Winning the Poverty War

What if they gave a war on poverty—and nobody came? Or in other words, what if, despite the pleas of socialist reformers, there is no longer a poverty problem in America? According to several recent analyses, that may well be the case. It all depends on how you define the problem, and how you collect the statistics.

The official statistics on poverty, published by the Census Bureau, are based on cash income. But a substantial portion of today's welfare assistance is in the form of in-kind benefits—food stamps, school lunches, medicaid, housing subsidies, etc.—that substitute for cash. Yet these benefits are not counted in the Census Bureau's definition of income! When the cash value of these benefits is included in poor people's income, the picture of American poverty changes radically.

A recent Rand Corporation study, for example, found that an average AFDC recipient in New York City could receive a total annual income of $6,088, including in-kind benefits. (If the head of that household were employed at the minimum wage, the family income would be only $4,784.) Economist Edgar K. Browning of the University of Virginia estimates that the average poor family (as defined by the Census Bureau) in 1973 had an actual income 30 percent above the poverty line, when in-kind benefits were included.

Looking just at Federal expenditures, the average cash transfer payment per poor person (not family) increased from $249 in 1966 to $482 in 1973; over the same period the value of in-kind transfer payments per poor person increased from $112 to $657. Over the ten-year period from 1965 to 1975 in-kind transfer payments increased 16-fold, while cash transfers grew "only" four-fold.

What all this means in terms of numbers of people has been computed by Dr. John Korbel of the Congressional Budget Office. Including income from Social Security, unemployment benefits, and cash transfer payments, the number of people in families below the poverty line is 21.1 million (10 percent of the population). These are the people counted by the Census Bureau. But including the value of in-kind benefits, the number of poor drops to 11.4 million—only five percent of the population. And by this definition, since 1965 the number of poor families has decreased by 60 percent.

"For all practical purposes," concludes Browning, "poverty has been virtually eliminated in the United States." Keep these figures in mind next time someone demands massive new antipoverty programs.

• "Multiple Welfare Benefits in New York City," Rand Corp., Aug. 1976.
• "Welfare—A Reconstruction," Edgar K. Browning, The Humanist, March-April, 1977, P-12.
• "Has War on Poverty Been Won?" AP (Washington), May 8, 1977.

Abolish Corporate Income Tax?

The corporation income tax should be abolished, said the resolution passed by the assembled delegates. A conservative group? A business organization? Hardly. This surprising resolution was part of a comprehensive tax reform proposal adopted by the 30th annual convention of Americans for Democratic Action (yes—the Eleanor Roosevelt/Arthur Schlesinger ADA!). The ADA's position is that corporate income should be "allocated to individual shareholders, and these shareholders should pay tax on this income at their own personal income tax rates."

Abolishing the corporate income tax is also being advocated by Sen. William Proxmire and new SEC chairman Harold M. Williams. Williams stresses the problems American firms are having raising equity capital. The yield on stocks is simply not that great, partly because Federal taxes reduce the amount of income available for dividends. If the corporate tax were abolished, Williams and Proxmire expect firms would pay out much higher dividends, thereby making stock ownership more attractive and easing the capital formation crisis.

• "ADA Urges End of Corporate Income Tax," UPI (Washington), May 9, 1977.
• "Chairman Williams Digs In at the SEC," Business Week, May 30, 1977, p. 69.

Setbacks for Zoning

The U.S. Supreme Court has made a dent in the extent to which cities can coerce property owners by means of zoning ordinances. In a 5-4 ruling, the court struck down an East Cleveland ordinance which limited occupancy of single-family houses to "nuclear families." The decision upheld the right of 63-year-old Inez Moore to share her 2-1/2-story home with her two sons and their two children. Mrs. Moore had been sentenced to five days in jail for violating the ordinance. The court's decision was in contrast to its 1974 ruling upholding a Belle Terre, NY zoning ordinance that prevents unrelated persons from living together in a single-family home.

A more fundamental challenge to zoning has come from syndicated columnist Neal Peirce, an editor of National Journal. The respected columnist recently attended a conference sponsored by the Association for Rational Environment Alternatives in Houston, Texas, the only major U.S. city totally without zoning. Via lectures, slide shows, and a bus tour of the city, conferees observed how the absence of zoning permits market forces free reign in revitalizing decaying neighborhoods, such as Houston's now-booming Montrose section. Peirce was impressed. In his recent column he presented the full range of arguments against zoning, as articulated by law professor Bernard Siegan and urban planner Dick Bjornseth. With scenes of Houston still vivid in his mind, Peirce concluded, "The Houston success story is strong enough to suggest that zoning may be the land-use dinosaur of the '70's."

• "Supreme Court Limits Zoning Authority," Los Angeles Times, June 1, 1977.
• "Is Urban Zoning the Dinosaur of the 1970s?" Neal Peirce, Ibid., May 29, 1977.

Laetrile Victories

Medical freedom of choice has been further expanded since last month. Five more states—Arizona, Nevada, Oklahoma, Texas, and Washington—have decriminalized the use of Laetrile, the controversial substance many believe is effective against cancer. The addition of these five brings the total to eight (including Alaska, Florida, and Indiana). In addition, similar measures have already passed one house in California, Delaware, Louisiana, and Illinois.

The FDA, which claims the substance is poisonous and worthless, is fit to be tied. A Federal judge in east Tennessee even ordered the FDA to return 6700 cases of apricot pits, worth $164,000, to a food wholesaler from whom it had seized them as contraband. (Laetrile is derived from a substance found in apricot pits.) The National Cancer Institute, bowing to public pressure, has agreed to conduct tests of Laetrile's action against cancer, if FDA approval can be obtained.

