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Food Stamps’ Multiplier Effect: Economic Voodoo

The insidious multiplier effect raises its ugly head again in the form of Nancy Pelosi.

At a press conference in her home town of San Francisco, Pelosi explained that the program’s multiplier effect –the amount of money generated in the local economy as the result of the subsidy– far exceeds the nearly $60 billion spent this year by the federal government and is a sure-fire way to stimulate the economy. For every dollar a person receives in food stamps, Pelosi said that $1.79 is put back into the economy. The U.S. Department of Agriculture cites an even higher figure of $1.84.

According to Pelosi the multiplier effect for food stamps (the new politically correct name is SNAP – Supplemental Nutrition Assistance Program) is 1.79 and the Agriculture Department cites and even more absurd multiplier of 1.84.  The absurdity of the multiplier effect can be easily proven by reductio ad absurdum.  If the multiplier effect is true why don’t we just spend an infinite amount of money then we will be infinitely wealthy?  You cannot create wealth by taking money from one person (who created the wealth) and giving it to another person to spend – on food in this case.  Entropy proves that you cannot even get $1 of return for each $1 spent on food stamps (welfare).  The obvious losses include the cost of the bureaucrats to run the food stamp program, the time, effort and gas the recipients expend to obtain the food stamps.  This does not add to GDP, since it is consumption.  Economists seem confused that the P in GDP is for spending or consumption, when it stands for Product or production.

Any economist who repeats the multiplier effect lie should be immediately fired.  Any politician who repeats the multiplier effect lie should be treated the same as people in the Flat Earth Society, as insane.  The multiplier effect is a con game designed to justify stealing.

October 9, 2010 - Posted by dbhalling | -Economics | , , ,

2 Comments »

  1. I totally agree! They should be immediately fired! Not surprising that Nancy Pelosi would say that though. She is mathematically and economically illiterate.

    Comment by khalling | October 10, 2010 | Reply

  2. Why yes, you’ve surely proven with reductio ad absurdum that the multiplier effect is nonsense. We all know that there are an infinite number of people living in the US who can all eat an infinite amount of food, and the goverment collects an infinite amount of money from its people. Who doesn’t know this basic fact?

    Your entropy point was also spot on. The founding fathers in America were correct in giving us the rough $14 trillion when we started out so that we would have enough money for the rest of our time to cycle the money around in our system. Just like the water cycle! The amount of water on Earth is constant, it just changes form. 1 drop of water never gives you more than 1 drop of water later, just like economies of today.

    It’s so nice to have well educated people like yourself dedicated to using their free time to extrapolate on topics of politics with such understanding as to produce eloquent detailed responses and rebuttles to things that people just drink down and take as fact.

    I look forward to your next blog posts.

    Comment by Herpderp | October 11, 2010 | Reply


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