Reassessing the War

| January 31, 2014

John Hood Headshotby John Hood, John Locke Foundation and NC SPIN panelist, January 31, 2014.

If University of Chicago economist Bruce Meyer and Notre Dame economist James Sullivan are correct, much of the recent political chatter about the 50 anniversary of the War on Poverty was little more than uninformed nonsense.

Meyer and Sullivan have been doing groundbreaking work in the area of economic statistics. Although many other economists and statisticians have questioned the accuracy of common statistics such as average incomes and poverty rates, Meyer and Sullivan have finally put some hard numbers on what had previously been largely theoretical discussions.

The official poverty rate, for example, is an odd statistic that has never really measured what most people think it measured. Based on pre-tax cash income, it doesn’t reflect the effect of most anti-poverty spending, such as food subsidies, free health care, public housing, or the Earned Income Tax Credit. Moreover, those who receive public assistance have strong financial incentives not to report all the income they receive, including paid labor, which is one reason why the average consumption of low-income households is often substantially higher — not just temporarily but over time — than their reported incomes.

According to the official poverty rate, then, the trillions of federal, state, and local tax dollars spent to subsidize low-income families since the mid-1960s haven’t had a major effect on their living standards. If you think about this finding for even a nanosecond, it should strike you as rather silly.

In a 2012 paper published by the left-of-center Brookings Institution, Meyer and Sullivan sought to develop and apply a more reasonable measurement of poverty status in the United States. They started with consumption rather than income, factored in the value of government benefits, and used a more appropriate adjustment for inflation than the Consumer Price Index, which does not adequately account for changes in the quality of consumer goods (among other defects).

Here’s what they found: About 31 percent of American households were in poverty by their measure in 1962. By 2010, that rate had dropped to 5 percent. The most rapid improvement came early, as the rate dropped about 14 percentage points from 1962 to 1972. But gains continued through the 1970s, 1980s, 1990s, and 2000s.

Obviously, government programs that redistributed cash or provided in-kind services to low-income families played a role in ameliorating deprivation. But so did economic growth. In fact, the data show that true poverty was also declining at a rapid pace during the 1940s, 1950s, and 1960s — before the Great Society programs were invented.

Perhaps the Meyer-Sullivan measure of poverty has its own bias. Certainly some left-wing activists think that vastly more Americans should be considered poor than the current poverty rate captures. In a sense, that’s a semantic matter. Regardless of where we want to set the poverty line, the point is that there has been a vast improvement in the material conditions of low-income Americans over the past several generations — reflected not just by the Meyer-Sullivan trend but also by many other measures such as nutrition, housing, asset ownership, transportation access, age-adjusted mortality rates, and health status.

In the case of food and nutrition, for example, economist Nicholas Eberstadt writes that “anthropometric data demonstrate that our poor are incontestably better off today than in 1965.” As for housing, “the poor today live in decidedly less crowded, more spacious, and better-furnished dwellings than they did four decades ago … by a number of benchmarks, indeed, the officially poor today enjoy better housing conditions than the average nonpoor in 1970, or the American population as a whole as recently as 1980.”

This optimistic take on poverty statistics challenges sides of the debate. Conservatives sometimes argue, implausibly, that spending trillions of tax dollars on government welfare programs makes no difference in the lives of the poor. And liberals argue, equally implausibly, that we don’t spend nearly enough on government welfare programs.

The real failure of the War on Poverty is not that poverty stayed the same. It was that programs originally sold as temporary interventions to foster self-sufficiency in the long run have instead fostered long-term dependency for too many families.

Category: NC SPIN Perspectives - Opinions from NC Leaders & Organizations

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  1. Norm Kelly says:

    And too many ‘poor’ people on government subsistence programs have more disposable income than their counterparts in the working class.
    Because of taxes and other expenses that are piled onto working people, those who get government subsistence payments often have ‘extra’ money to spend on large TVs, paid tv services, internet services, and various other ‘luxury’ items. People who work for a living have to PAY for these types of ‘luxuries’ as well as pay additional taxes on these services so the government can ‘give’ these items to ‘the poor’. People who have their housing paid for, subsidized food, subsidized or free health care, subsidized or free transportation, and various other living expenses paid for can therefore spend money on luxury items. I pay for my cell phone every month. How many ‘poor’ people get a free (or more than 1) cell phone? Do some of those poor people start to have their benefits cut when they start earning income from a job? What, then, would be the incentive to get a regular, paying job? If someone starts working and their housing benefit is cut, does this discourage them from seeking employment? If any of their other benefits are reduced or eliminated when they get a job, does this encourage or discourage regular employment? Does loss of benefits discourage some of these folks from reporting their income?
    There seems to be an awful lot of holes in the social welfare programs. Helping someone through a tough time is commendable. Helping someone to remain on government subsistence programs for an extended period is unforgivable. The more that’s revealed about government ‘benefits’, the more obvious it becomes that control of these programs by the central planners is the wrong place for it to reside. And to make matters worse, the central planners continue to steal more responsibility. They can’t manage the level of responsibility they’ve already taken, what makes ANYONE believe they can manage even more responsibility? Central planners fail EVERY TIME they try. Why would it be that this crop of central planners will do a better job? What makes anyone think they are capable of doing a better job? When the central planners fail at their attempts, they simply appoint non-elected officials to rule over us. Think EPA, think NLRB. The EPA has gotten so bold as to TELL Congress that if they don’t take specific actions, then the EPA will simply do it by regulation. Congress controls the purse strings, and every other aspect of EPA, yet it’s EPA telling Congress how to act. And we, the people, have no control over the EPA because they are unelected and report to no one with brains. (that’s a reference to the elected officials in both Congress and the White House!)