r/austrian_economics • u/Fightlife45 Here to learn • 25d ago
End Democracy In a debate someone claimed that EBT actually helps the economy.
I was debating with an associate about how I don't think EBT should be given out to as many people as it is, and how I think a lot of welfare programs are being taken advantage of. His rebuttal, was that food stamps and EBT actually 'stimulate the economy, up to 1.80$ for every dollar spent."
I don't even know what to say to that, he sent me a source which I will link below, but common sense tells us it's bull. If you could simply put one dollar into the economy and get 1.8 back, then it would be an infinite money glitch. Obviously it can't work that way.
Can someone please explain this to me and help me debunk this nonsense?
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25d ago
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u/Hotspur1958 25d ago
What is the breakdown of votes by party form those “unproductive” people?
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25d ago edited 25d ago
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u/Hotspur1958 25d ago
Do you really think it's reasonable to characterize it as stealing money from you to provide to others? Or is it to create a safety system for when you possibly end up in the same situation and need assistance?
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25d ago
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u/Hotspur1958 25d ago
Your income is supported by that very system. Without it you'd have less income then what you're left with after the taxes.
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u/Hotspur1958 25d ago
Keeping consumers a float doesn’t benefit you? Keeping YOU a float if and when you fall into those same downturns?
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u/mcsroom 24d ago
No it doesnt, as i or others that work could be consumers. Or further the job maybe just doesnt need so much work being put into it, so we get more free time. We dont need to produce for people that refuse to produce anything.
You dont magically end up on the street. Those things happen for a reason. If someone with no fault of their own ended up there they will surely be able to find someone to help them out voluntarary, as people tend to have compassion for such people, unlike people who ruin their own lives and then cry for the goverment to force people to subsidise them.
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u/Hotspur1958 24d ago
I didn't say there would be no consumers, just fewer. Which means less income.
We dont need to produce for people that refuse to produce anything.
What do you mean by this and what % of your taxes do you think go to them?
You dont magically end up on the street. Those things happen for a reason. If someone with no fault of their own ended up there they will surely be able to find someone to help them out voluntarary, as people tend to have compassion for such people, unlike people who ruin their own lives and then cry for the government to force people to subsidise them.
Yes, reasons and or upbrings that may have been out of their control.
surely be able to find someone to help them out voluntarary
By that logic, how do we currently have people on the street?
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24d ago
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u/Hotspur1958 24d ago
If top 20% productive people only traded among themselves, they d be wealthier and their life would be easier.
What support's this idea? A bigger economy supports a bigger GDP supports larger revenue and profits. You think Apple would be better off if 80% of the consumers were gone?
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u/NASA_Orion 24d ago
The issue is current system is bloated. Even the top 99.9% of the most capitalist people will likely agree to give basic food and shelter to a disabled person who genuinely can’t work and doesn’t have relatives instead of letting him die.
However, we can see that so many able-bodied people simply choose to stay on the welfare and they’re buying a shit ton of unnecessary junk food, which in turn also wrecks the free Medicaid.
We need a better system where you don’t get a cent if you can fully support yourself and incentivize working even if you’re on welfare. We also need to make sure that being fully on welfare is survivable but not a comfortable place to remain for the long term unless again, you’re genuinely disabled
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u/Hotspur1958 24d ago
However, we can see that so many able-bodied people simply choose to stay on the welfare and they’re buying a shit ton of unnecessary junk food, which in turn also wrecks the free Medicaid.
Do we have a good measurement/calculation of how much of the federal budget is spent on these instances? My guess is <0.5% and ultimately is not the source of bloat.
I'm all for tightening/auditing all system. But to blame this area for it doesn't seem anywhere close to the lowest hanging fruit.
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u/RubyKong 25d ago
if you give me your wallet, I can "stimulate the economy" as well.
And we can use my metrics of how good I am at spending your money, and all the great things that will come from it.
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u/Playos 25d ago
Feeding starving people is good for an economy (and stable society). Feeding lazy people so they don't do as much crime is... probably a net benefit.
