Four Things Government Could Do to Ease Poverty

Anti-poverty spending has soared while poverty rates have held steady. It's time to try something new.

The Census says 46 million Americans remain mired and poverty, and this is greeted as good news, because demographers had been expecting worse. About 15 percent of Americans are poor. That is the same ratio as in 2010 – and slightly higher than in 1966, despite the $16 trillion Washington has spent fighting poverty since Lyndon Johnson declared war on it. 

Jeffrey Miron, writing last year in National Affairs, notes that “if the $1.45 trillion in direct [federal] anti-poverty spending in 2007 had been simply divided up among the poorest 20 percent of the population, it would have provided an annual guaranteed income that year of more than $62,000 per household.” Unfortunately, “much of the redistribution goes to middle-class families,” while more is siphoned off to pay for the operation of the various programs aimed at fighting poverty.

“Fighting poverty” means at least two things: (1) alleviating the suffering of the poor by providing food, shelter, and other material necessities, and (2) actually reducing the ranks of the poor. Poverty programs are reasonably good at (1) and terrible at (2).

They are terrible at (2) because they cannot impose the one condition most likely to help people escape poverty: marriage. Families headed by a single parent are six times more likely to live in poverty, according to the Heritage Foundation. (Don’t trust Heritage? The Brookings Institution largely agrees: “Children in female-headed families are four or five times (depending on the year) more likely to be in poverty than children in married-couple families.”) And while anti-poverty spending has climbed steadily in the past three or four decades (see nearby chart), so has unwed parenthood.

 

(Source: http://www.nationalaffairs.com/publications/detail/rethinking-redistribution)

That is one reason income gains in recent years have accrued to better-off households: Those households have more married couples. The richest 20 percent of households contain almost 25 percent of the population, while the poorest 20 percent of households contain only 14 percent of the population. By household, there would be wealth inequality even if everyone were paid exactly the same.

The government cannot, and should not, force people to get married. But there are some things it could do to make climbing the economic ladder easier, such as:

(1) Call a cease-fire in the war on drugs. Although more white Americans than black Americans are poor, poverty and unwed parenthood are more acute in the black community, and the black community is disproportionately hurt by the drug war. According to the Charlottesville-based Rutherford Institute, whites use drugs at higher rates than blacks, but the black incarceration rate for drug crimes is 10 times that of whites. Doing prison time not only makes it harder to get a job, it also impedes wealth accumulation: People in prison aren’t building home equity or 401(k) savings. And locking up black men for minor offenses only makes the marriage problem worse.

(2) Reduce barriers to work. According to the Arlington-based Institute for Justice (IJ), in the U.S. it takes an average of 33 days to get certified as an EMT who makes life-or-death decisions. Yet the national average to get a cosmetology license is 372 days – and thousands of dollars in schooling. The 49 states that license nail technicians require an average of 87 days’ worth of training. Until IJ began filing lawsuits, even hair braiding sometimes required expensive cosmetology certification. Many other entry-level occupations also are walled off by strict licensing rules that are often supported by industry insiders fearful of competition.

Another barrier to work? Obamacare. The Patient Protection and Affordable Care Act forces all companies with 50 or more employees to offer health insurance. That hikes the cost of a new hire by several thousand dollars. What’s more, next year the law will require minimum annual coverage of $2 million, and forbid all coverage caps in 2014. That will eliminate the “mini-med” plans currently offered by employers such as McDonald’s and unions such as the United Federation of Teachers. (Both McDonald’s and the UFT received one-year waivers last year.)

(3) Give zoning a break. Anti-poverty advocates often demand horrendously expensive public transit systems so poor people can get to jobs. Yet one reason jobs are hard to reach is overly restrictive zoning policies that segregate residential and commercial activity. Look up some city photos from the turn of the 20th Century and you’ll see buildings with shops on the lower level, and apartments above. People didn’t need billion-dollar light-rail lines to get to work – just some stairs. Progressives who complain about the lack of jobs and cheap, healthy food in the inner city also ought to reconsider their knee-jerk opposition to Walmart, which delivers both.

(4) Fix the schools. After marriage and a job, education is the best road out of poverty. Redistribution is a zero-sum game, but improving human capital enables economic growth that benefits everyone.

Teachers can’t make students learn, but government can makes schools teach. Granted, doing so can be hard – as the Chicago teachers’ strike shows. More competition would help. More money probably won’t: Adjusted for inflation, since 1970 the cost of a K-12 public education per student has roughly tripled, while achievement has remained flat. By the same token, anti-poverty spending during the same period has soared while poverty rates have held steady. If that is mere coincidence, it is a remarkable one.

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  • robc||

    So, it looks like Johnson won the war on poverty, but we failed to call it off and ramped it up instead.

    We could just accept that the poverty rate is going to fluctuate between 10 and 14 percent and spend a lot less on it.

    Or, you know, do some of the things suggested above. #1-3 actually save money in the process.

  • MoreFreedom||

    Johnson didn't win the war on poverty, he just started the spending on poverty. And rather than the poverty rate continuing its decline, the rate leveled off during Johnson's term.

    Based on the evidence (a correlation), one could easily conclude that Johnson's war on poverty, stopped the reduction in poverty, and actually kept it there.

    How exactly Johnson's programs caused this is debatable. But some of the arguments are that creating a poverty benefit encouraged people to remain in poverty; creating dependency rather than lifting them out of poverty. Some of these poverty benefits also discourage marriage.

