Social Safety Trap

An article from the American Enterprise Institute today was lauded in some Economic circles, and certainly it has a great conclusion. But the entire article was based on a faulty premise: that the Social Safety Net is working. In fact, it’s torn to shreds, especially after today’s roll back on Food Stamps (more on that in a minute).

Social Safety Nets have one primary goal: to make sure that people don’t suffer. How does the article measure human suffering to determine that the social safety net is working? It doesn’t, really. What the author does is use things like food stamps and Medicaid as a factor of raw income. The last I looked, you couldn’t use Medicaid to pay your rent, or food stamps to open a money market.

So how can human suffering be measured?

One way is with the Gini Coefficient that measures income inequality. No one expects people in the safety net to be doing as well as they once were, but the Gini should at least tread water. Except that it doesn’t.

Gini

We can also measure Personal Consumption, and measure the ratio of durable goods as a factor of overall consumption. What is left is a measure of spending on all things that necessary, like food and gas, plus all non-durables like clothes. That isn’t looking so great either. 90 cents on every dollar is spent on food, gas, and non-durables, meaning most consumer spending is just on the essentials:

non-durable consumption

Or we can use this nifty map from the Census Bureau to tell us where people are living below poverty:

Poverty

So by all measures, the Social Safety Net has become a Social Safety Trap. There is no way anyone can make the claim that the Safety Net has been awesome.

Then there is this report from the Economics Policy Institute (PDF) showing the all out assault on labor rights adds to the number of people that are going to rely on Social Safety Nets.

Also, Walmart admitted that it loves food stamps. This is a vicious circle. Walmart assures that it’s employees will need to rely on food stamps because of low wages, which are then spend in Walmart. Walmart is controlling 18% of all food stamp dollars – some $17 Billion. So it’s in Walmart’s “rational self interest” to keep wages low.

Social Safety Nets are the “rational self interest” of Macroeconomics; Kenyes showed that. Yet, they have not been “nets” to catch the socioeconomically falling masses.

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