The SNAP Scam: How Billionaires and Politicians Built a Welfare System for the Rich

 

Behind the rhetoric about ‘lazy freeloaders’ lies a stunning truth: America’s largest corporations depend on food stamps to prop up their low-wage empires...

Democrats won big in last night’s election, and it’s a great sign for the future of American democracy. Voters rejected racism, fear, and cruelty. They said in a loud and singular voice — overwhelmingly voting for moderate Democrats, progressive Democrats, and even a ballot initiative without a single person on the ballot — that they want their democracy back.

Nonetheless, Mike Johnson is still keeping the House on vacation and John Thune is still refusing to break a Senate filibuster and reopen the government. And, crucially, Trump is still refusing to fully fund SNAP/food stamps, even though he can easily put his hands on the money.

Yesterday’s New York Times’ podcast The Daily interviewed a group of West Virginians who’d lined up at a food bank because Trump had cut off their Supplemental Nutrition Assistance Program (SNAP) funds. Many of them told their interviewer that they worked full-time jobs but still didn’t make enough money to feed their families. Roughly a third of the people on SNAP, in fact, work a regular job, and 70 percent of them work full-time.

While Trump and the ghouls in his administration tried to cut off SNAP benefits (and are now threatening to cut off unemployment benefits if Democrats don’t relent and let them gut Obamacare), what this entire drama is really revealing is how what started out as programs to help the unemployed or disabled people have now become billion dollar subsidies for morbidly rich employers and their massive corporations.

When FDR created the food stamp program in 1938, it had three main purposes. The first was to generate Keynesian “from the bottom up” financial activity by giving government money to retailers, who would then circulate it in, and thus stimulate, local economies. The second was to provide a market for struggling farmers, millions of whom were then facing bankruptcy. And the third was to ameliorate hunger among America’s poor.

Today, the SNAP program still accomplishes the goals of helping out farmers, supporting local food stores, and reducing hunger among America’s poor, but about a third of the program has also become a way of insuring that America’s morbidly rich billionaires get even richer on the taxpayer’s dime.

And it’s not just SNAP: you could make the same argument for much of Medicaid and the Temporary Assistance for Needy Families (TANF) program (TANF times-out at 5 years). As long as employers know that their employees can get SNAP, Medicaid, and TANF benefits even when they’re working full time, they’ll keep wages low and thus profits high. It’s really that simple.

With FDR‘s new deal, Democrats explicitly proclaimed that if you worked a full-time job, you should be able to buy a house and raise a family. Republicans, on the other hand, have argued since the 1930s that employers should have sole control over what paychecks they cut, even resisting the minimum wage. And now they’ve found a slick new way to exploit Democratic programs like SNAP and Medicaid to help employers further lower their payroll expenses.

Back in 1817, economist David Ricardo coined what he called the “Iron Law of Wages.” His point was that there’s a “marketplace” for labor and the price for labor — the wages paid — in that marketplace is determined by two main variables: actual take-home pay and the local cost of living.

Employers, in other words, carefully calibrate what they’ll pay people to meet (but not exceed) what their workers need to minimally meet the local cost of living. It’s why, for example, wages are higher in expensive cities and lower in cheaper rural areas.

Ricardo’s Iron Law is also why when taxes go down on working class people the effect is paradoxical: tax cuts will always, within a few years, cause corresponding wage cuts, while tax increases on working class people drive wages up. “Taxes on wages will raise wages,” Ricardo wrote. “If the taxes, instead of being increased, were diminished, wages would fall.”

The reason is easy to understand tax cuts mean more take-home pay, and when employers see that their workers are taking home more money than they need to live, they’ll lower wages to get back to where take-home pay was before the tax cut. On the other hand, if income taxes are increased employers will be forced to pay more so people’s take-home pay can once again cover the local cost of living.

We’ve even seen this work in real time. During the 1930s-1960s era, income taxes went up considerably on working class people to pay for WWII and digging America out of the Republican Great Depression; wages similarly went up. The years following Reagan’s, Bush Jr’s, and Trump’s tax cuts, however, each saw wages fall. (The same thing happened when income taxes fell after WWI and wages similarly dropped a year later.)

Which brings us to how SNAP, Medicare, and TANF have become Billionaire Protection Programs, helping them keep wages low and profits high. Ricardo’s Iron Law works the same way with government benefits, although they largely didn’t exist in his time.

Employers know what people need to take home to meet the local cost of living, but when government subsidizes people’s food (SNAP), healthcare (Medicaid), and/or rent and utilities (TANF) employers also know that’s money they don’t have to pay out as wages.

Billionaires like the Walton Family, in other words, know that they can cut their employees’ wages by the same amount as the government subsidies that are available to those workers. Every penny of government benefits, under this GOP strategy, becomes a penny less that Walmart, for example, has to pay its people who qualify for benefits.

The one-third of SNAP recipients who are working, for example, are receiving around $3 billion a month in food support from the government; that’s $3 billion that employers can keep for themselves instead of having to pay out as wages.

Republicans love to pretend that these programs are purely designed for the truly needy (and that’s generally been the goal of Democrats who’ve created them), but they give away the game when they repeatedly — and almost always successfully — force work requirements into them.

Why, after all, would anybody put together a program to feed hungry people and then demand that, to get the full benefit, they had to have a job? Shouldn’t every job pay enough — as Democrats have argued since the Minimum Wage was established in the 1930s — to prevent hunger? Shouldn’t people who work full-time make enough to cover healthcare, rent, and utilities?

The answer to this 50-year-long GOP scam isn’t to kill off these three programs, but, instead, to do the exact opposite of what Republicans are constantly demanding: eliminate eligibility for people working full-time jobs. That way, employers will be forced to pay a living wage to their workers, rather than padding their bottom lines with workers’ food, medical, and rent subsidies financed by our tax dollars. It’ll also increase pressure within state and local governments to raise minimum wages, another demonstrably positive outcome that Republicans and fat-cat billionaires hate.

Obviously, a change that radical would have to be phased in gradually and carefully, combined with increases in the Minimum Wage, so people's lives are not disrupted. But doing so would blow up the low-wage business model giant employers have been using for decades, converting government subsidies year-after-year into new yachts for their billionaire owners.

So, whenever you hear Republicans go on and on about the importance of “weeding out the welfare queens with work requirements,” know that what you’re really hearing is a variation on, “We want taxpayers to subsidize low-wage workers so the billionaires who fund our campaigns can buy another mansion or newspaper or TV network.”

Sometimes the biggest Republican scams are run right out in the open, right under our noses. It just takes a moment of reflection — and a simple insight from a 19th century economist — to see through them.

Hopefully the GOP’s attempt to increase Americans pain via SNAP denials will backfire and spark a much-needed conversation about how all this works. Last night’s elections are a good sign that we’re moving in that direction. That can lead to remaking our work and welfare systems, so they’ll once again benefit average people, instead of also subsidizing Trump’s plutocrat friends.

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