How Many of You Are on Food Stamps?

Personal Snapshots
Forecasts & Strategies
November 2000

by Mark Skousen

“Middle of the road policy leads to socialism.” -Ludwig von Mises

At the recent San Francisco Money Show, I asked an audience of several hundred investors, “By a show of hands, how many of you are on food stamps?” Not a single hand went up. Then I asked, “How many of you are on Social Security or Medicare?” A third of the audience raised their hands.

Finally, I asked, “How many of you think you will be on the food stamp program during your lifetime?” Again, not a single hand went up. But when I asked how many would eventually go on Social Security or Medicare, almost everyone raised their hand.

My point was simple. The food stamp program is a social welfare program limited to the very poor; there’s a means test to qualify for food stamps, and most Americans attending investment conferences don’t need food stamps. On the other hand, Social Security and Medicare are universal social insurance plans. Everyone pays these taxes and at age 65 (sometimes earlier) they all participate, even though most Americans could afford their own pension program and health care insurance. Is there any wonder voters are more worried about Social Security/Medicare than they are about food stamps?

The following table shows the stark contrast between the food stamp program and Social Security/Medicare.

U.S. SOCIAL WELFARE SYSTEMS

Program Total
Coverage
Current
Recipients
Total
Annual Expenditures
Social
Security
180.0
million
44.2
million
$375
billion
Medicare 180.0
million
38.4
million
$215
billion
Food
Stamps
19.8
million
19.8
million
$17
billion

Note: Figures for Social Security and Food Stamps are for 1998, Medicare for 1997, the latest available.

Why Not “Foodcare”?

Suppose the President of the United States proposes a new welfare program called “Foodcare.” Since food is even more vital to each American citizen than health or retirement, he argues, the food stamp program should be expanded and universalized, like Social Security and Medicare, so that everyone qualifies for food stamps and pays for the program through a special “food stamp” tax. Congress agrees and passes new welfare legislation. Thus, instead of 19.8 million Americans on food stamps, suddenly 180 million or more begin paying the “food stamp” tax and collecting food stamps, representing perhaps 10% of household budgets. What effect do you think this universal “Foodcare” plan would have on the food industry? Would we not face unprecedented costs, red tape, abuse and powerful vested interests demanding a better, more comprehensive “foodcare”? And suppose “snacks” were not covered by “Foodcare”–wouldn’twouldn’t the general public start demanding that “snacks” be covered by the government because the cast of snack foods was rising too fast? Ludwig von Mises was right: “Middle of the road policies lead to socialism.”

Fortunately, there is no nightmarish “foodcare” program. Granted, there have been abuses and waste in the food stamp program, but the problems of efficiency are few compared to, say, Medicare. In fact, since 1995, the number of Americans on food stamps has declined from almost 27 million to under 20 million, and the costs have fallen from $22.8 billion to $16.9 billion. Yet has the size of Social Security or Medicare declined? Never.

Safety Net or Dragnet?

The conclusion is clear. Government welfare systems-if they should exist at allshould be limited to those who really need assistance. They should be safety nets, not dragnets that capture everyone. It was a tragic mistake to create a Social Security and a Medicare system where everyone became at some point a ward of the state. I’m convinced that if President Roosevelt had conceived Social Security in 1935 as a retirement plan for only those less fortunate to plan ahead financially, it would be a relatively inexpensive welfare program that would require taxpayers to pay at most 2%-3% of their wages/salaries to FICA, not 12.4% as they do today. If President Johnson had proposed Medicare in 1965 as a supplemental medical/ hospital plan limited to the needy, today taxpayers would be paying 0.5% of their wages/salaries to Medicare, not 2.9% as they do today. Instead, the systems were made universal, and the duplication is horrendous-and unnecessary.

Because we all pay in and we all benefit, we don’t always think straight about these “entitlements.” Example: A stockbroker recently told me about a client who called and complained bitterly about attempts by Congress to revamp Medicare. He angrily said, “They can cut spending all they want, but don’t touch my Medicare!” While the stockbroker listened patient to this man’s tirades, he pulled up the client’s account on his computer screen. He had an account worth $750,000! If anyone could afford his own medical insurance plan, it was this man. He didn’t need Medicare. Yet he saw Medicare as his right. He had paid into it all his life, and he deserved the benefits.

Imagine, what this man would be saying about Congress and food prices if we had “Foodcare.”

