American Elephants

Poverty in America: We Have Spent $20.7 Trillion. Have We Reduced Poverty? by The Elephant's Child

Fifty years ago this month, Lyndon Baines Johnson stood before the U.S. Congress and, in his State of the Union address, declared, “This administration today, here and now, declares unconditional war on poverty in America.” So how did that work out? The poverty rate has fallen from 19 percent to 15 percent in two generations, but not exactly a  roaring success. But then there are many ways to measure poverty, and what does it mean to be poor in America anyway? Some studies have shown that the poor in America live better than the average European.

Current poverty has little resemblance to poverty 50 years ago. According to a variety of government sources including the census, the typical American living below the poverty level in 2013 lives in a house or apartment that is in good repair, equipped with air conditioning and cable TV. His home is larger than that of the average non-poor French, German or Englishman. He has a car, multiple color TVs and a DVD player. More than half have computers and a third have wide, flat screen TVs. The overwhelming majority are not undernourished and did not suffer from hunger for even one day of the previous year.

We have spent over $20.7 trillion in attempting to reduce poverty, but we are still talking about “the poverty rate,” rather than the numbers of people who have been moved out of poverty to become gainfully employed and self-supporting. We don’t know if these are the same people over time, or if we are talking about significant mobility or a sheer lack of mobility. The American dream has always been about mobility, and I have known numbers of people who have moved from poverty to wealth — largely because they didn’t like being poor and were very determined to move up, and did so.

We have all sorts of programs that represent a generous safety net. Schools now offer not only lunch, but often breakfast and dinner too for kids. We don’t want kids to go hungry and many school districts just offer free meals for everyone since it’s easier than distinguishing. One of the great incentives for escaping poverty has always been shame, but the liberal idea of poverty is that no one should feed bad about accepting food stamps, help with the rent or housing, aid to families with dependent children, free health care,  and free Obama phones.

The federal government currently runs more than 80 means-tested welfare programs that provide cash, food, housing, medical care and social services to poor and low-income Americans. The government spent $916 billion on these programs in 2012 alone. Federal welfare spending, adjusted for inflation is 16 times greater than it was in 1964. If it was converted to cash, current means-tested spending is five times the amount needed to eliminate all official poverty in the U.S. Couldn’t we just send them a check, and dump the bureaucracy involved?

The census defines a family as poor based on income level but does not count welfare benefits as income. So government means-tested spending can grow infinitely while the poverty rate remains unchanged.

LBJ intended to give poor Americans “opportunity, not doles.” One vast mistake was to give exactly the same benefits to unwed mothers as to married or widowed single mothers. It sounds like just fairness, but the incentives kept pregnant young women from marrying the father of their child. There are all sorts of anti-marriage incentives within welfare programs. Currently benefits are sharply cut if a mother marries a working father. Benefits are cut when a recipient goes to work, even if the salary is less than the benefit. The incentives are all wrong, and incentives matter.

The government is increasingly using its coercive powers to punish people who want to work, creating a vast class of able-bodied Americans who are dependent on the government — and their own politician — for their benefits. A smaller proportion of working-age Americans works today than when the recession officially ended 4½ years ago. The do-gooders who want to help want to increase the minimum wage, which the evidence shows is an unemployment act particularly for young people whose unemployment rates have skyrocketed. Extended unemployment benefits keep people from vigorously pursuing a job. How do you help people— tough love or enabling with generosity?

Every major city that is a center of poverty is run by Democrats: St. Louis, MO (26%), Detroit, MI (36.2%), Newark, NJ (26.1%), Cincinnati, OH (27.4%), Philadelphia, PA (28%), Milwaukee, WI (29.9%), Buffalo, NY (29.9%), El Paso, TX (25%), Cleveland, OH (36%),and Camden, NJ (42.5%)— cities who have had Democrat administrations for years and years.

Paul Ryan argues that government must tackle the causes of poverty, instead of perpetuating it by funding its symptoms. “We focus on how much money we spend. Instead, we should focus on results. We should focus on how many people get off public assistance — because they have a good job.”


Obama Has Brought Economic Mobility to a Screeching Halt. by The Elephant's Child

The federal government, for its own convenience, divides the American people into five classes by income. One poor, three middle, and one rich — or perhaps now it’s two middle and two rich. The Occupy people, an unfortunate distraction, divided Americans up into the 1% and the 99%, the filthy rich and the rest of us.  I always assumed it was the 1% of Occupy layabouts and the rest of us, for I certainly didn’t care to be associated with that mess.

There are reasonable ideas behind these divisions, for Americans believe there should be a safety net, and the poor and disabled should have the help they need. But then everybody starts using the “classes,” and drawing sharp lines and becoming obsessed by inequality, and the “growing gap” between the rich and the middle class. They do not understand the economy as a living, changing entity.

They see the economy as a pie, and if the rich get richer, then the rest will have to subsist on less. The rich make the poor poorer. But that is nonsense. The amount of money in the economy grows to accommodate increased economic activity. In theory, when the economy needs more money, the treasury prints some. In our current situation, we borrow more and sign more promissory notes.

The current battle over “The Fiscal Cliff” is all about “the rich.” President Obama wants to tax “the rich” significantly more because he has decided that they aren’t paying their “fair share” even though we have the most progressive taxes among  industrialized countries (until France elected a socialist president who raised taxes on the rich and the rich moved out of the country). This has long been a fixed idea among liberals.

According to Timothy Noah, a senior editor at the New Republic, the inequality dates from the Reagan tax cuts. The present gap between rich and middle class is intolerable. Noah declared it indisputable that income inequality is bad not only for people on the losing end but also for society at large.

There has always been enormous mobility in the American population. Young people start out poor, find jobs, get promoted or find a better job, and with hard work some even get rich.The rich are not the same people over time, nor are the poor. Obama hasn’t managed to make people richer, though he’s tried with his subsidies for political cronies; but  he has succeeded beyond anyone’s dreams at enormously enlarging the numbers of those considered poor. Over 540,000 people have dropped out of the labor force. More than 24 million Americans who want jobs don’t have them, driving labor force participation down to 63,6%. That is his accomplishment, not, as he so often claims, Bush’s fault.

There will be another big drop in the ranks of the employed in January as company after company lays off workers as a result of ObamaCare, and the threat of sequestration hits military defense contractors. Increasing taxes on “the rich” will only add to the unemployed as small businesses, who are the usual engine of prosperity, are deprived of the funds they might have used to hire or expand. New regulations being streamed out of the EPA will do more damage to the economy. The EPA has announced that consideration of costs or job losses are not a matter that they consider. They are only protecting the environment.

To make the economy prosper, we do not need to extract more taxes from the rich, we need to add a minimum of 200,000 new jobs every month. It is not happening, and because we are determinedly pursuing the wrong policies, there is no relief in sight. Obama created this mess, his policies have cost millions of jobs and money he has extracted from taxpayers has been wasted in endless, useless green schemes. If the president wants to know why the economy isn’t recovering, he only has to look in the mirror.

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