush took over and saw how many middle class people there were, he channeled Buffalo Bill. Just ask each one of them to give up a little bit so that the people at the top of the pyramid could have just a little bit more. How could it hurt?

But the Walmart annual report tells the story. It’s the section on risks:

“Our business operations are subject to numerous risks, factors and uncertainties, domestically and internationally, which are outside our control ... These factors include ... changes in the amount of payments made under the Supplement[al] Nutrition Assistance Plan and other public assistance plans, changes in the eligibility requirements of public assistance plans, ...”

In other words, things have gotten so bad that the Walton heirs can be hurt by cuts in the social safety net. It turns out that Walmart has profited two ways. Because of Medicaid, Walmart employees can get taxpayer supported health insurance. Rick Ungar, writing in Forbes, described how Walmart’s early support for Obamacare took into account the expansion of Medicaid to 133% of the poverty level. Walmart shoppers have been helping subsidize the company’s profits – except in those red states that refused to expand Medicaid.

The other way Walmart has profited from the Social Safety Net is that it provided the company with customers. Its famously low prices were an attraction for those people who had to feed a family with food stamps, at an average monthly benefit of $133.43, but when Consumer Reports rated supermarkets, Walmart had the lowest rating of any chain. Among the complaints were a lack of open check-out lanes – a function of having enough people working. Walmart reported a 21% drop in profits for the 4th quarter os 2013. One of the factors cited was the expiration of a temporary boost in food stamps.

What’s bothering Walmart is the same thing that’s bothering the economy as a whole – lack of demand. Even as the economy grows, and it has been, the Walton heirs and other oligarchs have been keeping the growth for themselves – this is the whole inequality thing and could be remedied by an expansion of the safety net. This isn’t “culture of work” nonsense, it’s economics 101. When you get into a mess like the current one, the way out is to give poor people money (and don’t talk about “makers and takers”. Some people will game the system but economics isn’t a morality play.) There’s a word for people who collect unemployment and food stamps, it’s “customers”. This is redistribution, and we need it – whatever the source of the money, it will wind up being spent, and at the very least, it will induce Walmart to open more check out lanes, which puts more people to work. Rising employment means more income. more spending and an upward spiral until the growing economy can support itself and fewer people need help.

This is stimulus, and it works if you let it. The unemployed, the elderly trying to survive on Social Security, and even those who “... turn the safety net into a hammock that lulls able-bodied people into complacency and dependence.” Spend the money and keep the economy running. The people with so much money that they can keep pulling out chunks to set aside for their heirs’ trust funds are the ones holding up the recovery. If we want to revive the economy, we shouldn’t take the money from people who are already spending, and that’s class warfare, it’s also economic reality. You can’t get a jump start from a dead battery.

We’ve just gone through a winter that is consistent with the warnings that climate scientists have been giving for years, and we’re living with an economy that’s totally consistent with Keynesian and neo-Keynesian projections.

We know what business friendly environmental policies will do, and we also know what Republican economic policies have done, and we’re at the verge of extinction. If it’s not too late, could we tell Paul et al. that we’ve learned from our experience, and we’d like to avoid going the way of the dodo?

Sam Uretsky is a writer and pharmacist living on Long Island, N.Y. Email

From The Progressive Populist, May 1, 2014

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