Winners and Losers in the War on Poverty

1384976086000-AP-Homeless-VeteransProgressives and liberals love William James’s idea of a “moral equivalent of war.” As Jonah Goldberg defines this concept, “The core idea, expressed in myriad different ways, is that normal democratic capitalism is insufficient. Society needs an organizing principle that causes the citizenry to drop their individual pursuits, petty ambitions, and disorganized lifestyles and unite around common purposes. Naturally, the State must provide leadership and coordination in this effort, just as it does in a war.” The redefining of social problems as battles in a “war” also expands the regulatory and intrusive power of the federal government, and justifies its appropriation of wealth in order to finance the programs that are de facto redistributions of property. The fundamental purpose of the Constitution, limiting the government in order to allow problems to be solved at the closest possible level to the people, is gutted by a false analogy.

Up until Obamacare, no greater example of costly failure of this idea has been Lyndon Johnson’s “War on Poverty,” a congeries of various federal programs legislated 50 years ago. Johnson’s grandiose utopian aim for his “unconditional war on poverty” was the “total victory of prosperity over poverty.” Recently the House Budget Committee issued a report surveying this effort, and its conclusions are stark: after spending $15 trillion, the war on poverty has led to an expensive stalemate at best. But it has been a winner for the party of big government.

The data gathered in the report document this failure. Between 1965 and 2012, the poverty rate declined a meager 2.3%. “Deep poverty” is at its highest recorded level. Nearly 22% of children live below the poverty line. All this despite 92 federal programs aimed at the poor, including 17 different food-aid programs and over 20 housing programs. In 2012 the tab for this largess was $799 billion––$100 billion for food, $200 billion on cash aid, $90 billion on education and job training, $300 billion for health care, almost $50 billion on housing. Any business getting such bad results after spending so much money would have long ago gone bankrupt.

In addition to wasted money, all these programs have had baleful effects on the culture and character of those the programs are supposed to help. One has been the erosion of the work ethic, as holding a job is punished rather than rewarded. Today labor-force participation is at a 36-year low of nearly 63%, and the Congressional Budget Office estimates a further 2-point drop over the next decade. There are several reasons for this decline, including an aging work force and the recent recession. But programs that make it possible not to work bear some of the responsibility. For example, as a result of the loosening of medical eligibility criteria in the Social Security Disability Benefits Reform Act of 1984, the number of workers receiving Social Security Disability Insurance increased from 2.9 million in 1980 to 10.9 million in 2012, at a cost of $137 billion. This trend will leave the program insolvent in 2016.

Another problem is the “poverty trap,” which results from the duplicative and uncoordinated programs that financially penalize people for doing better. As the Report writes, “The complex web of federal programs and sudden drop-off in benefits create extraordinarily high effective marginal tax rates, which reduce the incentive to work.” One study calculates that if a single mother of two children living in Colorado raises her income from $10,000 to $40,000, she will not keep much of that extra $30,000 because of higher taxes and benefit cuts. If she is enrolled in programs like food stamps, Medicaid, State Children’s Health Insurance, housing assistance, and welfare, her marginal tax rate will be over 80%. And enrolling in Obamacare will add another 13%. Given that someone in her position can earn extra cash from off-the-books work, why would she make an effort to get off the dole?

The obvious way to reform the dysfunctional federal anti-poverty complex is to reward work instead of punishing it. The Earned Income Tax Credit gives workers extra cash by compensating for payroll taxes. The 1996 welfare-reform legislation, which required recipients to engage in approved work programs, and set a 5-year limit on receiving benefits, reduced poverty among all cohorts except the elderly. Yet such reforms are hostage to party politics. In 2012 Obama weakened work requirements by offering waivers and reducing participation rates, changes that clearly violated the intent of the legislation. Given that these programs are administered by government agencies staffed by a unionized work force and run by political appointees, whether a program succeeds at its aim or fails is not as important as expanding the size and political clout of the agency.