The Anti-Capitalistic Mentality, Updated

Economics on Trial
Ideas on Liberty
November 2000

by Mark Skousen

“In the excitement over the unfolding of his scientific and technical powers, modern man has built a system of production that ravishes nature and a type of society that mutilates man.” -E. F. SCHUMACHER (1)

In 1956, Ludwig von Mises countered myriad arguments against free enterprise in his insightful book, The AntiCapitalistic Mentality. “The great ideological conflict of our age,” he wrote, “is, which of the two systems, capitalism or socialism, warrants a higher productivity of human efforts to improve people’s standard of living.” (2)

Unfortunately, Mises’s counterattack has done little to stem the tide of anti-market sentiments. One that continues to be popular is E. F.Schumacher’s 1973 book, Small Is Beautiful which has recently been reprinted in an oversized text with commentaries by Paul Hawken and other admirers. Schumacher has a flourishing following, including Schumacher College (in Devon, England) and the Schumacher Society (in Great Barrington, Massachusetts). Hawken hails Schumacher as a visionary and author of “the most important book of [his] life.” (3) Schumacher’s message appeals to environmentalists, self-reliant communitarians, and advocates of “sustainable” growth (but not feminists the old fashioned Schumacher cited favorably the Buddhist view that “large-scale employment of women in offices or factories would be a sign of economic failure” (4) ).

From Austrian to Marxist to Buddhist

Oddly enough, Fritz Schumacher’s background is tied to the Austrians. Schumacher was born in Germany in 1911 and took a class from Joseph Schumpeter in the late 1920s in Bonn. It was Schumpeter’s course that convinced Schumacher to become an economist. While visiting England on a Rhodes scholarship in the early 1930s, Schumacher encountered F. A. Hayek at the London School of Economics and even wrote an article on “Inflation and the Structure of Production.” (5) But his flirtation with Austrian economics ended when he discovered Keynes and Marx. He renounced his Christian heritage and became a “revolutionary socialist.” The Nazi threat forced him to live in London, where he was “interned” as an “enemy alien” during World War II. After the war, he worked with Keynes and Sir William Beveridge and supported the nationalization of heavy industry in both Britain and Germany. But his real change of heart came during a visit to Burma in 1955, when he was converted to Buddhism. “The Burmese lived simply. They had few wants and they were happy,” he commented. “It was wants that made a man poor and this made the role of the West very dangerous.” (6)

Schumacher greatly admired Mahatma Gandhi and his saying, “Earth provides enough to satisfy every man’s need, but not for every man’s greed.” Eventually he wrote a series of essays that became his classic, Small Is Beautiful, published in 1973. In the 1970s, he became passionate about trees and began a campaign against deforestation. After a successful book tour in the United States, including a visit with President Jimmy Carter, he died in 1977 of an apparent heart attack.

The Lure of Buddhist Economics

Schumacher’s message is Malthusian in substance. Small Is Beautiful denounces big cities and big business, which “dehumanizes” the economy, strips the world of “nonrenewable” resources, and makes people too materialistic and overspecialized. According to Schumacher, individuals are better off working in smaller units and with less technology.

His most important chapter is “Buddhist Economics,” with its emphasis on “right livelihood” and “the maximum of wellbeing with the minimum of consumption.” Foreign trade does not fit into a Buddhist economy: “to satisfy human wants from faraway places rather than from sources nearby signifies failure rather than success.” (7) In sum, traditional Buddhism rejects labor-saving machinery, assembly-line production, large-scale multinational corporations, foreign trade, and the consumer society.

There are two problems with Schumacher’s glorification of Buddhist economics. First, it denies an individual’s freedom to choose a capitalistic mode of production; it enslaves everyone in a life of “nonmaterialistic” values. And second, it clearly results in a primitive economy. Mises responded to both these issues: “What separates East and West is . . . the fact that the peoples of the East never conceived the idea of liberty . . . . The age of capitalism has abolished all vestiges of slavery and serfdom.” And: “It may be true that there are among Buddhist mendicants, living on alms in dirt and penury, some who feel perfectly happy and do not envy any nabob. However, it is a fact that for the immense majority of people such a life would be unbearable.” (8)

I have no objection to preaching the Buddhist value that sees “the essence of civilization not in a multiplication of wants but in the purification of human character.” Nor do I disapprove of localized markets (see my favorable review last November of the Grameen Bank, which makes small-scale loans to the poor). But none of this idealism should be forced on any society. Ultimately we must let people choose their own patterns of work and enjoyment. Clearly, whenever Third World countries have been given their economic freedom, the vast majority have chosen capitalistic means of production and consumption. As a result, poor people have been given hope for the first time in their lives-a chance for their families to break away from the drudgery of hard labor, to become educated, see the world, and enjoy “right living.”

Freedom is beautiful!

1. E. F. Schumacher, Small is Beautiful Economics as if People Mattered: 25 Years Later with Commentary (Point Roberts, Wash.: Hanley & Marks, 1999 (1973)), p. 248.
2. Ludwig von Mises, The Anti-Capiaadatie Mentality (South Holland, Ill.; Libertartan Press, 1972 [1956]),p. 62.
3. Paul Hawken, Introduction to Schumacher, p. xiii.
4. Ibid., p. 40.
5. Sec The Economics of Inflation, ed. by H, P. Willis and J. A Chapman (New York: Columbia University Press, 1935).
6. Quoted in Barbara Wood, E. F. Schumacher: His Life and Thought (New York: Harper & Row, 1984), p. 245.
7. Schumacher, p. 42.
8. Mises, p. 74.