Neil Cavuto continued Fox News' long tradition of denying that food stamps and unemployment benefits stimulate the economy, asking, "What is more stimulative? Kate Upton or this: lovely granny promoting food stamps from her fridge."
Cavuto was ridiculing House Minority Whip Steny Hoyer's statement that food stamps and unemployment benefits stimulate the economy. But economists agree.
On Tuesday, Hoyer responded to a question about extending the Bush-era tax cuts for incomes above $250,000 by stating: "If you talk to economists, they will tell you there are two things that are the most stimulative that you can do -- one's unemployment insurance, the other's food stamps, okay?"
After first comparing the stimulative value of food stamps to images of Sports Illustrated swimsuit model Upton in a bikini on Your World, Cavuto disparaged the effect that food stamps and unemployment benefits have on the economy, leaving out the fact that Hoyer was contrasting the stimulative value of these benefits to the effect of extending the Bush tax cuts.
But economists agree that food stamps and unemployment benefits are more stimulative in a struggling economy than extending the Bush tax cuts.
Moody's Economy chief economist Mark Zandi said in November 2008 congressional testimony that to get "the largest bang for the buck," "[t]he most efficacious spending includes extending unemployment insurance benefits [and] expanding the food stamp program." Zandi also said that extra food stamps and unemployment benefits "are the most efficient ways to prime the economy's pump." Based on Zandi's testimony, the Economic Policy Institute created the following chart showing that food stamps have nearly six times the bang for the buck as extending the Bush tax cuts do:
A January 2010 Congressional Budget Office report showed that increasing aid to the unemployed would have a bigger impact on the economy than reducing taxes:
Additionally, CBO director Douglas Elmendorf testified in January 2009 that increased unemployment benefits and food stamps would help the economy more than tax cuts, because cash transfers tend to be spent quickly whereas tax cuts are more likely to be saved:
Transfers to persons (for example, unemployment insurance and nutrition assistance) would also have a significant impact on GDP. Because a large amount of such spending can occur quickly, transfers would have a significant impact on GDP by early 2010. Transfers also include refundable tax credits, which have an impact similar to that of a temporary tax cut.
A dollar's worth of a temporary tax cut would have a smaller effect on GDP than a dollar's worth of direct purchases or transfers, because a significant share of the tax cut would probably be saved. The nonbusiness tax cuts in H.R. 1 would reduce revenues much more in calendar year 2010 than in calendar year 2009 because much of the reduction in taxes would be realized by households when they filed their returns in 2010.
Many other economists also have touted the stimulative effect of increased unemployment insurance.