The whole question of poverty, however, is beset by other problems. The first is the defining what constitutes poverty. As the Report points out, the Official Poverty Rate used by the government and journalists measures pre-tax income and ignores consumption, which is a significant omission given that the statistical poor consume much more than they earn. As a result, we have a national discourse on poverty that often indulges an emotional rhetoric more suitable for Dickens’s London or rural America during the 1930s, but doesn’t square with a society in which the “poor” enjoy cell phones, satellite television, video games, and air-conditioning. The second flaw in the OPR is its failure to take into account non-income sources of support from assistance programs like food stamps, housing subsidies, the Earned Income Tax Credit, or other pre-tax and non-cash benefits. Thus the political discourse on poverty is based on a misleading definition that obscures the federal government’s interest in magnifying the number of poor. The fact is, those deemed poor in America would be considered solidly middle class in most of the world.

The War on Poverty has failed because, like most of progressive utopianism, it ignores the flaws of human nature. Having discarded notions like sin and vice as retrograde superstitions out of touch with scientific knowledge, progressivism has thrown out as well the virtues like self-control, personal responsibility, and hard work that control the sorts of destructive behaviors contributing to poverty. Indeed, poverty today strongly correlates with unwed motherhood, not working, and dropping out of school, all of which were once stigmatized and made one an object of shame. Even more troubling, as John C. Goodman of the Independent Institute pointed out recently, the government knew long ago that their programs would create the wrong incentives by rewarding bad behavior. Studies conducted in the late 1960s “established without question that welfare changes behavior. It leads to the very behavioral changes that keep people in a state of poverty and dependency.” So why have these programs continued to expand, and new ones like Obamacare continue to be created?

The simple answer is that too many people benefit politically and economically from the poverty industry. Public employee unions donate millions to politicians who increase the number of those on the dole in order to buy political support. The rhetoric of poverty and “income inequality” serves to mask the failure of economic policies to create jobs and give people the chance to achieve autonomy and abandon dependence. From that perspective, the War on Poverty hasn’t failed at all. Whatever its initial good intentions, it has succeeded at creating ever more clients and dependents for one political party. And we all know which one that is.

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  • Ms. Pinky Stanseski

    I firmly believe what will help win the war on poverty is increasing the minimum wage, increasing the wages inmates get paid (Right now, they stretch from $0 an hour to about $1.15 an hour, depending on the correctional institution that they live at) & enacting ban-the-box laws.

    • objectivefactsmatter

      $100 an hour will eliminate poverty for sure.

      • gerry

        Double it,so everyone can drive expensive cars,jet around etc etc…More people neede to build cars,houses,fly planes etc etc…A win win situation.

        • objectivefactsmatter

          Right. And if there is some “inflation” we’ll just keep doubling it till everything is “fair.”

    • TheOrdinaryMan

      If inmates’ wages are increased, shouldn’t we charge them for room & board?

    • CowboyUp

      The ‘war on poverty’ is unwinnable, has been counterproductive, and should be abandoned.

    • Schmitty

      What is a ban the box law?

  • johnlac

    Johnson’s WOP was a disaster for a number of reasons. But two big reasons are it (1) Took trillions of dollars away from the producers and gave them to the non-producers and (2) it created a permanent class of “victims” who were more than happy to wallow in their victimhood. Of course the Dems seek to make more and more victims the better to expand their voting base. It was all about power for the Dems. And it still is.

  • Gee

    The term “income inequality” is another expression for Socialism. It doesn’t work, has never worked and will never work

    • gerry

      There is income inequality,not too many people get the same income or salary as Reid,Pelousy,etc etc.So,what are they not redistributing,not only part of their income and wealth?

    • objectivefactsmatter

      Don’t people realize that the real problem is atomic inequality among the periodic table of elements? And I have the science to PROVE it!

      WTF do we do now? It’s like global warming and income inequality all rolled in to one. There is no escape.

      Unless of course you put me in charge. Only my plan will work but I need to have a lot more power than any other leader before. We must have a unified global plan for this problem. And my power must be virtually unchecked because I will act in the name and the interests of the people.

  • Capt Bob

    Don’t forget the 62,000 (according to HUD) Homeless American Veterans that are cold and hungry on the streets of the US. What happing to: “Standing up for those that stood up for us.”

  • Realist

    A really good read and so informative, but I have to admit I don’t expect this type of rational thinking to win the day.

    We have one of the core poisons of modern liberalism being injected into the societal DNA of Human Nature daily. The vast majority of people will do only as much as is necessary to have a minimum of material wealth and comfort weighed against the effort required to obtain that wealth and comfort. The short-circuiting of this normal (unmolested by government) cost to benefit ratio destroys the normal pricing mechanisms inherrent in any market, and as the market distortions grow from government interference the demands for more government interference to ameloriate the distortions grow even faster and louder, all of which leads to the exponential growth of market distortions and the inexorable failure of those markets.

