I’ve shared many charts over the years, but two of the most compelling ones deal with poverty.
The numbers in this chart, which are based on Census Bureau data and scholarly studies (see here, here, here, and here), show that the poverty rate was steadily falling in the United States – until the federal government decided to launch a so-called War on Poverty.
Once Washington got more involved and started spending trillions of dollars, we stopped making progress. The poverty rate has changed a bit with shifts in economic conditions, but it’s stayed remarkably steady between 11 percent and 15 percent of the population.
So why have we stopped making progress? This second chart shows how redistribution programs create a dependency trap. The plethora of handouts from government make self-reliance and work comparatively unattractive, particularly since poor people are hit with very high implicit marginal tax rates.
And just as rich people respond logically to incentives, the same is true of poor people.
In a recent debate with a representative of the Center for American Progress, I tried to make these points. I doubt I had any effect on her outlook, but hopefully viewers began to see that the welfare state has been bad news for taxpayers and bad news for poor people.
Our debate was cut short by the host, but I think it was a fair representation of each side’s views.
And if you want more information on this topic, my former colleague from my days at the Heritage Foundation, Robert Rector, assesses the War on Poverty for today’s Wall Street Journal.
He starts with some very sobering numbers.
Fifty years later, we’re losing that war. Fifteen percent of Americans still live in poverty, according to the official census poverty report for 2012, unchanged since the mid-1960s. Liberals argue that we aren’t spending enough money on poverty-fighting programs, but that’s not the problem. …The federal government currently runs more than 80 means-tested welfare programs that provide cash, food, housing, medical care and targeted social services to poor and low-income Americans. Government spent $916 billion on these programs in 2012 alone, and roughly 100 million Americans received aid from at least one of them, at an average cost of $9,000 per recipient. …Federal and state welfare spending, adjusted for inflation, is 16 times greater than it was in 1964. If converted to cash, current means-tested spending is five times the amount needed to eliminate all official poverty in the U.S.
He then explains that poor people don’t suffer from material deprivation (which may explain why the Obama Administration wants to manipulate the numbers to justify more welfare spending).
…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 the home of the average nonpoor French, German or English man. He has a car, multiple color TVs and a DVD player. More than half the poor have computers and a third have wide, flat-screen TVs. The overwhelming majority of poor Americans are not undernourished and did not suffer from hunger for even one day of the previous year.
Robert then gets to the heart of the issue, explaining that the welfare state has expanded dependency and exacerbated social pathologies.
…consider LBJ’s original aim. He sought to give poor Americans “opportunity not doles,” planning to shrink welfare dependence not expand it. …By that standard, the war on poverty has been a catastrophe. The root “causes” of poverty have not shrunk but expanded as family structure disintegrated and labor-force participation among men dropped. A large segment of the population is now less capable of self-sufficiency than when the war on poverty began. …In 1963, 6% of American children were born out of wedlock. Today the number stands at 41%. As benefits swelled, welfare increasingly served as a substitute for a bread-winning husband in the home. …children raised in the growing number of single-parent homes are four times more likely to be living in poverty than children reared by married parents of the same education level. …Even in good economic times, a parent in the average poor family works just 800 hours a year, roughly 16 hours weekly, according to census data. Low levels of work mean lower earnings and higher levels of dependence.
Mr. Rector also has some specific suggestions in his column, most of which seem sensible, but this is where I think my idea of sweeping decentralization and federalism is very appropriate.
P.S. Thomas Sowell’s indictment of the welfare state is must reading.
P.P.S. Some honest leftists now acknowledge that big government creates worrisome forms of dependency.
P.P.P.S. If you want to know how dependency varies by state, here’s a map showing welfare payments and another map showing food stamp usage.
P.P.P.P.S. Shifting to a bigger stage, my least favorite international bureaucracy has made the preposterous claim that poverty is a bigger problem in America than it is in basket-case nations such as Greece and Portugal. Not that we should be surprised since the OECD actively urges a bigger welfare state in the United States.
P.P.P.P.P.S. And don’t forget our Moocher Hall of Fame if you want examples of the human cost of the welfare state.
