CNN's Brown, Velshi falsely claimed increased food stamps and unemployment payments are "not stimulus"

››› ››› MATT GERTZ

On Campbell Brown: No Bias, No Bull, Campbell Brown and Ali Velshi repeatedly claimed that provisions in the economic recovery bill that extend food stamps and unemployment insurance payments are, in Velshi's words, "not stimulus." But the same day, the Congressional Budget Office director stated in congressional testimony: "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."

On the January 27 edition of CNN's Campbell Brown: No Bias, No Bull, host Campbell Brown and chief business correspondent Ali Velshi repeatedly claimed that provisions in the American Recovery and Reinvestment Act of 2009 that extend food stamps and unemployment insurance payments are, in Velshi's words, "not stimulus." But earlier that day, Congressional Budget Office director Douglas W. Elmendorf stated in testimony before the House Budget Committee: "Transfers to persons (for example, unemployment insurance and nutrition assistance) would also have a significant impact on GDP." Additionally, in 2008 congressional testimony, Mark Zandi -- the chief economist and co-founder of Moody's Economy.com, who was reportedly a McCain campaign economic adviser -- stated that "extending food stamps are [sic] the most effective ways to prime the economy's pump" and cited extending food stamps and unemployment insurance payments as having a greater "Fiscal Bank for the Buck" than any other potential stimulus provision he analyzed, including temporary and permanent tax cuts.

On No Bias, No Bull, Brown asserted: "Food stamps, unemployment benefits not likely to stimulate the economy because these are the people who are in the most dire straits spending the bare minimum." After Velshi replied, "That's right," Brown stated, "So the stimulus part comes from the big spending package that we're going to talk about." Velshi responded: "Right. And, you know, maybe the $500 or $1,000 you get per family. But you're absolutely right. There are some of these things that are more about recovery than stimulus. The administration likes to call it a recovery bill. If you're giving food stamps and you're giving unemployment benefits, that's not stimulus; that's simply helping people out who are in a lot of trouble."

In his January 27 testimony, Elmendorf said:

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.

In his July 24, 2008, testimony before the House Committee on Small Business, Zandi stated:

An effective package of stimulus could include a gas tax holiday, expansion of the food stamp program, a payroll tax holiday, aid to state governments, extension of the investment tax incentives, and increased infrastructure spending. The biggest lift from this stimulus would go to lower income households struggling to pay for soaring gasoline and food prices, and small businesses who are getting hit hardest in the current downturn.

More specifically, extending food stamps are the most effective ways to prime the economy's pump. A $1 increase in food stamp payments by $1 boosts GDP by $1.73 (see table). People who receive these benefits are very hard-pressed and will spend any financial aid they receive within a few weeks. These programs are also already operating, and a benefit increase can be quickly delivered to recipients.

Zandi also included in his testimony a table that showed that "Extending UI [unemployment insurance] Benefits" would boost GDP by $1.64 for every dollar spent, a greater "Bank for the Buck" than the tax provisions he analyzed:

From the January 27 edition of CNN's Campbell Brown: No Bias, No Bull:

BROWN: And tonight, everybody, we're going to start a series, a No Bias, No Bull look at the president's economic plan. And our goal is pretty simple here: breaking it down into real terms. What would it actually mean for you, your family, your job, your neighbors? And is it enough to actually get the economy moving again? Chief business correspondent Ali Velshi is here to look at one of the most important parts of the package, and that is those tax cuts. And Ali, the Obama administration says this is the part of the plan that's aimed at helping working families. What can you tell us?

VELSHI: All right. It's complicated, and, you know, President Obama just said he hopes everybody's read the bill in Congress. This is -- there's a lot of information in here.

Let's start with tax cuts. The centerpiece of this is the $500 per worker or $1,000 per family that Americans will get. That'll come right on to your paycheck. It's not really a tax cut in the traditional sense because it's not ongoing, it's not a reduction in a percentage. Everybody under a certain income level -- and we don't know what that is yet -- is going to get it. But the Obama administration says 95 percent of working Americans will get that tax cut.

Then there's the child tax credit, an extension of that. The parents of 16 million more children will get a benefit under the proposed child tax credit. Food stamps: 30 million people will get enhanced food stamps. This not something that is ultimately going to stimulate the economy. If you're on food stamps, you're buying the minimum anyway. This is just to help people, the increasing number of people, who are out of work and need extra money.

Social Security. There's an immediate $450 to people -- a supplement to Social Security -- for some of the aged, some people on disabilities and things like that. So again, that'll be aid to older people or people suffering with disabilities in this program.

And an extension of unemployment. The Emergency Unemployment Act extended until December 2009. An extension to your ability to buy COBRA, which is your health-care benefits after you've been unemployed, although COBRA does tend to be very, very expensive. Many people who are laid off aren't able to do it.

The total of these tax cuts turn out to be about 275 billion. It's a big portion of the $825 billion plan. Again, a great deal of disagreement about whether or not this will actually work.

BROWN: Well, and go back to a point you made earlier. Food stamps, unemployment benefits not likely to stimulate the economy --

VELSHI: Right.

BROWN: -- because these are the people who are in the most dire straits spending the bare minimum.

VELSHI: That's right.

BROWN: So the stimulus part comes from the big spending package --

VELSHI: Right.

BROWN: -- that we're going to talk about.

VELSHI: And, you know, maybe the $500 or $1,000 you get per family. But you're absolutely right. There are some of these things that are more about recovery than stimulus. The administration likes to call it a recovery bill.

If you're giving food stamps and you're giving unemployment benefits, that's not stimulus; that's simply helping people out who are in a lot of trouble. And as we report here almost every night, that's an increasing number of people.

BROWN: Absolutely, Ali. And we're going to be walking through the --

VELSHI: Yup.

BROWN: -- spending part of the bill --

VELSHI: That's right.

BROWN: -- as we know more about it. With you.

VELSHI: We'll break it down. We'll talk about the health-care parts of it. We want everybody to understand what it is, and then you can decide whether you're in favor of it or not.

Posted In
Economy, Jobs, Wages, & Unemployment
Network/Outlet
CNN
Person
Campbell Brown, Ali Velshi
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Campbell Brown: No Bias, No Bull
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