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Does the September jump in food stamp recipients signal a red alert for the US economy?

11 December 2012

Summary:  The number of households getting food stamps tells us little about the future (ie, it’s not a leading indicator). It tells us something about the present. And reporting about it tells us much about the reporter.  America will become a stronger nation when we demand high-quality sources of information, and complain about those that twist the news to suit our biases. That’s something each of us can do, starting today.

The US Department of Agriculture released the food stamp data (ie, SNAP) for September. Before tropical storm Sandy hit.  Zero Hedge tells a story about the numbers.

The just reported foodstamp number for September was a doozy, with 607,544 new Americans becoming eligible for foodstamps, as a record 47.7 million Americans are now living in poverty at least according to the USDA. The monthly increase was the highest since May 2011, and with August’s 421K new impoverished America, over 1 million Americans made the EBT card their new best friend. It is unclear just which atmospheric phenomenon will get the blame for this unprecedented surge in poverty, which comes at a time when the pre-election economic data euphoria was adamant that the US economy was on an escape velocity to utopia.

Being from Zero Hedge, this is of course misleading.  The USDA data page clearly shows that September data includes disaster relief, and they hyperlink to an explanation.  The number of people getting SNAP benefits rose 608 thousand in September. The number of people getting new SNAP benefits in response to Hurricane Isaac: 654 thousand.

USDA Food & Nutritional Service Responses to Hurricane Isaac

FNS approved operation of the Disaster Supplemental Nutrition Assistance Program (D-SNAP) for new D-SNAP recipients and ongoing SNAP recipients to help disaster survivors in Louisiana and Mississippi in response to Hurricane Isaac which made landfall on August 28, 2012. Preliminary reports show that as of October 12, 2012, FNS has provided over $114.9 million in Disaster Supplemental Nutrition Assistance Program (D-SNAP) benefits to help disaster survivors in Louisiana and Mississippi in response to the extended power outages and flooding caused by Hurricane Isaac. Over 654,652 individuals in 283,598 households received these benefits. In addition, FNS provided over $19.2 million in supplemental benefits to 299,169 individuals in 125,605 ongoing SNAP households affected by the disaster.

Zero Hedge also provides graphs (as usual, of excellent quality), which tells the story of our economic recovery: weak — and leaving many people behind.

20121210-September-Foodstamps

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20121210-Foodstamps-Households

An example of an excellent Zero Hedge article

Zero Hedge provides material from top-quality other sources, many of which are difficult to obtain (copyrights!), which might be a reason for their popularity.  Here’s an example, in which they provide supporting material to an excellent and important Bloomberg article: “The Mysterious Case Of America’s Negative Real Wage Growth“. It’s well worth reading.

For More Information

Where to find reliable sources of information and analysis about economics: Economics can help understand events in America and the world. Here’s where to find those answers.

Other posts about Zero Hedge:

  1. Another example of the “it’s on the Internet so it must be true” fail: Zero Hedge, 14 May 2010
  2. “2nd Iceland volcano issues warning” (Katla speaks to MSNBC’s newshounds), 28 May 2010
  3. We are ignorant because we enjoy being lied to. Today we look at lies about the US debt., 8 August 2011
  4. Plus the many times they’ve warned that the US was about to attack Iran

About the recovery:

  1. It’s the end of the world we’ve known since WWII (updated status report), 29 June 2012
  2. Did the recession begin in July? If so, expect an ugly 2013, 2 December 2012
  3. Report about the state of small businesses: yellow alert, 7 December 2012

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22 Comments leave one →
  1. Thomas More permalink
    11 December 2012 1:37 am

    The general outlook and bizarre op-eds at Zero Hedge relate to conventional economics in the same way that astrology relates to astronomy. Zero Hedge is a wacka-wacka fringe gold bug site obsessed with fantasies about eliminating “fiat” currency (paper money) in favor of gold coinage and getting rid of fractional reserve banking.

    That said, Zero Hedge does provide good charts and some of the info they cite from more reliable sources, like the UP or the AP wire service, is sometimes very good.

    My guess is that Obama is now making noises about raising the medicare eligibility age as a prelude to privatizing medicare entirely, because (like the rest of the Washington beltway elite) he can clearly see that we’re headed from another recession and tax revenues are going to plummet. Since war has become the health of the state, reducing military spending is off the table: indeed, spending on America’s military-police-prison-surveillance-torture complex will have to increase sharply to keep a lid on the increasingly widespread food riots and Occupy-type demonstrations as an ever larger percentage of the U.S. population find themselves unemployed and bereft of a social safety net. This means that the only way to make America’s budget workable going forward is by cutting back on both social security and medicare to make room for all the ongoing lavish spending on endless unwinnable foreign wars and new prisons and new police and new riot-armored goons from the DHS, the TSA, and the rest of the useless pointless alphabet-soup security agencies.

