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Posts Tagged ‘Poverty’

I’m frequently baffled at the stupidity of Republicans.

When they took control of Congress back in 1994, for instance, they had unrestricted ability to get rid of the bureaucrats that generated bad economic analysis at both the Joint Committee on Taxation and the Congressional Budget Office.

Yet notwithstanding more than a decade of congressional power, GOPers did almost nothing to neutralize the bureaucrats who produced shoddy research that helped the left push for more spending and higher taxes.

Sort of like a football team allowing the opposing coach to pick the refs and design game plans for both teams.

Another painful example is that Republicans never used their majority status to defund the Paris-based Organization for Economic Cooperation and Development.

This international bureaucracy is infamous for pushing policies to expand the power of government. That’s not too surprising since it’s dominated by European welfare states. But it is amazing that Republicans seem to think it’s perfectly fine to send about $100 million each year to subsidize the OECD’s agenda.

Particularly when the OECD so often pushes policies that are directly contrary to American interests.

It has allied itself with the nutjobs from the so-called Occupy movement to push for bigger government and higher taxes in the United States.

The bureaucrats are advocating higher business tax burdens, which would aggravate America’s competitive disadvantage.

The OECD is pushing a “Multilateral Convention” that is designed to become something akin to a World Tax Organization, with the power to persecute nations with free-market tax policy.

It supports Obama’s class-warfare agenda, publishing documents endorsing “higher marginal tax rates” so that the so-called rich “contribute their fair share.”

The OECD advocates the value-added tax based on the absurd notion that increasing the burden of government is good for growth and employment.

It even concocts dishonest poverty numbers to advocate more redistribution in the United States.

Let’s elaborate on the last item dealing with poverty in the United States. According to the OECD, poverty is more sever in the United States than it is in relatively poor nations such as Greece, Portugal, and Hungary.

Indeed, the bureaucrats in Paris even put together a chart showing how “bad” America ranks in this category.

But it’s all bunk. Utterly dishonest garbage. Here’s some of what I wrote last year on this topic.

…if you read the fine print, you may notice one itsy-bitsy detail. The chart isn’t a measure of poverty. Not even close. Indeed, the chart wouldn’t change if all of the people of any nation (or all nations) suddenly had 10 times as much income. That’s because the OECD is measuring is relative income distribution rather than relative poverty. And the left likes this measure because coerced redistribution automatically leads to the appearance of less poverty. Even if everybody’s income is lower!

But the OECD isn’t letting up. In a new “Society at a Glance” look at the United States last month, here’s what the OECD claimed.

The relative poverty rate in the U.S. is 17.4%, compared to an OECD average of 11.1%. Only Chile, Israel, Mexico and Turkey have higher poverty rates than the U.S.

But unlike in other publications, the OECD didn’t bother to include any fine print admitting that its poverty measure has nothing to do with poverty.

That’s grotesquely dishonest and morally corrupt.

And since we’re on the topic of corruption, let’s broaden our discussion. National Review’s Kevin Williamson has an article on the rampant corruption among elected officials.

But what caught my attention weren’t the parts about pro-gun control politicians trying to help sell weapons to terrorists. Instead, I especially appreciated the broader lesson he provides for readers.

James Madison famously observed that “if men were angels, no government would be necessary.” But he also understood that men do not become angels once they win elections, become police, or are appointed to positions of power. Our constitutional order strikes an elegant balance between policing the non-angels outside of government and constraining the non-angels within government, setting the ambitions of the three branches against one another and subdividing the legislative branch against itself. …Adam Smith’s formula for prosperity — “peace, easy taxes, and a tolerable administration of justice” — is the very modest ambition that conservatives aim for. Limited government is the tool by which government can be made to do good without necessarily being good, or being composed of good men. …The corruptibility of the political classes is fenced in by limiting the power of the political classes per se. You cannot expand the scope and scale of government without expanding in parallel the scope and scale of government corruption.

Amen to that. That’s the core message of this video I narrated, which explains that shrinking the size and scope of government is the only effective way to reduce corruption.