    The now archaic idea of “poverty” as a condition that has metrics that can be reliably measured so that the effectiveness of programs to address that poverty can be measured have been rapidly flushed down the memory hole by libcultists. This is because the “poor” as a group do not vote in sufficient numbers to insure that lib politicians stay in power. Now the libcultists have introduced their latest carefully crafted deception and they call it “inequality”. This formulation seeks to conscript a much larger percentage of society as “victims” of invidious forces that have somehow “stolen” their fair share of success when it is really the massive market distortions created by libcult policies that are 99% to blame.

  • sprinklerman

    “I am for doing good to the poor, but I differ in opinion of the means. I think
    the best way of doing good to the poor, is not making them easy in poverty,
    but leading or driving them out of it. In my youth I traveled much, and I
    observed in different countries, that the more public provisions were made
    for the poor, the less they provided for themselves, and of course became
    poorer. And, on the contrary, the less was done for them, the more they did
    for themselves, and became richer.” – Ben Franklin, Relating to prices and the poor, 1766

    This isn’t rocket science and human behavior hasn’t changed since Ben walked this earth. When are we going to learn from the past?

    • gerry

      We have learned how to create more poor.This is an industry,lots of people are living nicely on the back of the poor.Lots of people are eating nicely at the poor’s tables.Those people are unemployable and it is not in their interest to have less poor people.What terrifies those people is a poor with a textbook.

  • tmrshll1

    1. If the Us would measure poverty rates like the rest of the world, it would show more families in poverty rather than less because the US uses an absolute measure rather than a relative measure, in which you are considered in poverty if your income falls below 50% of the median income for the country. So in 2014, the absolute poverty rate of a family of four in the US is $23,850, and higher in Alaska and Hawaii. However if we use the relative measure, the poverty rate in the US would jump to $25,000, hence more families in poverty, not more in middle class.
    2. The majority of families who are enrolled in federal aid programs are working, not freeloading as people like to paint them. I’m all for cutting waste in spending at the federal levels, and so how about along with cutting aid to families who are working and receiving aid to barely survive, we also cut federal subsidies to cooperations who are moving jobs away from the US, not to it, are giving themselves bigger and bigger salaries and not creating the jobs that they said would happen with tax cuts for them. How can having programs that do relieve poverty be considered Socialism, while at the same time the government gives money to cooperations in the name of job creation (which it does not do) and THAT not be Socialism.
    3. These “victims” that are so often negatively portrayed in the media, whether you want to admit it or not, are still subjected to oppression at the hands of those in power. It’s really hard to move up the social ladder if you can only get jobs that pay $7.25 an hour.
    4. Raising the minimum wage would increase jobs in the country and help alleviate poverty. This is because those who are poor tend to spend their entire paychecks rather than save them. SO if they had more money to spend, then although they would start saving more, they would also be putting more back into the economy. When that happens, then there would be an increase in demand for products, hence more job openings as companies would be forced to increase their supply into the market place, all this with relative minimum cost to the consumer. For example, if Wal-Mart increased its minimum wage to $12 an hour, the price increase would only be $12.50 per YEAR. Seems like a fair trade off to me.
    5. Inmate in several states are already charged room and board anywhere from $1 a day up to $142 a day. This combined with how much (or little i should say) they get paid means that they are in debt when they leave the system, and could be sent back to jail for not paying their debt. even those who can pay it off, they are still in Poverty when they return home, and cannot survive on minimum wage, like other Americans.

    • bpuryea

      Jeez, where to start, how about at the beginning.