    Food stamps represents an early and obvious warning sign of an economic downturn, along with new student loan defaults (also up sharply: see “Student loan default rates jump sharply,” 3 October 2012, CNN Money website) and the small business downturn rate you cited.

    My guess? After privatizing medicare, Obama will move fast toward some sort of privatization scheme for social security, then quickly pivot to propose internal passports, nationwide pedestrian and traffic checkpoints manned by military personnel, and a nationwide nightly curfew. It’s surprising that these proposals haven’t yet surfaced. Presumably Obama wanted to wait until his second term to complete the full transition to effective martial law nationwide, inasmuch as America has languished under de facto martial law ever since 9/11.

    Like

    • 11 December 2012 4:23 am

      I had to laugh at this one, Thomas.
      IF they can pull all of these scenrios off in under Four ( more) Years, I gotta hand it to these Goons!
      And I must say that the coming quasi-human robot revolution has already arrived!
      ………….
      The Bloomberg article and ZH additions were quite interesting.(I don’t read there much anymore for quite a long time as it is too hard to sift the chaff.)
      Recall the days of Green Shoots???
      Man oh man.

      Breton

      Like

  2. Thomas More permalink
    11 December 2012 4:39 am

    While internal passports and paramilitary checkpoints and privatization of medicare may sound extreme, bear in mind that effective internal passports are already in place. The ICE and DEA are already conducting unscheduled traffic stops and sweeps in border states. Failure to produce a valid drivers license means immediate detention. So a drivers license operates effectively like an internal passport today. Ratcheting up the amount of ID required is trivial, and the inevitable calls for some sort of new form of supposedly “secure” ID like a new national ID card will grow louder and more frequent as time goes on. VIPR stop checkpoints are already being conducted on freeways by the TSA and the TSA is already conducting unscheduled warrantless searches of all passengers in bus terminals and train stations. Making these searches regularly scheduled instead of unscheduled is trivial. The DHS has already announced that it plans to expand its body scanner program to cruise liners, bus terminals and train stations.

    As for the privatization of medicare, it cannot have escaped your notice that using vouchers for medicare is the start of privatization. That’s the camel’s nose under the tent. Once we get vouchers, it’s only a matter of slightly increasing the dollar amount of the voucher while relentlessly cutting back on medicare benefits and soon medicare will get entirely voucherized, which is to say, privatized. You might also have noticed that the ACA ‘reform’ (so-called) allows states to opt out of medicaid. Since medicaid is one of the states’ biggest expenses, eventually all states in the union will opt out of medicaid. Once medicare is entirely voucherized, the abolition of medicaid will land a one-two punch to privatize state-delivered medical care in America altogether.

    Take a look at this short video where Barack Obama calls Paul Ryan’s proposal to voucherize medicare a “legitimate proposal” in 2010 and tell me Obama and company aren’t planning on privatizing medicare.

    Like

  3. 11 December 2012 5:13 am

    A more optimistic forecast for the US economy:

    GOLDMAN: The Economic Crisis Ends In 2013“, Business Insider, 1 December 2012

    Goldman’s Top Economist Explains The World’s Most Important Chart, And His Big Call For The US Economy“, Business Insider, 10 December 2012.

    Like

    • 11 December 2012 8:52 am

      GOLDMAN: The Shale Oil Revolution Is Real, And It Will Have A Massive Impact On The Global Economy“, Business Insider, 5 December 2012

      And here’s another Goldman, happy-happy, story on the growth of shale oil. I think it’s speculative because it shows the growth of shale oil in the USA from 2011-16 while it’s still 2012. So, they’re anticipating shale oil growth. Is this going to happen? I don’t know — I’m not an oil business expert, but I would just guess that this kind of business has the potential for unforseen problems.

      Like

    • 11 December 2012 9:17 am

      It seems almost everybody has done ga-ga over the shale oil revolution. Few seem interested in the environmental effects, especially when done in areas (like New York) much more sensitive than North Dakota. This is part of our broader blindness to pollution. Hysteria grows over the possible effects of future warming, while the real and present effects of pollution grow. My guess: lots of power to be gathered and money made by programs to control global warming. Not so much of their in fighting pollution — or habital destruction. Or saving the world’s remaining fisheries.

      And about all that shale oil/natural gas: the jury remains out on the economics and longer-term potential. For a minority opinion see “Oil-Prone Shale Plays: The Illusion of Energy Independence“, Arthur E. Berman (Labyrinth Consulting Services, Inc.), Houston SIPES Continuing Education Seminar, 19 October 2012.