Remember the lesson of this superb poster: If more government is the answer, you’ve asked a very strange question.

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The political left obviously hopes that it can score political points by pitching some Americans against others with a campaign based on income inequality and class warfare taxation.

Is there any merit to this approach? Are the less fortunate suffering because some are succeeding? And would more government alleviate this problem, to the extent it actually exists?

George Will has a must-read column in the Washington Post on the topic of inequality, including a very relevant observation that the rich on Wall Street are the ones who benefit from the easy-money policy embraced by the Washington establishment.

In this sixth year of near-zero interest rates, the government’s monetary policy breeds inequality. Low rates are intended to drive liquidity into the stock market in search of higher yields. The resulting boom in equity markets — up 30 percent last year alone — has primarily benefited the 10 percent who own 80 percent of all directly owned stocks.

But his main point is that the lack of growth in the real economy has been very damaging to ordinary Americans.

And that lack of growth – acknowledged by both the Washington Post and Congressional Budget Office – is because politicians have been increasing the burden of government.

Richard Fisher, president of the Federal Reserve Bank of Dallas, says the total reserves of depository institutions “have ballooned from a pre-crisis level of $43 billion to $2.5  trillion .” And? “The store of bank reserves awaiting discharge into the economy through our banking system is vast, yet it lies fallow.” The result is a scandal of squandered potential: “In fourth quarter 2007, the nation’s gross domestic product (GDP) was $14.7 trillion; at year-end 2013 it was estimated to be $17.1 trillion. Had we continued on the path we were on before the crisis, real GDP would currently be roughly $20 trillion in size. That’s a third larger than it was in 2007. Yet the amount of money lying fallow in the banking system is 60 times greater now than it was at year-end 2007.” …there is abundant money for businesses. But, says Fisher, the federal government’s fiscal and regulatory policies discourage businesses from growing the economy with the mountain of money the Fed has created. This is why “the most vital organ of our nation’s economy — the middle-income worker — is being eviscerated.” And why the loudest complaints about inequality are coming from those whose policies worsen it.

Trillions of dollars sitting on the sidelines because of bad government policy.

Seems like Chuck Asay’s cartoon is right on the mark.

Let’s dig deeper into this topic by looking at what a couple of experts have written on the topic of inequality.

Here are some excerpts from a column by Ronald Bailey for Reason.

Here’s everything you need to know.

Are the poor getting poorer? No. In fact, over the past 35 years most Americans got richer. Has income inequality increased in the United States? Yes. Does it matter? Well, President Barack Obama thinks so.  …Is that true? No. …The real defining economic challenge of our time isn’t to end inequality. It’s persistent joblessness and weak economic growth perpetuated by feckless Obama administration policies.

If you want to know the details (and you should), Bailey explains that what matters is growth because that means all groups can enjoy rising incomes. And that’s exactly what you find in the data.

Using the CBO data, the Brookings Institution economist Gary Burtless has shown that from 1979 to 2010, the last year for which data are available, the bottom fifth’s after-tax income in constant dollars rose by 49 percent. The incomes of households in the second lowest, middle, and fourth quintiles increased by 37 percent, 36 percent, and 45 percent, respectively. The poor and the middle class got richer. …The rich got richer too, and they got richer faster. …So inequality in the U.S. has increased. But if most Americans’ incomes are rising, does it matter if some are getting a larger share?

He also makes the key observation that you shouldn’t just compare income groups over time.

This is because there is mobility. A poor household one year may not be part of the “bottom 20 percent” five years later.

Here’s more of what Bailey wrote.

