What the crusaders against American "income inequality" won't tell you.
While President Obama is pushing his redistributionist war on "income inequality," the American left is excited about a new study, "Trends in Poverty with an Anchored Supplemental Poverty Measure" that purports to show that government welfare programs have significantly eased the burden faced by poor Americans in the nearly 50 years since Lyndon Johnson's War on Poverty was launched. According to the research, the so-called safety net was instrumental in reducing the percentage of poor Americans from 26 percent in 1967, to 16 percent in 2012. Yet even in the midst of the euphoria, the Washington Post reveals that the study's findings "contradict the official poverty rate, which suggests there has been no decline in the percentage of Americans experiencing poverty since then." In other words, the statistics have been manipulated to reach the desired result.
While that conclusion may rankle leftists, it is political blogger Kevin Drum writing for the left-leaning Mother Jones who explains why it is true. In an article with an equally rankling title, "New Study Says Poverty Rate Hasn't Budged For 40 Years," Drum notes that statistical analyses must be done with care. "If it's test scores among school kids, you need to disaggregate by race and ethnic background," he writes. "If it's life expectancy and Social Security, you need to make sure to use life expectancy at age 65, not life expectancy at birth. And if it's poverty measurements, you need to distinguish between elderly poverty and working-age poverty."
When he separates elderly poverty--which is considerably lessened by Social Security, a program that existed long before the War on Poverty began--from working age poverty, the results are discouraging. Overall poverty "has still declined, but not by much and only between 1967 and 1973. Since 1973, the poverty rate hasn't budged. It was 15 percent forty years ago and it's 15 percent today." And while he applauds the "good news" in the study, he is forced to acknowledge that it is the result of its authors using "their new measurement" to achieve it.
By contrast, the Cato Institute's Daniel J. Mitchell bases his findings on figures released by the Census Bureau. Those figures paint a damning picture of leftist re-distribution schemes, revealing that the largest decrease in the percentage of poor Americans occurred before LBJ’s War on Poverty began. From 1950 to the late 1960s, Census Bureau data show the poverty rate in a dramatic decline. Immediately after LBJ's "Great Society" programs kicked into gear, the poverty rate began to stagnate. And it has more or less stagnated ever since, despite trillions of dollars of government spending on means-tested programs. Mitchell concludes there could be alternative explanations for such stagnation, but he wonders aloud whether "government intervention may be encouraging poverty by making indolence more attractive than work."
A 2013 study published by the Cato Institute's Michael Tanner and Charles Hughes provides some daunting insight. “The current welfare system provides such a high level of benefits that it acts as a disincentive for work,” Tanner and Hughes write. "Welfare currently pays more than a minimum-wage job in 35 states, even after accounting for the Earned Income Tax Credit, and in 13 states it pays more than $15 per hour."
Tanner and Hughes further contend that if political officials are serious about reducing dependence and rewarding work, "they should consider strengthening welfare work requirements, removing exemptions, and narrowing the definition of work. Moreover, states should consider ways to shrink the gap between the value of welfare and work by reducing current benefit levels and tightening eligibility requirements."
Unfortunately, the Obama administration has been moving in the opposite direction. In 2012 they gutted much of the welfare reform instituted by The Personal Responsibility and Work Opportunity Reconciliation Act of 1996. Better known as the Welfare Reform Act of 1996, the bill was enacted during the Clinton administration with the kind of bipartisan majorities in both chambers of Congress for which today's Democrats ostensibly yearn. And it was gutted in a move that has become depressingly familiar: Congress was bypassed, and a policy directive was issued by the Department of Health and Human Services (HHS). It was gutted despite the reality that in the four years following its passage, welfare caseloads and childhood hunger numbers were cut nearly in half, even as employment surged, and poverty among single mothers and black Americans dropped to historic lows.
That leftists would be more excited about studies that require "new measurements" to promote the value of dependency on government programs, as opposed to empirical evidence that demonstrates unquestionable success in promoting independence and work, is quite revealing.