      Like

    • Jordan permalink
      11 December 2012 9:54 am

      I find the need to cover groving effects of peak oil in more desperate search for “green shots” that will “save” us. Shale oil false capacity marketing is fullfiling the need for calming the populace with “everything is fine” meme, no need to make drastic action.
      Let’s build up confidence and they will spend us into recovery meme is an initial and still pervasive thinking of Obama since inaguration. It looks like every Obama’s policy reflects such thinking.
      “Everything is fine”

      Like

    • ulenspiegel1965 permalink
      12 December 2012 6:25 am

      The problem with shale oil usually is that economists do not do much research on production decline of unconventional oil wells and, therefore, do not see that the increase of production requires hardware and manpower which are not available, growth is limited by physics. :-)

      Ted Patzek (Prof. in Austin, expert for oil production) has a very simple but robust model on decline rates and his production curve follows very well the reality: The Gobal Oil Peak or a Plateau? (picture 5)

      Or a more phenomenological take from German sources: The predictions of oil prices by industry/banks was piss poor in the past, the second best predictions still come from academic sources and the best from hard core greenies.

      Like

    • 12 December 2012 7:32 am

      “Or a more phenomenological take from German sources: The predictions of oil prices by industry/banks was piss poor in the past, the second best predictions still come from academic sources and the best from hard core greenies.”

      I very much doubt the accuracy of that. Can you cite some examples? Past accurate forecasts? (not just one or two lucky guesses, like punters at the track).

      Like

    • ulenspiegel1965 permalink
      12 December 2012 8:04 am

      Here a compilation of forecasts for German import prices for oil, hard coal and gas. The dark green graph is the one from industry, the DLR is a high quality academic source, the greenies are WWF, Öko-Institut, greenpeace: :-)

      If you check press releases of bank and economic institutes then usually their forecasts are also low: They assume that tight oil will bring down the price and do not see that the high price of oil was the reason tight oil is produced. :-)

      Like

    • 12 December 2012 2:02 pm

      Thanks, that is interesting. But the graphs (I cannot read the text) are forecasts only, and don’t tell us anything about accuracy of past forecasts.

      “They assume that tight oil will bring down the price and do not see that the high price of oil was the reason tight oil is produced.”

      I don’t believe that’s correct. Look at US natural gas. High prices sparked production from tight formations, which have crashed prices. But, contrary to many predictions, production has remained stable. These things are complex, which is why forecasts of energy prices are so often very wrong.

      Like

    • ulenspiegel1965 permalink
      13 December 2012 1:46 pm

      You have to get the data for 2012 and compare them with the forecasts, the greenies win.

      Like

    • 13 December 2012 3:23 pm

      “You have to get the data for 2012 and compare them with the forecasts, the greenies win.”

      One year’s prediction means nothing, any more than than successfully picking the winning horse in a race. Especially if the different goups have inherent views (ie, prices rise, prices fall). If so then one group will be right due to chance as commodity prices bounce around due to random factors.

      Like

  4. Thomas More permalink
    11 December 2012 6:21 am

    Economist Steve Kopits has done an analysis on the way rising oil prices limit economic growth that suggests a sharp upper limit to U.S. GDP growth of circa 2% given current oil prices.

    Koptis’ presentation in the form of slides here. Slide 23 is the crucial one for U.S. GDP growth.

    In normal times, 3.0% GDP growth is supported by 1.8% oil consumption growth in the US. The difference, 1.2%, is provided by efficiency gains. Now, in recent times, US oil consumption has been declining by 1.6%, and this is entirely consistent with my October 2009 article entitled `Peak Oil Economics.’ From this article, we also know this trend is likely to continue. Thus, 3.0% GDP growth would require 3.4% (1.8% + 1.6%) increased efficiency gains, and 4.6% efficiency gains in total (3.0% GDP growth
    + 1.6% oil consumption declines).

    Now we know from the UMTRI that new vehicle average mileage is increasing by 3.7% per year, keeping in mind that this is only for new vehicles, not the vehicle fleet as a whole (which will by definition be less). But even if we allow 3.7% as the actual efficiency gain for oil in the economy, we are still 0.9% short of the pace needed to maintain 3.0% GDP growth. Thus GDP growth would be capped out around 2%, and maybe somewhat lower.

    And we can see this in vehicle miles traveled (VMT). For the three months ending October (compared to the same period previous years), US VMT is
    - up 0.4% on Oct. 2011
    - down 1.6% on Oct. 2010
    - down 0.3% on Oct. 2009 (US in recovery)
    - down 0.4% on Oct. 2008 (US in recession)

    Clearly, efficiency gains to date have not been able to compensate for declining oil consumption. This would appear to be a red flag, something which would feature prominently in analyses of the path of GDP.’