Meanwhile, another banned drug is winning a reprieve at the state level. DMSO, effective against bladder conditions, skin diseases, and with about 31 other pharmaceutical applications, has been used in Oregon for years, despite an FDA ban. Now the Oregon Senate has passed a DMSO legalization bill, by a vote of 28 to 0. Similar action is expected in the House. It seems that more and more people just don't want the FDA to tell them what they can and can't do.

• "Laetrile Legalized," The Choice, June 1977 (published by the Committee for Freedom of Choice In Cancer Therapy).
• "National Cancer Institute to Test Laetrile," AP (Morristown, NJ), May 23, 1977.
• "Pharmaceutical Brinksmanship," The National Enterprise, May 11, 1977.

Israel Going Capitalist?

The Likud Party, victorious in Israel's recent national elections, has announced plans to bring a dose of free enterprise to the country's socialized economy. Economist Milton Friedman [subject of this month's REASON interview] has been asked to advise the new government on fiscal matters, and on policies for introducing more economic freedom. The party's platform has advocated increasing the rate of economic growth; cutting inflation (now 40 percent per year) by reducing government spending, cutting subsidies, reducing the civil service, and selling off some government property; reducing military imports; and encouraging foreign investment.

The Israeli economy is beset by inefficiency. Service workers constitute over half the work force, many of them in make-work jobs in government bureaucracies. These bureaucracies are considered some of the world's most cumbersome, and are cited as one factor that discourages foreign investment. Service workers are highly unionized and, like British workers, engage in frequent wildcat strikes. Israel's former Labor government had a history of giving in to wildcat strike demands, but Likud plans to sing a different tune. Besides being a tougher negotiator, the new government plans to shrink the civil service by attrition, turning thousands of service workers into production workers in expanded industry.

The Friedman/Likud attempt to reform a socialist welfare state will be interesting to observe. If it can work in Israel, perhaps there is hope for Italy and England after all.

• "New Israel Regime Heading for Struggle with Labor," Los Angeles Times, May 29, 1977.

Steps Toward Private Education

Support for public schools is dropping precipitously, while private schools are growing in popularity. Recent trends indicate the possibility of fundamental shifts in the way American education is provided.

According to the National Association of Independent Schools (NAIS), private school enrollment is up 24 percent over five years ago, while public school enrollment continues to decline, reflecting the coming of age of the post-war baby boom. Significantly, the growth in private school enrollment is coming from the middle class. The NAIS survey found that 30 percent of the students attending its boarding schools come from families with under $25,000 annual income, 58 percent from families of under $35,000. And two-thirds of the new students in its member schools were previously enrolled in public schools. Increasingly, middle-class families are finding public schools too lax, both in discipline and in academic standards. Forced busing programs are also a factor, but many experts, including USC psychologist Edward Stainbrook, discount fear of integration as a primary factor. Quality of education is the principal reason for the move to private schools.

Several straws in the wind suggest further growth of private schooling. Both the Republican and Democratic platforms of 1976 pledged tax-credit assistance to parents paying tuition to private elementary and secondary schools. Sen. Daniel Moynihan introduced a bill to that effect in May. Such a measure would reduce the burden on such parents of having to pay for public schools via taxes, as well as paying private tuition.

Another development that would spur the trend toward increased private schooling is realistic pricing of education. Both public and private colleges are moving in that direction. Declining Federal aid and the end of the baby boom are forcing colleges to begin to take a businesslike approach to educational programs, starting with their adult education departments. Many such departments are self-supporting, and are coming to be looked on as money makers. Schools such as St. Mary's College near San Francisco, Boston State College, Northeastern, and Temple University are adopting hard-sell marketing techniques to attract students. "Backed with market research, flamboyant promotion, and cost controls," Temple's continuing education campus moved into the black within 18 months of startup. Temple now spends 5.5 percent of its total budget on advertising. The adult education division of St. Mary's College turns enough of a profit to offset the undergraduate division's current $200,000 annual loss, keeping the school in the black overall. College marketing consultant Peter Tolos tells colleges, "You have to push the idea that there is a customer and the program is a product that has to be marketed."

Ultimately, of course, all educational services should be provided in the marketplace, paid for by the users. This erstwhile radical notion was recently endorsed by syndicated columnist Ernest Ferguson. "In fairness," he wrote, "why should the man who prefers to live quietly and improve his property without benefit of children have to pay more in taxes for schools than does the equally wealthy man around the corner who has six children and a run-down house? A heretical question, though eminently fair." What Ferguson wants us to consider is "the theory that the recipient of a service should be the one who pays the most,"—an eminently libertarian idea. Though he refers to the concept as a "user tax," it's but a short step from that to a user charge. Yet another libertarian idea is beginning to surface in the media.

• "Despite High Tuition, Private Schools Enjoy a Surge in Enrollment," Wall Street Journal, April 13, 1977.
• "Tax Credits Urged for Private Schools," UPI (Syracuse), May 15, 1977.
• "Colleges Learn the Hard Sell," Business Week, Feb. 14, 1977, p. 92.
• "Why Are We Taxed for Others' Kids?" Ernest B. Ferguson, Los Angeles Times, May 4, 1977.


• More Free Speech. The U.S. Supreme Court has further strengthened the First Amendment's protection of "commercial speech" by overturning 8-0 a Willingboro, NJ ordinance which prohibited the use of "For Sale" signs in front of houses. The ordinance had been aimed at averting "white flight" to the suburbs. (Source: "High Court Rejects Ban on 'For Sale' Signs," Los Angeles Times, May 3, 1977.)