Friday, May 18, 2012

Simple Math #2 ... Food Stamps and Wasteful Spending ... Who's at Fault?

I'm all for taking good care of the poor among us.

I'm also all against impoverishing America.

When food stamp money is spent in a wasteful manner, who's really at fault? And whose money is being wasted?

And what's the larger lesson underlying this specific example? For that, let's start with the big picture.

Here's what columnist David Brooks says about human nature in The Age of Innocence:

"The people who pioneered democracy in Europe and the United States had a low but pretty accurate view of human nature. They knew that if we get the chance, most of us will try to get something for nothing. They knew that people generally prize short-term goodies over long-term prosperity. So, in centuries past, the democratic pioneers built a series of checks to make sure their nations wouldn’t be ruined by their own frailties. . . .

Though the forms were different, the democracies in Europe and the United States were based on a similar carefully balanced view of human nature: People are naturally selfish and need watching. But democratic self-government is possible because we’re smart enough to design structures to police that selfishness.

James Madison put it well: “As there is a degree of depravity in mankind, which requires a certain degree of circumspection and distrust: So there are other qualities in human nature, which justify a certain portion of esteem and confidence.”

But, over the years, this balanced wisdom was lost. Leaders today do not believe their job is to restrain popular will. Their job is to flatter and satisfy it. A gigantic polling apparatus has developed to help leaders anticipate and respond to popular whims. Democratic politicians adopt the mind-set of marketing executives. Give the customer what he wants. The customer is always right.

Having lost a sense of their own frailty, many voters have come to regard their desires as entitlements. They become incensed when their leaders are not responsive to their needs. Like any normal set of human beings, they command their politicians to give them benefits without asking them to pay." 

Now let's move from the general to the specific and observe the government subsidized OPM mentality in action. Food Stamps and the $41 Cake is worth considering for its larger lessons:

"Beware of little expenses.
A small leak will sink a great ship.

—Benjamin Franklin

There is a large chain grocery store in my neighborhood that I rarely frequent because the prices are too high. Instead, I will travel an extra 30 blocks to another store where the costs per item are 20%-30% lower.

I arrange my travel around this activity. It takes a little extra effort, but within a year the savings are substantial. As it turns out, I am not alone. The average income of Costco discount shoppers, it was reported recently, is $96,000—so perhaps they're not the millionaires and billionaires the president talks about, yet not the folks one might immediately expect to be watching their pennies either.

But every so often I will need one item late at night—a quart of milk, a missing part of a school lunch—and I run over to the high-price store nearby. There, I've noticed something happening with increased regularity: The person ahead of me in line or at the next checkout counter is using a benefits card. Since we are now in the third year of our national recession and unemployment remains depressingly high, I understand this.

Recently I had to run into that store and, sizing up the three lines, chose to stand behind a woman with one item in her cart. It was one of those large ice-cream cakes. When the checkout person said "Forty-one dollars," I wasn't the only one who blanched. The shopper's son, around 12, repeated it as a question: "Forty-one dollars?"

I quickly calculated that the woman's cake was eight times more expensive than the kind I make at home to celebrate birthdays. The mother ignored her son's question.

She took out her benefits card, swiped it through the machine, and they were off. My turn.

I stood there, wondering what lesson the young boy takes away from this transaction. Does he grow up with the faintest understanding of delayed gratification—that you have to earn your money before you can buy candy—or, in this case, an ice-cream treat? I wondered how we arrived at this point as a nation. I also felt like a chump.
The vast majority of Americans—Democrat, Republican or independent—will readily help someone who cannot make ends meet in a bad economy. Americans want a hungry child to be fed. I know this because in no other country do people donate more to charities. Americans will go far beyond what our taxes already pay for to help the less fortunate. We have been blessed with overabundance in this land, and we are a very generous people.

But over the last four decades, our government has quietly done away with almost all of the restrictions once placed on food assistance. SNAP cards (Supplemental Nutrition Assistance Program) can be used to purchase practically anything with the exception of liquor and cigarettes. These cards are also openly and illegally sold for cash, which allows the recipient to buy anything they want, including cigarettes and liquor.

Food assistance is helping many families keep their heads above water when they would otherwise not get by, and many of these families watch every dime. But the system also allows people to flagrantly disregard the program's original purpose.

Of course there are instances of fraud in every corner of the government, from Congress to defense spending. Why single out food stamps? Because, with over 48 million Americans now using some form of food assistance and few restrictions, the possibilities of waste are unlimited.

My grandmother did not serve on the president's Council of Economic Advisers. She did not have an M.B.A. from Harvard. She never went to high school because she had to go to work to support her family. But she gave me an astute piece of financial advice when I was about to enter the world. "Never," she told me, "spend more than you earn" and "always try and save a little something."

When we wonder how this great nation traveled from our grandparents' common sense to where we are today, it might be easier to understand with this question: How did the country that created the strongest middle class in history, the country that offered everyone the chance to succeed, the country that built and paid for the transcontinental railroad and the Hoover Dam, won World War II and put Neil Armstrong on the moon—how did that country rack up trillions in debt?

One $41 cake at a time."

Summing Up

The writer had a wise grandmother. My parents thought that way, too. Both worked hard at relatively low paying jobs, and they encouraged my brother and me to work hard, get a good education and always live within our means.

They taught us about hard work and living within our means by their examples and, with respect to the importance of getting a good education, taught us about that through their sacrifices on our behalf.

Neither Dad nor Mom was a college graduate, and each was employed as an hourly worker. Dad worked in a distillery and Mom worked in the grade school cafeteria. Dad also umpired, tended bar and played the drums in a band for extra income.

We always had enough money and never spent more than we had. I believe we were like a lot of other families in the '50s and '60s.

My brother and I both graduated with honors with advanced college degrees (master's in math and law, respectively) without ever incurring student debt. And while attending college and graduate school, we worked some, too.

What's So Bad about the Good Old Days?

My fundamental point is simple, and it's the same simple advice given by the writer's grandmother about "high finance."

To wit, "Never spend more than you earn and always try and save a little something."

When did so many of We the People and the nation as a whole stop listening to grandma? And why?

Why do we continue to elect politicians who are leading us to the edge of the fiscal cliff? And why don't those politicians abide by grandma's teachings?

We the People aren't stupid, so when it comes to government freebies, why do we act that way?

We all know there's no free lunch for any of us, even if the politicians say otherwise.

Continuing this path dependent behavior is dangerous to our financial health and well being, both as individuals and as a nation.

It's dangerous to our society's moral underpinnings, too.

Thanks. Bob.