    I find this analysis cogent, but then I’m not an economist. Perhaps FM can find an error here.

    Like

    • 11 December 2012 6:50 am

      More,

      I don’t have time to read this, but the excerpt shown makes no sense to me. Why does GDP growth have a fixed relationship to miles driven? So in response to rising prices, we drive less. Local vacations, Boy Scouts camp closer to home, car pooling, more use of mass transit, etc.

      History shows there is no fixed relationship between oil consumption and economic growth. Oil prices rose from $1.80 in 1970 to $36.83 in 1980 (Arabian Light oil price, as posted at Ras Tanura). Global oil consumption peaked in 1979 at 66,048 million barrels/day, then the magic of economics did its work:

      • Consumption dropped by 14% through 1983. Four years of declining oil consumption, while global gdp rose!
      • Consumption equaled the 1979 peak again in 1993 (see the BP Statistical Review for details). During this period the global economy (GDP) increased at roughly 3%/year, slightly below the post-WWII average (using IMF data). Fourteen years of GDP growth with no increase in oil consumption!

      What are the economic mechanisms that make this possible? See this post for the answers!

      Like

    • 11 December 2012 9:20 am

      >Does the September jump in food stamp recipients signal a red alert for the US economy?

      The increase from the storm is maybe significant to the extent people become permanently poor following that storm. If you’re marginally eeking out an existence at low wages, and then the storm blows away your support system, that puts you at the very bottom level. I would just guess some of that will occur, but I don’t have numbers.

      However, that black line of food stamp numbers going from 2006 to 2013 should be a red alert. We’re pushing 45M on food stamps with a population of 300M or so? That’s 15%. You have to be pretty poor for food stamps.

      >Generally, your household cannot have more than $2,000 in resources (things you own). But, if your household includes a person age 60 or older or who is disabled, the limit is $3,000.

      I’m sure there are a lot of people struggling out there, who have more than $2000 in stuff. This is the tip of the iceberg. BEEP BEEP BEEP, RED ALERT — ECONOMY VERY BROKEN!

      Like

    • Ulenspiegel_1965 permalink
      12 December 2012 6:10 am

      @FM

      Koptis and other assume that economic growth is related to mobility. If high fuel prices reduce or at least constrain mobility, this has an (ugly?) impact on the economic growth.

      Therefore, Koptis asked the interesting and correct question whether fuel efficiency gains are sufficient or not.

      (See some of the current discussion on econbrowser)

      Like

    • 12 December 2012 6:24 am

      ulenspiegel,

      Thanks for explanation. The assumption appears quite like that made by economists in the early 1980s, which proved quite wrong. But it’s not my fied, and I haven’t read those articles.

      Like

    • ulenspiegel1965 permalink
      12 December 2012 8:10 am

      FM wrote: “The assumption appears quite like that made by economists in the early 1980s, which proved quite wrong.”

      Do you have data on percentage of houshold income of working class families spent on commuting back then and for 2012? Maybe the crucial difference.

      Like

    • 12 December 2012 2:06 pm

      The large decline in oil consumption following the 1970s price increase was at first largely substitution. For example, shift away from burning oil to generate electicity. Then came efficiency gains, etc.

      The focus on miles driven as a driver of oil prices is, I suspect, mistaken. Then and now. Probably reflects the fact that everybody understands that factor, whereas the other factors are far more complex.

      Like

  5. guest permalink
    11 December 2012 1:19 pm

    “The increase from the storm is maybe significant to the extent people become permanently poor following that storm.”

    I think this is a very important point — but a picture will only emerge in one year or so. By then, we shall have a better picture of how many people have been knocked off from their (however precarious) social position into final poverty.

    Interestingly, it seems that the variety of events with similar socially catastrophic consequences is increasing: serious chronic illness sending people into bankruptcy and permanent destitution, crushing student debt, coming back shell-shocked from one of those neo-colonial campaigns in far-away lands — all are tickets towards enduring poverty.

    Like

  6. 15 December 2012 3:31 pm

    I think the foodstamp growth is far more a function of elite entitlement than it is of lower class sloth. I wish there was a data set that showed foodie recipients who are also employed. That number is a measure of theft of sorts, where an employer (Wall Mart, I’m looking at you) benefits from the foodstamp program feeding their employees, the rent assistance programs paying for the roof over their head, and any number of other programs looking after basic needs. A scam where tax dollars are converted to corporate profits via programs that are said to help the poor.

    Like

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