      1. Poverty Rate – doesn’t matter how you measure it for the simple reason that the vast majority who would be counted as living in poverty 10 years ago, have moved up the economic scale and are now solidly middle class, some of them are even millionaires. The progressives have successfully defined this group of poverty stricken individuals as being constant, composed of the same hapless souls year in and year out. The simple fact of the matter is that it is not constant. Among those being counted as being poor ten years ago, a huge number of them were in their first jobs upon graduating from high school, college or a trade school. Many more are counted as being poor as they are full time students who work part time jobs. etc. Those who perform well are either promoted out of poverty or seek and gain employment with a company who values their time more than the company they work for now. There is a problem with generational poverty, but it is a problem of choice not opportunity.
      2. I too would end all subsidies to all industries from the federal government. I would do this even if we weren’t able to end the majority of welfare programs. Problem is, the “poor” would be hit hardest by this end of subsidies and the libs would scream the loudest. How much would gas cost at the pump without the federal subsidies? How much would food cost without the subsidies? Quite a bit more than they do now. There is an undeniable and verified axiom that states: If you want less of something, tax it or regulate it, if you want more of something, subsidize it. We have effectively been subsidizing behavior that inflicts the outcome of “being poor”. Many lift themselves out of this mindset, millions do not.
      3. $7.25 an hour jobs are, ready for it, “Entry Level Jobs”. They are not intended to provide a livable income. They are intended to provide experience so one can move up the pay scale. A jog is worth exactly what someone, anyone, is willing to do it for.
      4. You just can’t fix stupid. Your entire analysis ignores half of the equation and the sad thing is I don’t think you have a clue that the half you ignore even exists. When you raise the minimum wage by government decree, you do not create more jobs, you create fewer jobs and you inflict the true minimum wage on a huge percentage of those in the work force at this minimum wage. What is the true minimum wage achieved by government meddling in this arena – Zero dollars per hour! What do you imagine a small business owner will do if his cost of employing an entry level worker goes from $7.25 and hour to $12.00 an hour. (Don’t forget that’s just the visible cost, the employer also has to cover an additional 6.5% of the incremental difference in SSI payments as well as some percentage increase for unemployment insurance and the medicare tax – the increase isn’t just the $4.75 hourly differential, but a bit more than that) By the way, the largest employer in the US are the millions of small business owners taken as a whole.
      The small business owner has several choices when faced with the additional expense of something like $5.00 per hour as the employees who will receive it aren’t magically going to provide an equivalent offset in productivity to cover the additional expense. They can:
      a. Take less income out of their businesses to cover the additional expense. Like most Americans, these business owners have life styles that match their current income so this isn’t likely to be their first choice although it will be forced on many of them as the other choices may not cover the entire difference)
      b. Work more hours, why more hours you say? To cover the hours of employees who they either laid off or who have had their hours cut.
      c. Raise prices to the consumer.
      The reality is that all of the above happens which leads to less workers in the work force, less take home pay for those left in the workforce, and more hours worked by the employer. All of this REDUCES the amount of money available in the market place and INCREASES the unemployment rate.
      5. Who cares! If you commit a crime and you leave jail with a bill due to those of us who suffered from your crime and then paid for your incarceration, YOU SHOULD PAY IT ALL BACK – WITH INTEREST!

    • Geoffrey_Britain

      Your missive is proof positive that you either never took econ 101 or slept through the entire class. Educate yourself.

      “Better to remain silent and be thought a fool than to speak out and remove all doubt.” Abraham Lincoln

    • Larry S.

      Raising the minimum wage would increase jobs in the country and help
      alleviate poverty. This is because those who are poor tend to spend
      their entire paychecks rather than save them. SO if they had more money
      to spend, then although they would start saving more, they would also be
      putting more back into the economy.

      That’s a very dubious proposition supported by only the most selective of supporting rationales. You completely ignore the jobs that are indeed lost when the cost of providing whatever good or service those jobs created exceeds what the market is willing to pay for the good or service. You have a very static view of a complex, dynamic, almost chaotic system that a modern economy represents.

      If your hypothesis is correct, why not increase the minimum wage to $60.00 per hour? Then all the wonderful effects you cite would be even more powerful, generating even more prosperity. Unfortunately, your hypothesis is simply empty rhetoric (a polite phrase for hot air).

  • Geoffrey_Britain

    “Here’s Williams’ roadmap out of poverty: Complete high school; get a job, any kind of a job (that may mean moving where the jobs are); get married before having children; and be a law-abiding citizen. Among both black and white Americans so described, the poverty rate is in the single digits.” Walter Williams

    • gerry

      Although I am now retired this is what I am doing right now in Southeast Asia.Helping the poor,by providing them with a good education that will enable them to get a degree,and a good job.Lots of resistance from certain quarters.