The part of this article that stuck me the most was that Wal-Mart will be cutting over 2,300 jobs and closing stores. Partially in response to this cut to Food Stamps, but more because their profits would drop. This is potentially an example of where a government pulling its involvement has hurt the economy, with workers losing jobs and forcing them to potentially pull even more money into other welfare programs like unemployment. Not because the workers were lazy, but because the firms would rather see workers unemployed than lose any amount of profits.
Read the article here
3 comments:
It's definitely sad to read that the government chose to allow a large portion of the foodstamp program to expire and, therefore, prompt the loss of so many jobs in efforts to reduce losing profit. This is a case where a lack of congressional urgency let the program fall through. Could this be considered a form of 'government failure?'
It definitely could be, considering this could be contributed to a massive difference between Republicans and Democrats, where Republicans are calling for even larger cuts to programs like Food Stamps and similar social services. This, while it could help the government side of GDP, could ultimately hurt the consumer side of GDP, as transfer payment programs are counted in consumption.
Although other articles written on Wal-Mart's dismal forecast have indicated that cuts to the food stamps program will affect the stores earnings (because a large proportion of Wal-Mart's customers are low-income individuals and families), they don't say that the cuts to the program are the only reason for cutting jobs within the company. Competition from other dollar stores and online stores is hurting the company and troubles with Wal-Mart's international stores have hurt the company's profits. I don't disagree that cutting food stamps hurts individuals and the stores that they use food stamps at, but it's a stretch to say that this is the only factor influencing Wal-Mart's decision to decrease their payroll. http://www.reuters.com/article/2014/01/31/us-walmart-outlook-idUSBREA0U0YK20140131
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