Equally revealing was the Obama administration's efforts to promote their own set of “new measurements” with regard to poverty itself. A 2010 article by National Review's Robert Rector explained the change, noting that the old poverty measure was based on "absolute purchasing power--how much steak and potatoes you can buy," he wrote. "The new measure will count comparative purchasing power--how much steak and potatoes you can buy relative to other people."
The reason for the change is obvious: once poverty is relative, it becomes impossible to eliminate--along with the government programs and the massive amounts of bureaucracy needed to do so. Furthermore, as Rector illuminates, "if the real income of every single American were to magically triple over night, the new poverty measure would show there had been no drop in 'poverty,' because the poverty income threshold would also triple." Rector then gets to the issue that is very much in the forefront of President Obama's current populist pitch. "In honest English, the new system will measure income inequality, not poverty," he wrote three years ago.
Most Americans are undoubtedly inclined to help the poor. Yet as a Heritage Foundation study released in 2011 reveals, the term has largely lost its meaning, at least in terms of material wherewithal:
In 2005, the typical household defined as poor by the government had a car and air conditioning. For entertainment, the household had two color televisions, cable or satellite TV, a DVD player, and a VCR. If there were children, especially boys, in the home, the family had a game system, such as an Xbox or a PlayStation. In the kitchen, the household had a refrigerator, an oven and stove, and a microwave. Other household conveniences included a clothes washer, clothes dryer, ceiling fans, a cordless phone, and a coffee maker.
Such an inconvenient reality underscores the Obama administration's need to promote poverty in relative terms. If Americans were largely aware of the true nature of American poverty, a safety net that has engendered a significant portion of our $17 trillion debt bomb would be a prime target for serious reformation.
Thus, the American left is once again hard at work, pulling on the public's heartstrings. A good example of that effort is a five-part New York Times story dedicated to the travails of a New York City family, and the hard-heartedness of a town where income inequality looms large. Yet as the rival New York Post reveals, the "hooey" presented by the Times downplays some critical facts, including the reality that the family's "shelter, rental assistance and food stamps alone have added up to nearly half a million dollars since 2000. In addition, Medicaid covers health care." They further note that the parents of the eight children are a couple "with a long history of drug problems and difficulty holding jobs."
Thus, the Post reaches an alternative conclusion. "If the city is at fault here, it might well be for having been too generous--providing so much that neither the father nor mother seems much inclined to provide for their kids."
If there is one thing the left depends on when it comes to pushing the expansion of the welfare state, it is the idea that such disinclination can never be measured statistically. Moreover, it would be utterly anathema for those promoting statist solutions to all of our problems to do so. Better to characterize any effort to reduce government dependency as "mean-spirited," and any effort to weed out fraud, such as obtaining fingerprint IDs from welfare recipients for example, as stigmatizing.
All of that being said, the "wealth gap" that ostensibly antagonizes the president is in fact occurring. The word "ostensibly" is critical because it is precisely this administration's embrace of the Federal Reserve's Quantitative Easing policy most responsible for it. As the New York Post's John Crudele reiterates, it has caused the "largest wealth redistribution in the history of mankind." "Those who’ve saved and rely on interest income are being screwed," he explains. "Those wealthy enough and courageous enough to put their money into the stock market have seen their wealth soar."
What Crudele doesn't explain is why the Fed's interest rate has been kept at virtually zero for the longest stretch of time in the history of the nation. It's because the vast amount of deficit spending necessary to underwrite the welfare state--and the unconscionable amount of interest payments generated as a result--would be virtually impossible to continue doing at historically normal interest levels. Furthermore, what amounts to little more than a debasement of our currency, represented by the $85 billion per month of newly-created money, exacerbates the wealth gap even more: devalued currency amounts to a de facto tax on everything Americans buy.
Yet while this utterly misguided policy has been a boon for the rich, the massive amount of government "stimulus" that has necessitated it has done virtually nothing for the poor, other than providing an increasing disincentive to work. And while the poor may be less poor in material terms relative to the rest of the world, they still remain afflicted by the same dignity-sapping dependency that relying on the tender mercies of bureaucrat masters inevitably engenders. It is precisely the maintenance of that dependency--rather than the liberation from it--that forms the heart of progressive policy-making.
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