Nonprofit Newswire | Reality Need Not Apply: Fox Continues to Deny Aid to Poor is Stimulative

October 7, 2010; Source: Media Matters for America | We regularly watch Fox & Friends with co-hosts Steve Doocy, Gretchen Carlson, and Brian Kilmeade for their political and economic commentary—as well as that of occasional guests such as blogger Michelle Malkin. Like the website, Media Matters, we watched on the morning of October 7 to hear Malkin and Doocy make fun of House Speaker Nancy Pelosi’s contention that food stamps and unemployment insurance are significantly stimulative expenditures.

According to Doocy, “she’s promoting some strange multiplier effect study to argue this,” and Malkin added, “the only thing that these programs stimulate, of course, is bigger government.” This is hardly the first time that Fox News anchors and guests have questioned the stimulative nature of food stamps and extended unemployment benefits.

Watch it here:

Truth be told, economists generally agree that food stamps are stimulative, making Doocy and Malkin pretty much well, wrong. The very well respected economist Mark Zandi – who provided advice to the McCain presidential campaign in 2008 said at the time in written testimony to the House Committee on Small Business that extending food stamps would be among “the most effective ways to prime the economy’s pump.” Zandi’s 2008 testimony included a table that showed that a dollar spent in a temporary increase in food stamps would generate an increase of $1.73 in real GDP compared to $1.64 from a dollar in extended unemployment insurance benefits, $1.59 for infrastructure spending, and $1.36 for aid to states (see table).

We don’t have quite the obsession with Fox News that others do. It’s important to hear different opinions on matters of politics and economics, and with Steve Doocy and Michelle Malkin weighing in, you certainly get opinions that aren’t heard very much because they’re so clearly out of the mainstream of economic thought. Doocy and Malkin (and others on FOX such as Stuart Varney and Newt Gingrich who also deny the stimulative effect of food stamps, Gingrich questioning the entire concept of economic multipliers actually) could argue that they don’t like food stamps or unemployment insurance for other reasons, much like the debates pro and con concerning welfare reform during the Clinton Administration.

But their arguments were less about economics and more sociological and behavioral. And from among the list of potential economic shots in the arm that might be pursued in an economic stimulus program, food stamps do provide a significant GDP boost, or in Speaker Pelosi’s words, “the biggest bang for the buck.”

Nonprofits need to understand how social safety net programs such as food stamps and unemployment insurance and others, seen by opponents as simply feeding big government, are truly positive stimuli in a recession economy. Since nonprofits played an important role in carrying out the nation’s stimulus spending component, they should be aware of what the critics are saying and what the facts are behind the debate.—Rick Cohen

  • James Charles

    So why isn’t it working? 😮

  • rick cohen

    Dear James: Well, let’s see why it might not be working. Here’s my guesses: The stimulus was divided into thirds, roughly, one third for discretionary spending on programs, one-third for expanded entitlements (like but not limited to food stamps and UI), and one-third for tax incentives for business. Based on Zandi’s chart, the tax incentives were pretty limited as economic incentives, to put it mildly, so you can write off a third as pretty limited in their stimulative effect. The program expenditures were scattered among a variety of programs, making their cumulative impacts a bit limited, and overall, having shot 1/3 of the stimulus on tax cuts with minimal impact, the nation needed a stronger, more focused jump-start than the ARRA provided. Given the resilience of the recession, despite pronouncements that the recession ended sometime last year, it would seem to be that a second stimulus with a focus on interventions that stimulate the economy would be warranted. One jolt of electricity, especially with the power wavering, was clearly not enough. The stimulative effect of food stamps and unemployment insurance is that those items get spent by the recipients, unlike business subsidies and tax incentives, which as the TARP demonstrated, often get “banked” and “warehoused” rather than reinserted into the economy.

  • James Charles

    Well who made this allocation? It seems it was not so well thought out, maybe even rushed through…

  • rick cohen

    Dear James: That’s the weakness of the stimulus legislation, much like the TARP legislation that preceded it. In the political process, things were rushed, programs were jumbled, priorities were lost, too many interests used the ARRA legislation as the vehicle to get things done that they weren’t able to do previously. So the stimulus legislation includes a mix of stimulative activities and others which much less stimulative effect. Some of those other activities may have been important social safety net programs necessary to assuage the pain that Americans were suffering during the height (or depth) of the recession, but still others were horse-traded programs to buy support from various constituencies. That’s the legislative process, no?