[…] previously pointed out that the so-called War on Poverty is a failure, both for poor people and for […]
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[…] conclusión es que el estado de bienestar es una mala noticia tanto para los contribuyentes como para los beneficiarios. Todo lo cual puede ayudar a explicar por qué la tasa de pobreza dejó de caer una vez que el […]
[…] Some of that political analysis is reasonable. FDR’s failed New Deal did expand government, as did LBJ’s failed War on Poverty. […]
[…] Some of that political analysis is reasonable. FDR’s failed New Deal did expand government, as did LBJ’s failed War on Poverty. […]
[…] bottom line is that the welfare state is bad news for both taxpayers and recipients. All of which may help to explain why the poverty rate stopped falling once the government declared […]
[…] that system has been bad news for both taxpayers and poor people, a swap sounds very […]
[…] P.P.P.S. The Census Bureau’s report also has the latest data on poverty. The good news is that the poverty rate fell. The bad news is that long-run progress ground to a halt once the federal government launched the ill-fated War on Poverty. […]
[…] P.P.P.S. The Census Bureau’s report also has the latest data on poverty. The good news is that the poverty rate fell. The bad news is that long-run progress ground to a halt once the federal government launched the ill-fated War on Poverty. […]
how to make $3500 per a day
This is my Excerpt
[…] is bad news for poor people and bad news for taxpayers. But it’s also bad news for the nation since it reflects an erosion of societal […]
[…] low-income people) in Washington and replace them with a “block grant.” This could be good news for federal taxpayers if the annual block grant is designed to grow slowly. And it could be good news for poor people […]
[…] The bottom line is that our current welfare system is a dysfunctional mess. It’s bad for taxpayers and recipients. […]
[…] subsidies have undermined progress on poverty by trapping people in long-run government […]
[…] the current system is bad for both poor people and taxpayers. But why would anyone think that we’ll get better results if we give generous handouts to […]
[…] the current system is bad for both poor people and taxpayers. But why would anyone think that we’ll get better results if we give generous handouts to […]
[…] The welfare state is bad news for both taxpayers and recipients. […]
[…] The welfare state is bad news for both taxpayers and recipients. […]
[…] like the welfare state because I care about both the best interests of taxpayers and also about the best interests of poor people. And this is why I repeatedly share data showing how American was making impressive progress […]
[…] No wonder the welfare state and War on Poverty have been bad news for both taxpayers and poor people. […]
[…] No wonder the welfare state and War on Poverty have been bad news for both taxpayers and poor people. […]
[…] No wonder the welfare state and War on Poverty have been bad news for both taxpayers and poor people. […]
[…] No wonder the welfare state and War on Poverty have been bad news for both taxpayers and poor people. […]
[…] The welfare state is bad news. It’s bad for taxpayers and it’s bad for recipients. […]
[…] The welfare state is bad news. It’s bad for taxpayers and it’s bad for recipients. […]
[…] I repeatedly try to convince people that the welfare state is bad for both taxpayers and poor people. […]
[…] I repeatedly try to convince people that the welfare state is bad for both taxpayers and poor people. […]
[…] large increases” in supposed anti-poverty spending. Based on the evidence, it would be more accurate to say that poverty has stayed high “because of large […]
[…] This system has been bad for taxpayers and bad for poor people. […]
[…] This system has been bad for taxpayers and bad for poor people. […]
[…] It’s been bad for taxpayers and bad for poor people. […]
[…] It’s been bad for taxpayers and bad for poor people. […]
[…] That should be compelling, especially when combined with the data on how the welfare state simply traps poor people in government […]
[…] been bad news for taxpayers, of course, but it’s also been bad news for poor people since they get trapped in […]
[…] But that doesn’t mean we shouldn’t be worried. Indeed, the welfare state should be radically changed because we care about both taxpayers and poor people. […]
[…] Or we could just keep the current system, which is bad for both poor people and taxpayers. […]
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[…] Cato economist Dan Mitchell has often written on the same topic. Here’s a post he wrote on the failures of the War on Poverty and another on the “redistribution trap.” That latter is […]
[…] occasions, I’ve observed that the poverty rate in America was steadily falling, but that progress came to a halt in the mid-1960s when the government declared a War on […]
[…] is even more preposterous than asserting that we should squander $1 trillion per year on anti-poverty programs, not because that redistribution will help the poor, but rather because it makes leftists feel […]
anyone who has ever lived or worked in the backlands of the developing world knows what human poverty really is…. what we have here in America is political opportunism masquerading as compassion… forced redistribution as a substitute for individual initiative and personal responsibility… and politics as a vexation to the human spirit…
“The War on Poverty’s Biggest Casualties”
http://www.frontpagemag.com/2014/matthew-vadum/the-war-on-povertys-biggest-casualties/
[…] The War on Poverty Has Been a Disaster for Taxpayers…and for Poor People […]
Yes, do you hear that… you one billion Chinese, another billion Indians, and another two billion lucky emerging world souls — who live in forty square meter apartments and are on the cusp of buying your first Tata Nano car ever? The American at $29K/year is starving and needs an additional $28K in redistribution. I mean, without the extra $28k, our poor American might have to move down to a house that is only three times bigger than yours and his college aged daughter may have to give up her Toyota Corolla for the same wretched Tata Nano you one day hope to transport your entire family in. The family may even have to give up their trip to Disneyland!