Those worried about rising income inequality also often make the mistake of assuming that each income quintile contains the same households. They don’t. Between 2009 and 2011, for example, 31.6 percent of Americans fell below the official poverty threshold for at least two months, but only 3.5 percent stayed below it over the entire period. …In 2009, two economists from the Office of Tax Analysis in the U.S. Treasury compared income mobility in two periods, 1987 to 1996 and 1996 to 2005. The results, published in the National Tax Journal, revealed that “over half of taxpayers moved to a different income quintile and that roughly half of taxpayers who began in the bottom income quintile moved up to a higher income group by the end of each period.” …The Treasury researchers updated their analysis of income mobility trends in a May 2013 study for the American Economic Review, finding that about 75 percent of taxpayers between 35 and 40 years of age in the second, middle and fourth income quintiles in 1987 had moved to a different quintile by 2007. …In January, scholars from Harvard and University of California, Berkeley bolstered the Treasury economists’ conclusions. Parsing data from the 1950s and 1970s, the researchers, who are involved with The Equality of Opportunity Project, reported that “measures of social mobility have remained stable over the second half of the twentieth century in the United States.

Let’s continue with more wonky data.

Writing for National Affairs, Scott Winship delves into the issue, beginning with an explanation of the left’s hypothesis.

To hear many liberals tell it, increasing inequality is holding back growth, crushing the prospects of the poor and middle class, and even undermining American democracy. Such concerns are prominent in President Obama’s rhetoric, and seem also to drive key parts of his policy agenda — especially the relentless pursuit of higher taxes on the wealthy. …Perhaps the most common assertion regarding the ill effects of inequality in our time is that an unequal economy just doesn’t work for most people — that inequality impedes growth and harms standards of living.

He then unloads a bunch of data and evidence to show why the statists are wrong, including reliance on bad methodology.

…does it in fact reduce growth? There is no clear evidence that it does. …one of the most widely cited papers in the inequality debates — a 2011 study by IMF economists Andrew Berg and Jonathan Ostry showing that inequality hurts growth — suffers from this very problem of focusing primarily on developing countries.

But if the research looks at industrialized nations, it becomes apparent that it is not bad for growth when some people become rich.

Recent work by Harvard’s Christopher Jencks (with Dan Andrews and Andrew Leigh) shows that, over the course of the 20th century, within the United States and across developed countries, there was no relationship between changes in inequality and economic growth. In fact, between 1960 and 2000, rising inequality coincided with higher growth across these countries. In forthcoming work, University of Arizona sociologist Lane Kenworthy also finds that, since 1979, higher growth in the share of income held by the top 1% of earners has been associated with stronger economic growth across several countries.

There’s a lot more in the article, but this already is a long post. I encourage you to read both articles in their entirety.

The bottom line is that you don’t help poor people by savaging rich people (though it is very appropriate to target rich people who have undeserved wealth because of crony policies such as TARP and Ex-Im Bank).

Pizza FairnessThe left mistakenly acts as if the economy is a fixed pie and one person’s success necessarily means the rest of us are worse off. So in an effort to increase the relative amounts received by the poor, they pursue policies that cause the pie to shrink.

As Margaret Thatcher famously said, it seems they’re willing to hurt the poor if they can hurt the rich even more.

That’s not the way the economy works when people are liberated from the heavy yoke of statism.

Simply stated, you’re not going to be doing much to help the poor unless you focus on policies that generate faster long-run growth.

P.S. It’s not related to the issue of inequality, but George Will also included this delicious sentence in his column. It’s too good not to share.

We spend $1 trillion annually on federal welfare programs, decades after Daniel Patrick Moynihan said that if one-third of the money for poverty programs was given directly to the poor, there would be no poor. But there also would be no unionized poverty bureaucrats prospering and paying dues that fund the campaigns of Democratic politicians theatrically heartsick about inequality.

P.P.S. I also can’t resist sharing this video showing a European Parliamentarian denouncing the politicians and bureaucrats of the European Commission for hypocritically trying to squeeze more tax from the private sector while simultaneously benefiting from special tax breaks only available to themselves.

Gotta love any politician who is willing to quote Murray Rothbard and also state that government is a racket. And Dan Hannan has made similar points.

I can only wonder, by the way, what Mr. Bloom would say if he knew about the bureaucrats at the Organization for Economic Cooperation. They are totally exempt from income tax, yet they spend a lot of their time trying to impose higher taxes on other nations (including the United States).

You can also see him wax poetic in these two videos. And his better-known fellow MEP, Dan Hannan, also has weighed in on the same topics.

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On several 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 Poverty.

