Bread, Bombs, and the Big Stimulus

Bread, Bombs, and the Big Stimulus


In 2007, over 37 million Americans, or 12.5 percent of the US population, lived below the federal poverty line–$21,200 for a family of four (well below the income truly required to make ends meet in our economy.) And now, as we head into this deepening recession, we’re looking at a jump in the number of people living in poverty.

According to a new report by the Center on Budget and Policy Priorities (CBPP), based on Goldman Sachs’ projection of a 9 percent unemployment rate by the end of 2009, the number of Americans living in poverty will increase from 7.5 to 10.3 million people, of which 3.3 million total will be poor children, with 1.5 to 2 million more children living in families with incomes below half of the poverty line, or what is called “deep poverty”. (CBPP’s numbers are consistent with the rise in poverty relative to the increase in unemployment over the last three recessions.)

What’s even more ominous about the current recession as compared to those of the past, the CBPP report warns, is the truly depleted state of the safety net: “Because this recession is likely to be deep and the government safety net for very poor families who lack jobs has weakened significantly in recent years, increases in deep poverty in this recession are likely to be severe.”

CBPP points to some early indicators that “poverty is now climbing rapidly.” Food stamp caseloads rose by 2.6 million people between August 2007 and August 2008. In 25 states, at least one in five children is now receiving food stamps. According to the USDA’s annual report on food security, nearly one in eight Americans struggled with hunger in 2007 — which means “36.2 million adults and children… didn’t have the money or assistance to get enough food to maintain active, healthy lives.” 691,000 children “suffered a substantial disruption in the amount of food they typically eat” — a more than 50 percent increase from 2006 and the highest number since 1998. James Weill, president of the Food Research Action Committee, said that the current economic downturn isn’t reflected in the USDA report on hunger and 2008 numbers “almost certainly will be far worse.”

In addition to the challenges posed by a tattered safety net, many non-profits are already stretched to capacity at a moment when the donors they depend on are either less able or less willing to give. According to Paul Light, professor of public service at NYU, over the next six months up to 100,000 of the 1 million currently operating non-profits will fail.

While the social service sector is experiencing pay cuts, layoffs and failures, the military is enjoying a hiring boom during the recession that we now “officially” know (as opposed to what common sense long told us) began last December. The Washington Post reports, “The economic downturn and rising unemployment rate are making the military a more attractive option, Pentagon officials say. In some cases, the peace of mind that comes with good benefits and a regular paycheck is overcoming concerns about the wars in Iraq and Afghanistan, which any new enlistee is likely to join.” For some, it’s clearly a case of desperate times calling for desperate measures. In the past fiscal year, the Army recruited more than 80,000 soldiers while the number of unemployed people grew by 2.8 million people over the past 12 months.

In addition to its projections on the impact of this recession, the CBPP report is invaluable for its clear blueprint on what the government can do to protect the most vulnerable people hit by this downturn, while also stimulating the economy. These measures include:

  • a temporary increase in food stamp benefits;
  • additional rental assistance through the housing voucher program — cities and school districts are already reporting an increase in the number of homeless families;
  • expand and extend unemployment benefits.Fewer than 40 percent of unemployed workers now receive unemployment benefits, in many states low-wage and part-time workers (especially women) are ineligible when laid off
  • provide significant fiscal relief to states — states aren’t permitted to run deficits, even in recessions, and cuts will further damage the ability to meet rising demand for assistance while also weakening the economy.

Many of these recommendations are expected to be part of the next stimulus package — the long promised help for Main Street after weeks in which we’ve witnessed a splurge of nearly $1.4 trillion in spending on Wall Street. Food stamps, extended unemployment benefits, and fiscal aid to revenue-starved states will all figure prominently, as well as repairing public infrastructure and investing in green technologies.

As to the question of how large such a stimulus needs to be in order to be effective, Nobel Prize-winning economist Joseph Stiglitz suggests “at least $600 billion to $1 trillion over two years” in a New York Times op-ed on Sunday. Stiglitz discounts “latter-day Hooverites [who] will say the soaring deficit and national debt mean we cannot afford a large stimulus package.” “But,” he writes, “what you do with the money counts, too. The money needs to be spent carefully to ensure that every dollar provides as much stimulus now as possible while also contributing to long-term growth.” That’s why Stiglitz calls for restructuring the troubled Troubled Asset Relief Program (TARP) that has doled out nearly $350 billion to banks to get them lending again to little avail.

I would suggest, too, that the defense budget needs to be looked at with fresh thinking. Do we really need a $500 billion budget — and an additional $200 billion on Iraq and Afghanistan wars — “nearly equal to all of the rest of the world’s defense budgets combined“? A budget that represents 54 percent of all discretionary spending? The Congressional Progressive Caucus will no doubt organize around Congressman Barney Frank’s call for a 25 percent cut in the defense budget — approximately $150 billion in annual spending– or another defense budget they collectively agree on, and reach out to friends outside of the Beltway to pursue an inside-outside strategy for substantial change.

One quick example where savings could be achieved — the $13 billion a year missile defense program which a new Pentagon report study suggests is “plagued by mismanagement and corruption [and] has deployed weapons that don’t work against threats that don’t yet exist,” according to Ploughshares President Joseph Cirincione and Victoria Samson, senior analyst at the Center for Defense Information. Cirincione pointed to even bigger savings, telling me: “We could save $21 billion a year by going from the 10,000 nuclear warheads we now have at the cost of $31 billion annually, to a force of 1000 total weapons… for about $9.7 billion. Still enough to destroy the world, but at one-third the cost. Cutting to $3-5 billion a year on missile defense programs would save $8-10 billion more. Total from both — $29-31 billion a year…. And this is just from the nuclear related programs. Imagine how much we could save if we really got serious!”

If we are to rebuild our nation by passing a massive stimulus package, investing in a green economy, revamping healthcare, and strengthening our frayed social compact, we will need to make some bold choices. That kind of real change is going to demand a smart and focused inside-outside strategy.

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Katrina vanden Heuvel
Editorial Director and Publisher, The Nation

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