Now don’t you get any global redistribution ideas. The money of our rich is an exclusively American public resource. The money of our rich is slated to help our poor $29/$57K Americans maintain their top five percent worldwide standard of living. As far as our $57K/y single mother, she ain’t got a dime to spare for the billions who live on $7k per year. Ok, let’s make it short and practical: You don’t vote here, so you are irrelevant to us and our politicians.
So, see, you may aspire to move to America, but see what a wretched fate awaits you were you to move here? So stay where you are and, my, my,… FEAR mighty America. Because America will always be able to outcompete you. Our companies with the $29/$57K janitor and 60% marginal tax executive will always be able to make products with better value/cost ratios than you and your Ming and Gupta executives can muster. I mean, what motivation to produce do you possibly have compared to our $29/$57K per year single mother? You will never be able to produce things with a better value/cost ratio than our $29/$57K janitor and 60% marginal tax executive companies. We Americans are preordained to outcompete you, and our $29/$57K poor American is destined to maintain his top five percent of the world standard of living. After all, our god is the right one – and he’s on our side.
[…] Cato Institute’s Dan Mitchell has a pretty good post about the legacy of Lyndon Johnson’s so-called “War on Poverty…. Since the Industrial Revolution, wealth prosperity in terms of disposable income and access to […]
[…] The War on Poverty Has Been a Disaster for Taxpayers…and for Poor People […]
Ahh, where to start…
http://www.mydesert.com/article/20140108/OPINION04/301080016/Letting-residents-go-hungry-isn-t-way-boost-economy
This idea that productivity drops when the more productive are taxed to support the less productive is just a bogus myth propagated by right wing ideologues.
We Americans are patriotic hard working innovative people. No matter how much we are taxed, no matter how much we are helped, we will keep working and being all that we can be. Besides, divine forces are on America’s side, so my American middle class standard of living, in the world’s top ten percent, rests secure.
As a matter of fact, I cannot wait for the wonderful future that awaits us. We are finally on our way to free healthcare! Next election I’m voting for free food, free education, free housing, free transportation and a paid four week vacation, all as basic human rights.
Oh yes, I forgot, free sex too. Who can argue that sex is just as important to a decent human life as food, education, housing, transportation and vacation? Sex is also a human right to a decent life. I want it, and if a majority of us finally votes to make it a human right, then…. well… the minority will have to provide it. What choice will they have anyway? By then, they will be disarmed!
Ok. Maybe I will not quite get all my wishes this time around. But little by little….
In a nutshell, if you want to remain in the world’s top ten percent, you have to let your neighbor be rich.
Poverty is remaining constant, or perhaps even increasing a bit, because … well… that kind of poverty is no longer poverty really.
The single mother who makes 29k but receives net income of 57k is … well… no longer poor. She has been, to a large extent, insulated form poverty. Actually, she is in the top 10% of worldwide prosperity. Her bumper sticker should really say “top 10% worldwide”.
But Americans are gambling with their hard earned top of the world prosperity status. The effort-reward flattening effect of insulating people from the consequences of mediocrity flattens the effort-reward curves at the lower part of the income curve, while the inevitable heavy taxation that must accompany this redistribution decreases motivation to work at the upper end of the income scale.
This decreases motivation levels throughout American companies, from the lower paid but supported janitor to the highly paid but also heavily taxed executive. At some point, the aggregate motivation and productivity (i.e. competitiveness) of American companies will lose its top status in the world – at which point America will quickly fold.
Quickly fold you say? Why? Because of the vicious cycle. As America’s worldwide competitiveness is surpassed by more motivated societies, desperation will set into the lives of the once enviably wealthy American middle class voter-lemmings. The world is not linear in that respect. Losing top competitiveness does not mean you just sell a bit less. It means you get obliterated by the competition. When that happens, voter-lemmings will predictably and instinctively turn to the polls for immediate redistribution, in an effort to hang on to their once top 10% worldwide standard of living. The crisis will intensify and the vicious cycle will fold America’s once good (but unappreciated) selfish fortunes.
This is exactly the wrong time to flatten effort-reward curves to European levels.
By virtue of the fact that other nations are now catching up to America, Americans are poised to join the real middle class: The worldwide middle class, where American prosperity is no longer exceptional. No, life in absolute terms will not get worse. But just like a telephone was a luxury a century ago while those who don’t have one today are considered living in indecent poverty, so, in a few decades, when the cure for cancer is finally available, and your country is not wealthy enough to provide it, you will be living a wretched life. Still better than today, but wretched by the future standards set by a rising humanity.
In a nutshell, that is essentially what a compounding 2-4% annual growth trendline deficit compared to the world average will do to your prosperity.
Reblogged this on Public Secrets and commented:
Maybe after 50 years of empirically verified failure, we should try something else.
[…] Jan. 8, 2014: The War on Poverty Has Been a Disaster for Taxpayers…and for Poor People – Libertarian Dan Mitchell argues that “the poverty rate was steadily falling in the United […]