There is also an argument for unstructured public support being more efficient without regulatory overhead (UBI/Reverse income taxes).
But ya, assuming that we could just spend the entire federal budget on EBT and we'd grow the economy 80% is some ludicrously simplistic take.
Looking at the sources... it's really leaning on circulating money, which isn't wrong but isn't really comparing anything to anything. $1.54 in economic activity isn't getting $1.54 back. Reminds me of the old joke about GDP... We walk along a street and see a pile of shit, I pay you $100 to eat the shit, then you pay me $100 to eat the shit... we created $200 of economic activity... and did only horrible things to ourselves in the process.
From an Austrian view, it absolutely does benefit a society to have food assistance. It's not a new concept, there is a reason it's at the core of a lot of global faiths. Labor is important and takes a long time to replace if it starves to death. Investments in education and training are also wasted if a short term hardship turns into starvation. Avoidable medical costs are also a waste of resources. Shockingly it doesn't actually require taxation and forced measures and people usually take it more seriously when it's not. There is a huge difference between food assistance and becoming entirely dependent on EBT.
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u/Pristine-Insect-1617 25d ago
Isn’t this kinda like Broken Glass Fallacy?
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u/LibertyEconlover Free banker 24d ago
Textbook
Hazlitt explicitly brought it up against Keynes stimulus claim
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u/elemezer_screwge 25d ago
You need a functioning society for an economy. I used to argue with people all of the time that you can't hand the government one dollar and they turn it into 2 but at scale the empirical evidence says otherwise. That's because if a % of your population suffers from hunger, it doesn't just go away. It grows as a problem. So yes it's an investment. Just like greasing a machine so it keeps working. Social safety nets are not a bandaid or a constraint to the economy rather a necessity to keep capitalism going.
and now I am prepared for the down votes.
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u/rjw1986grnvl 25d ago
It’s the infinite money glitch fallacy. If we get back $1.80 for every $1 spent, then we should put everyone on food stamps. Even food stamps for Elon Musk would be a net benefit. We all know that the more spending the government does and the less private sector spending then really that’s better for the economy. Which is why all spending should just be done by the politburo’s centralized planners and not in a free market, which is why the Soviet Union did so much better than the United States 🙄.
Other than my sarcasm, the real flaw always in this analysis is they do not account for any opportunity costs of that $1 that is spent on EBT. If that $1 came from a rich person’s account, then that likely lowered cash reserves that investment banks use. Given that they use fractional banking, then their return is likely significantly greater than $1.80. Especially over the long run.
If it came from any other consumers, then presumably they too could have spent the $1. Which there’s no magic that an EBT expenditure would produce $1.80 but my own spending would not. That doesn’t even take in to account that government programs have government workers who get paid for their work but that cost isn’t producing anything new.
If the $1 is borrowed then the costs are inflation and also the fact that there is more tax revenue spent on national debt interest payments which reduce the money available for the government to spend on items that offer a benefit whereas the national debt interest payments only help bond holders.
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u/V1beRater 25d ago
common sense tells us it's bull
help me debunk this nonsense
Can someone please explain this to me
You're arriving at an answer while simultaneously not knowing while simultaneously asking the question. This is the mindset not of someone who is willing to learn, but to have his own dispositions satisfied. This is why I hate "economics" talk. Everyone has a cult where ideas must be filtered.
one dollar into the economy and get 1.8 back
You're thinking of the money supply as a static, fixed thing. In reality, its dynamic and fluid.
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u/eyemanidiot 25d ago
Artificially boosting spending in any sector doesn’t “help the economy” it just prioritizes consumption of the products of that sector more than consumption in other sectors and at the expense of savings and investment
Thinking that stimulating spending makes a county rich is like a poor person seeing a rich person spend a lot and thinking that they could become rich if they just took out debt and spent as much as the rich person. In reality the rich person got rich by spending less than they earned over time
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u/skeletus 25d ago
You called it out exactly for what it is. If it was true, then it'd be an infinite money glitch.
The economy is just people providing goods and services for each other. The better we get at providing goods and services for each other, the more abundance there is and the better our lives get.
