Surfing the Internet has been difficult as of late. I can't stop rolling my eyes at the claims that food stamps and unemployment benefits “stimulate” the economy. This is economic nonsense that only tells half the story.

It started with Colorado Springs Gazette reporter Emily Wilkins' July 8 article on food stamp usage rates in Colorado. Ms. Wilkins pointed out that, “less than 42 percent of Colorado residents eligible for food assistance are receiving the benefits.” The article made it clear that this was a problem. To Ms. Wilkins and her sources, nearly 60 percent of eligible Coloradans weren't doing their job to help stimulate the economy by graciously receiving benefits paid with money earned by other people. One source in the article lamented this missed opportunity for “job creation” and “economic development.”

A month later, White House press secretary Jay Carney picked up where Ms. Wilkins left off when he asserted that unemployment insurance was a great way to generate economic growth and create jobs. “There are few other ways that can directly put money into the economy than providing unemployment insurance,” he told a Wall Street Journal reporter.

On the other hand, Agriculture Secretary Tom Vilsack thinks that food stamps are an even better stimulus than unemployment payments. He called food stamps, “the most direct stimulus you can get into the economy during tough times.”

The story that Emily Wilkins, Jay Carney and Tom Vilsack tell is at most a half-truth. They focus only on what is seen: people spending on goods and services they might not have purchased without the help of a particular government program. In their minds, these purchases spur economic growth and hiring. But that's only the first half of the story. They forget the second half — all of the costs associated with the program.

The money the government gives to somebody who isn't working was first taken from someone who is working. By taking money from productive people, either now or in the future with debt that will have to be repaid later, the government is skewing the incentives away from production and wealth creation.

First, the productive people (which include business owners) who are targeted for the government shakedowns have a disincentive to keep producing wealth and earning more money. Why work longer and harder if your additional earnings succumb to additional taxes? After a certain point, it's just not worth it. The entrepreneur becomes tempted to enjoy leisure rather than continue working. The unemployed who are being paid because they are jobless have an incentive to remain jobless. If the government pays you because you don't have a job, why would you get one that could potentially pay you less than you earn not working? Finally, businesses finance these redistribution programs through higher payroll taxes. If employers were left alone, they could have used the money taken from them to hire productive people and expand production. In other words, create jobs.

The unemployment insurance money and food stamps certainly help some people. These people are visible for everyone to see. Invisible are all the unemployed people who could have gotten jobs if only employers had the money to hire them.

Since there is no magic money fairy, food stamp and unemployment programs have to get their money from somewhere. That somewhere is productive people — entrepreneurs, employers, employees, and anyone else who created wealth and earned money. Taking from wealth creators to give to wealth consumers does not “stimulate” our economy or make our country richer.

If the Obama administration and Ms. Wilkins were right, we could create prosperity by simply adding more people to the food stamp rolls. Why stop at a few million people here and there? Why not put the whole country on food stamps?

But in real life, wealth doesn't come from buying food with food stamps. It comes from production. Food stamps are not production.

Economic analysis that only accounts for half of the story is dangerous. It gives the illusion that you can get something for nothing. Milton Friedman famously said, “There is no such thing as a free lunch.” Food stamps can be lunch, but they are certainly not free. Each stamp represents one less lunch in the private sector. You don't want to come between a productive person and their lunch do you?



Justin Longo is a research associate at the Independence Institute, a free-market think tank in Golden. He studied economics at George Mason University.