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Winners and Losers in the War on Poverty

Posted By Bruce Thornton On April 1, 2014 @ 12:50 am In Daily Mailer,FrontPage | 21 Comments

Progressives 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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