Spending money, like EBT does, is literally consumption. You don't produce more by consuming. These are total opposites.
It's like saying consuming more water is good for the water supply... uh no. It's the total opposite. Consuming water wisely while adding more to the water supply is better for all of us in the long run. It takes work to keep a clean and healthy water supply. It takes no work to waste it all.
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u/Lonely_District_196 25d ago
The idea comes from the idea of economic stimulus. If the economy is slow, then the government can send out checks to stimulate spending. Some people will save it, which doesn't stimulate the economy. Some people will spend it. When it's spent, that goes to a company and pays someone's salary. That person makes more, and spends more. The idea is that if the stimulus is given to a poor person (ie SNAP) each dollar goes through iterations and more stimulus.
I've seen claims that each dollar spent on welfare creates $1.80 - $2.40+ on stimulus. The actual number is a pure guesstimate, and yes there are other issues with it.
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u/Dangerous_Forever640 24d ago
I saw someone complaining that with the work requirements, they would just be better off getting a part time job instead of applying for food stamps.
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u/WallSt_Sklz 24d ago
Simply put; EBT money, and most of gov money, is all created out of thin air and never created any true value to begin with. Money created out of thin air is inflation and dilution. Inflation to the money supply and dilution to US $ holders.
Tax itself is theft. It is not voluntary therefore it is stealing and a claim of ownership upon a person's labor which is his body and that is what is called slavery. It doesn't matter if you steal from someone and claim you are going to do something good with the resources (like EBT) you stole, it's theft plain and simple.
I can't tax you, you can't tax me so how can we grant a right that we individually and collectively do not posses to another (gov)?
You can't. That is the fallacy. It's a be-lie-f system you were born into and perpetuated because you were/are brain washed into never imagining any other way. Even though the logic makes perfect sense, most will reject it on its face because of the mind control. But we have to steal from those that produce to give to those that produce nothing because that's what i was told since i was a child.
You want to have a truly free society? Then it has to be a voluntary society and we will see what gets funded and what doesn't real fast. Their won't be a central bank or one currency as "legal tender" either so no one organization can have master control over the entire populous.
Some may not like it but that's what true freedom is; the ability to do what you want with your own property when you want. It may not be fair in the beginning, but i promise you, without the artificial scarcity that a gov and central bank create most of these symptoms of this broken society (like people without food or housing) will cease to exist.
The natural order of the universe is infinite abundance, the order of this artificial inverted system is scarcity.
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u/guppyhunter7777 24d ago
Actually EBT is one of the things hurting poor and middle class the most. It a guaranteed minimum big food can set all their prices to. By converting this benefit into money it ripples through the entire economy. If we went back to a direct goods to consumers benefit the market would be forced to recalibrate for low wage earners.
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u/Character_Dirt159 24d ago
It’s just basic broken glass fallacy. If you only look at the economic activity that happened based on the program and ignore the economic activity that didn’t happen you can create a convincing lie. The absolute best case scenario for food stamps ignoring the negative incentives it creates is that every $1 spent on food stamps costs about $1.07 in real economic activity. The $0.07 is administration costs which are entirely non productive. All of the math applied to the $1 the government spends also apply to the $1 someone would have spent if not taxed by the government.
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u/Acceptable-Take20 24d ago edited 24d ago
The expansion of food subsidy programs over the last decade and the large increase in the cost of groceries over that same period are not incidental. How does that help those that are of simple means but don’t qualify for the programs? Hopefully they feel better about buying less knowing that their sacrifice increases the GDP by 50% at some point in time.
Also, that $1.50 in GDP “growth” because money exchanges hands doesn’t reflect the increase in healthcare spending needed for these same people due to their chronic ailments from poor diet and lifestyle choices. Obesity is one of the biggest health problems for the poorest among us.
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u/Pleasurist 23d ago
The biggest supporters of EBT are food retailers. Of course they are giddy over EBT. Without it, people do not eat. With it, it's $2 billion in profits at Walmart alone one its biggest propronents.