    John Stossel recently did a show on unemployment. He asked those in line for unemployment benefits, if they could find a job, and they all said no. Yet he found dozens of available jobs within a few blocks.

    As a libertarian, I find government welfare in all its forms to be immoral, simply because the money is taken by force from some, only to give it to others. This is called theft, and the government doing it doesn't make it moral.

  • Fist of Etiquette||

    5. Change the definition. Again.

  • Fluffy||

    I would add:

    1. Eliminate all social-worker administered anti-poverty programs and consolidate their spending into a tweaked EITC.

    2. Structure that new EITC so it pays more to married couples than to single-parent households, and more to families with 2 or less children than to families with more than two children.

    3. Eliminate judicial child support awards for children born out of wedlock.

  • MoreFreedom||

    Ann Coulter would say the real beneficiaries of government welfare, are the government workers administering it.

  • ||

    The graph strikes me as somewhat misleading, since it appears to look at the poverty rate post-government assistance. Perhaps a third line could be added for the percentage of the population reliant on government assistance to remain over the poverty line? Giving people more money will obviously keep them from becoming impoverished, but seeing how the increased spending affects recipients' propensity to earn would be interesting.

  • Rhino||

    I'd like to add the time before LBJ's war on poverty to see how we were doing before we started spending the money.

  • The Late P Brooks||

    Stop "helping"?

  • The Late P Brooks||

    Of course, once "the poors" are safely wrapped in the cocoon, they find they are subject to a greater than 100% marginal tax rate on additional (reported) earnings.

    Incentives matter.

  • robc||

    That was why the negative income tax was a decent idea (insert SLD liberally). And its basically what Fluffy is proposing above.

  • Spoonman.||

    The importance of stopping putting all young minority men in jail can't be exaggerated.

    I have another one: Teachers must be required to speak standard English at all times. Children must be required to speak standard English in school. Speaking a lower-class form of English permanently consigns people to the lower class.

    Urban school districts are terrible about this.

  • ||

    At one time teachers in schools serving black students in Northern city schools considered that an important part of their duties was "getting the geechee out" of their newly arrived students from the rural south.

  • The Late P Brooks||

    Actually, I was thinking about something along the lines of a negative income tax when I said that. It's not the worst idea ever, but where do you set it? I like the idea of a flat tax with a fairly large exclusion of initial income, but even assuming the person has a job and a paycheck the marginal benefit of zero tax is not great.

    If people are in programs which provide actual material assistance (cash, or subsidized housing, or day care), they eventually have to be phased out. "How" is problematic.

  • robc||

    Using 2012 poverty levels, which is $11,170 for first member of each household and $3960 for each after, I will adjust that to $11,170 per adult and $3960 per child (I dont want to create a marriage penalty, and if it encourages marriage, good).

    Lets go with a 30% flat tax...its high, but lets see the results first.

    That makes the deduction per adult $37233 and per child $13200.

    So your married family of four would not get to the zero point until $100866.

    For an individual, that point is $37k. I could see a lot of families going back to single worker if the Husband had a decent income that was tax free, lets say $60k, and they received a EITC check on top of that.

    70-100=-30k*.3=-9k.

    That turns 70k into 79k, tax free.

    No way that is revenue neutral, I wonder what rate that would take?

  • robc||

    Then again, while it isnt revenue neutral, expenses drop dramatically as every welfare program goes to $0. And Social security goes away, as the negative income tax prevents elderly poverty.

  • aelhues||

    Interesting.

    I personally think we should just have a flat tax, without any deductions or fiddling. The way I'd make up for that being harder on minimum wage earners, is elliminate much of the regulatory restrictions on housing, and anything that increases the cost of food and energy.

    I don't see any reason why I shouldn't be allowed to live in a tent, if I so choose.

    As for those that can't work, church and community aid and programs should, and I believe would, pick up the slack.

  • robc||

    as I said up above:

    (insert SLD liberally)

    I oppose income tax. But, amongst the evils, a negative income tax isnt the worst thing ever.

    And it almost happened back in the 70s.

  • The Late P Brooks||

    That makes the deduction per adult $37233 and per child $13200.

    I'm a little slow this morning; how did you get to this?

  • robc||

    poverty rate / 30%

    That way, at $0 earned, the negative income tax will get you to the poverty level.

  • The Late P Brooks||

    Thanks, rob.

  • ||

    About 15 percent of Americans are poor.

    I'm guessing a goodly portion of that 15% have a roof over their head, enough calories to eat, and access to transportation to get them to jobs.

    You know -- not poor.

  • MoreFreedom||

    Hinkle misses the best thing government could do to ease poverty, namely cut the size and scope of government. ALL levels of government in the US consumed only 8% of GDP until about 1915 (see www.usgovernmentspending.com/past_spending). Today, the federal government alone consumes over 20% of GDP.

    Less government means less taxation, and more of an incentive to work. It also means we'll have more money available for private charity. And private charity has more of an incentive to teach people to fish, rather than giving them a fish. While government bureaucrats want as many "customers" as possible.

    If people realized how much they are ripped off by the government for their welfare programs (including Social Security and Medicare), they'd realize that government welfare isn't a good deal, even for the poor.

    E.G., David Goldhill, CEO of the Game Show Network, author of "How American Health Care Killed My Father" and life long Democrat, wrote that seniors on Medicare today, pay more out of pocket for health care than BEFORE Medicare existed!!! In other words, ignoring the costs of paying into the system for a working lifetime, they have to pay more later than if the program didn't exist. That's how lousy government deals providing security are. You don't get security, and you don't get a choice.

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