FOOD FOR THOUGHT
Recently, on a trip to Boston, I read in the morning Globe that food stamp use in Massachusetts was soaring. More than a half million people claimed this subsidy in April, up 63% from five years ago. The cost was almost $50 million for the month. That’s $600 million per year for one state. In addition to the weak economy, a relaxation of eligibility requirements has boosted demand. The state has waived face to face interviews, and you can enroll online. Eight new satellite offices help new applicants. Furthermore, it no longer matters if you have money in the bank, own property or have a retirement plan. If you or your family makes less than $42,500, you’re in.
Multiply this by 49 states and you’re talking about a massive government expenditure. The annual cost is $30 billion or more. Food stamps became a permanent program in 1964 with a budget of $75 million serving 500,000 people. It now goes to almost 30 million people. Like most other government programs, the cost is running away. These programs generally start small, with modest goals. Before long they transfer themselves into budget-busting social schemes that buy votes for the left.
No matter how noble the objective, the negatives outweigh the benefits. For one thing, social welfare reduces self-sufficiency and increases dependency. Ultimately, it leads to helplessness and bad behavior. The financial repercussions of exploding social expenditures will ultimately render them unaffordable. But not before the economy crashes, the dollar dies, and America suffers all the nasty consequences of capital consumption and deficit spending.
In his opus, Human Action, the great Austrian school economist, Ludwig von Mises, contrasted two types of government; the night watchman model and the Santa Claus model. Mises wrote, "The Santa Claus fables of the welfare school are characterized by their complete failure to grasp the problems of capital." When we reduce savings, investment and capital accumulation, we nullify economic progress. In other words, we are eating the seed corn. He advised that, "the Santa Claus principle liquidates itself."
Mises wrote about liberal economists, politicians, media spokesmen and welfare propagandists. "They are the harbingers of economic retrogression, preaching a philosophy of decay and social disintegration. A society arranged according to their precepts may appear to some people as fair from the point of view of an arbitrary standard of social justice. But, it will certainly be a society of progressing poverty for all its members.’
We’re forestalling this poverty by debasing our money. By creating money and credit from thin air we have been able to maintain our living standards. But the rest of the world is catching on to our borrowing binge and explosion of debt. They are less willing to hold our debt and to finance our profligate spending.
The constant erosion of the dollar’s value is a long-term phenomenon. It’s our contention that holding silver should also be for the long term. Even if silver were to suddenly double, the temptation to sell should be resisted. The dollar leaks air at an accelerating pace. Few things exist that will offset this chronic loss of purchasing power. No matter what your age, you should be gravely concerned about running out of money in your retirement years. You don’t want to rely on food stamps, public housing or your kids.
Above all else, remember that it’s impossible for the government to pay for all the handouts and subsidies currently in the pipeline. The politicians who appear clueless will ignore the massive deficits that threaten the nation’s solvency. They will keep spending relentlessly and raise taxes to pay for it. The final outcome of this impossible formula will be a national economic disaster. There’s no way to avoid it.