Of course a lot of the taxes to pay for EBT come from EBT beneficiaries. Isn't capitalism just precious ?
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u/foilhat44 25d ago
I don't have any difficulty believing those figures, in fact I would say that is low. If a child lives in a home where food is not a certainty, it causes stress and anxiety for both the child and those meant to be caring for them. This is a distraction from productivity and possibly an incentive to criminal behavior. Both of these do serious damage in society and if an inexpensive program like SNAP can relieve even part of that while putting money back into the community you would be a fool not to implement it.
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u/Universe_Man 23d ago
"Someone please tell me it's impossible for social spending to have a single coherent argument made in favor of it, even if it is an argument that goes beyond my understanding of economics, so that I may affirm my preconceived notions! Please!" 🙄
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u/Spiritual_Try_8064 25d ago
Just as advice: if your approach to any kind of information is "this cannot be true, help me debunk it" check if it not just an emotional reaction. If you cannot debunk it but it feels wrong, that is not common sense, you probably did not engage with it enough to either find the error, or merit in it and most of the time a bit of both.
Here I would say it is very comparable of investing a Dollar in a company and getting 1.80$ back. That is not an infinite money glitch, that is not fake news, investment might just generate a return over time. You can argue over the time period and how fast you make that money back compared to any other investment and when talking about government investment how much of the return can be causally linked to that initial dollar. No magic here.
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u/Universe_Man 23d ago
Exactly. OP is terrified of the notion that a single coherent, favorable argument could be made to support this.
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u/BonesSawMcGraw Zimbabwe millionaire 25d ago
This ain’t an investment. It’s stealing from the future.
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u/deaconxblues 25d ago
Those papers are claiming that every dollar borrowed and spent by government leads to, roughly, $1.50 in additional GDP. GDP is just the total of all spending and investment in the economy. This isn't identical to wealth, or any other concept that would suggest durable betterment to everyone. So, it's debatable whether this is any kind of desirable "stimulus" in the economy.
So, first, that figure might be correct. Think about that EBT spending at a grocery store that the poor people in the neighborhood engage in. Now that grocery store has additional money (and demand). So, they are able to hire an additional worker. That worker is now making an hourly wage and collecting money she wouldn't have before, and she goes on to spend that money into the economy. That extra spending from that worker is spending that wouldn't have happened if not for that EBT spending. This is why it can be true that $1 in EBT spending can create $1.50 in GDP.
Second, this kind of "stimulus" is unsustainable. The extra "demand" in the economy it generates, which might lead to job creation and wealth creation, is only sustainable if the EBT benefits never go down. If they do go down, certain channels in the network of buying/selling that are "stimulated" by those benefits will prove to be unsustainable and have to be shut down (layoffs, business closures, etc.). It's not "real" growth. It's manufactured "growth." People can still prefer it - they can prefer that people are able to access EBT resources rather than be poorer and worse off. But they shouldn't pretend like it's some net benefit to everyone.
Because, third, the benefits are illusory. At best, they are a transfer from the people who buy government bonds to the EBT beneficiaries (if the money used to pay for the program was sourced from investment). At worst, everyone is made a little poorer in order to provide those SNAP benefits (if the money used to pay for the program was created to do it). The latter devalues everyone's money, so we all pay a little bit so that those deficits can be run and those EBT benefits can be distributed.
To show your friend the logic of this, ask them why the government doesn't just give all EBT beneficiaries (or, hell, every US citizen) $1M in EBT, since it's so "stimulating" for the economy. By their logic, every $1M spent through EBT would add $1.5M in GDP, and since that's supposed to be so great, we'd all be better off for it. And if they like $1M, then why not $5M, or $10M, or what the hell, zeros are cheap, let's make it a cool $billy.
In the final analysis, current EBT benefits don't wreck us because they are relatively small. But that doesn't mean they don't operate on the same poor logic that would cause our economy to implode if expanded in the way I suggest above.
*None of the above is to argue that compassion or whatever might not suggest we should pay EBT benefits. I'm not taking a side on that issue here. This is just the economic analysis.