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Stimulating With Food

The CBO says a temporary increase in food stamp benefits would be an economic stimulus with a lot of bang for the buck. Makes sense. A stimulus should be temporary. Meanwhile, food stamps are something you have to spend, and people on public assistance are likely to spend any additional income quickly. Greg Mankiw demurs:

I wonder if we really want to target such cyclical measures on the poorest members of society. That is, for any mean level of food stamps, wouldn’t the poor be better off with a constant stream of benefits than with a benefit that fluctuates over the business cycle? Using food stamps as a cyclical tool seems to risk destabilizing some families’ food consumption in an attempt to stabilize the overall business cycle.

Like Felix Salmon, I’m skeptical that opposing such an increase out of tender concern for the poor makes much sense. Mankiw’s larger point that “we should think harder about improving the economy’s automatic stabilizers” seems quite correct, but as long as congress wants to enact a stimulus package it ought to enact a good, useful stimulus package.

In terms of automatic stabilizers, it seems like the best thing to do for the long run would be to try to enact some kind of policy designed to counteract the counterproductive and pro-cyclical nature of state and local level budget policies. If not for that pesky constitution we could force states to accumulate responsible-sized rainy day funds during booms in order to avoid budget cuts during slowdowns, but I’m pretty sure the federal government can’t do this in the real world.

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Photo by Flickr user ChicagoEye used under a Creative Commons license