What Should Have Happened with T.A.R.P., the Stimulus, and the Bailouts
by Dave Brown
Here’s the simple, sad truth that transcends ideology, philosophy, political affiliation: in order for the economy to grow, people need more buying power. We’ve all been taught that the economy runs on the forces of supply and demand. As the demand for something increases, the supply will follow and vice versa. The problem with our current economic situation is that we have plenty of pent-up demand but people simply don’t have the money to turn that demand into sales. And without sales, businesses can’t hire more workers, and without more jobs, people can’t spend more money, and so on. We are stuck in a seemingly never-ending downward spiral.
Wal-Mart’s most recent annual report perfectly illustrates this situation (emphasis mine) –
…the problem isn’t that Wal-Mart revealed how poor its customers really are, it’s that Wal-Mart revealed how poor U.S. shoppers really are.
The hook here, the news peg, is that Wal-Mart released its annual report and in it, there’s a paragraph that states:
Our business operations are subject to numerous risks, factors and uncertainties, domestically and internationally, which are outside our control … These factors include … changes in the amount of payments made under the Supplement[al] Nutrition Assistance Plan and other public assistance plans, changes in the eligibility requirements of public assistance plans, …
The implication is that Wal-Mart preys on the poor, that the retailer has somehow created poor people by paying low wages. That it relies on government assistance in a way that goes beyond accepting payment from shoppers via government programs.
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Not quite.
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In November, benefits for a family of four were reduced by $36 a month. Benefits had been increased as part of the Recovery Act in 2009, but Congress allowed the increase to expire on Nov. 1, 2013.
An estimated 48 million Americans benefit from SNAP while roughly 80% of U.S. consumers shop at Wal-Mart at some point during the year.
Not all of them use SNAP, but the majority have some kind of budgetary constraint and it’s a number that keeps growing. Ten years ago, roughly 50% of Wal-Mart shoppers cited low prices as the most important reason to shop at Wal-Mart; today that number is 75%…
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Wal-Mart shoppers are particularly sensitive to fluctuations in the price of gas, to small tax increases or to anything that adds another $20 burden to a household in any given week. Budgets are tight and getting tighter all the time, in spite of a slowly recovering economy.
Wal-Mart is hardly the only retailer to be affected by a reduction in SNAP benefits, or to say so in financial documents. The dollar store segment is also vulnerable. Roughly $4 billion in SNAP benefits were vaporized, money that was once spent at U.S. stores, not just at Wal-Mart.
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As one grocery executive said in an online retail forum regarding the issue, “This cut hurts all of our sales, not just Wal-Mart, let me make that clear. The struggle is universal for retailers, and sales are down around 8-10% since the first of the year.”
I’m not a fan of criticizing other reporters or publications, but these headlines are designed to get clicks, to be shared, to fan the flames of outrage. In this case, it’s a false and very misplaced outrage.
Wal-Mart didn’t just reveal how poor its customers really are, it revealed just how poor so many U.S. shoppers are.
Exactly! The problem here is that the people, the average folks, are getting struggling, watching their income and, in the case of some, assistance shrinking causing their buying power to decrease on a nearly daily basis.
When things first hit the economic fan in 2008, President Bush unveiled the Troubled Asset Relief Program, otherwise known as T.A.R.P. This program funneled $700 billion into the troubled financial sector in the hopes of preventing the entire banking system from collapsing. Since then the government issued the American Recovery and Reinvestment Act of 2009 (aka the “Stimulus”) which cost, depending on who you ask, at least $540 billion and then there was the auto industry bailouts that cost, again depending on who you ask, about a total of $35 billion (I’m rounding low by the way). That comes out to an estimated total of $1,275,000,000,000,000 (i.e. one trillion, 275 billion dollars).
So in an attempt to help save the economy, the government has spent over a trillion dollars on programs that were specifically designed as some type of bailout or stimulus. Yet the economy still flounders, floating down poo river, grasping to a piece of ship wreckage for dear life. Nothing has changed.
We are six years into this economic downturn and the reality is, for the average folks, things are pretty much where they were before the fit hit the shan, if not worse. Now the upper crusts of society are doing quite well for themselves; thanks in no small part to the cronyism in Washington, DC that has put the interests of the rich and powerful few above those of the many. This country has evolved from a constitutional republic into a plutocracy that is run by groups of ideologues, yes-men, and party whores that put the needs of their power and wealth before that of those they claim to serve. This has nothing to do with ideology and everything to do with power.
But what if all of that money had actually gone into the hands of the people? What effect would that have had on the economy? Take this into consideration. The population of the United States is currently about 317 million. So had our government taken that $1,275 trillion and divided it up and given it out to the people of this country that would have meant about $4 million in the pocket of each and every American. Imagine the possibilities. That money would have turned into mortgages, car loans, credit card, and student debt being paid off; child support payments being paid and past balances being paid off; new homes and cars being purchased (with cash no less); banks would have flourished thanks to the huge influx of new deposits; business would have thrived thanks to the public’s new found buying power; and an end (even if only temporarily) to many public assistance programs (for example, all SNAP benefits could be put on hold for a year). Sure there would be waste and corruption but in this scenario at least the people are given the power and ability to fix the economy from the bottom up instead of relying on those in power to fix it from the top down.
Obviously there are arguments about why this wouldn’t work or how it’s not the government’s job, and blah, blah, blah. The point is that money was spent and it was a huge opportunity that was missed.
Otter Limits 