And I almost always included a chart showing the annual poverty rate over several decades.

Moreover, I posted graphs showing how government programs trap people in dependency because of very high implicit marginal tax rates. And that’s true in other nations as well.

But it didn’t matter how many times I revisited this issue, I was never clever enough to look at the poverty-rate data to estimate what would have happened if the federal government hadn’t become involved.

Fortunately, John Goodman of the National Center for Policy Analysis was insightful enough to fill the breach. He shows that the War on Poverty has made a big difference. But in the wrong way.

Poverty Goodman

Here’s some of what John wrote about the topic in a column for Forbes.

From the end of World War II until 1964 the poverty rate in this country was cut in half. Further, 94% of the change in the poverty rate over this period can be explained by changes in per capita income alone. Economic growth is clearly the most effective antipoverty weapon ever devised by man. The dotted line shows what would have happened had this trend continued. Economic growth would have reduced the number in poverty to a mere 1.4% of the population today—a number so low that private charity could probably have taken care of any unmet needs. …we didn’t continue the trend. In 1965 we launched a War on Poverty. And as the graph shows, in the years that followed the portion of Americans living in poverty barely budged.

John augments this analysis by looking at some of the social science research about poverty and government dependency.

The numbers are very depressing.

…here is something you may not know. Early on ― in the first decade of our 50-year experiment with an expanded welfare state ― carefully controlled experiments funded by the federal government established without question that welfare changes behavior. It leads to the very behavioral changes that keep people in a state of poverty and dependency. …The experiments were all conducted by social scientists who believed in the welfare state and had no doubt about its capacity to be successful. …The experiments were all controlled. Randomly selected people were assigned to a “control group” and an “experimental group.” …the results were not pretty. To the dismay of the researchers, they largely confirmed what conventional wisdom had thought all along. …The number of hours worked dropped 9% for husbands and 20% for wives, relative to the control group. For young male adults it dropped 43% more. The length of unemployment increased 27% among husbands and 42% for wives, relative to the control group. For single female heads of households it increased 60% more. Divorce increased 36% more among whites and 42% more among blacks. (In a New Jersey experiment, the divorce rate was 84% higher among Hispanics.)

President Obama and other folks on the left don’t seem overly interested in this data.

Instead, they beat the drums about class warfare and income inequality.

They want us to believe the economy is a fixed pie and that all of us somehow get less if some entrepreneur becomes rich.

But John’s point from the column is correct. Economic growth is the way to help the poor, not redistribution.

Unfortunately, many politicians are hostile to the types of policies that produce more growth. Maybe it’s because they don’t understand economics. Or maybe they understand economics but don’t care because they think they’ll be more successful at the ballot box if they pursue the politics of envy and division.

But regardless of motive, bigger government doesn’t have good results, as illustrated by this Gary Varvel cartoon.

Political Cartoons by Gary Varvel

This Chip Bok cartoon, featuring Obama with his ideological soulmate, also is worth sharing.

Political Cartoons by Chip Bok

P.S. Margaret Thatcher has the best-ever takedown of the left’s inequality agenda.

P.P.S. If you want to get agitated, click here to see how a bureaucracy in Paris is using American tax dollars to push a crazy new definition of poverty. Why? To promote more redistribution.

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A bunch of well-connected rich people and government officials are descending upon Switzerland for the annual World Economic Forum meeting in Davos.

This upsets many people, and perhaps with some justification. After all, bad things often happen when big business and big government intersect.

But some folks reflexively think that wealth is bad and they would like us to believe that the economy is a fixed pie, meaning that the rich have more money because the poor have less money.

If you think I’m exaggerating, check out a new report from Oxfam, a UK-based group that was created to alleviate poverty but has largely morphed into a left-wing pressure group.

The folks at Oxfam complain about the supposed “capture of opportunities by the rich at the expense of the poor and middle classes” and that “tax rates for the richest have fallen in 29 of the 30 countries.”

Here are some excerpts from a report in the EU Observer.

As the world’s richest and most powerful men and women prepare to meet in the Swiss resort of Davos for the annual World Economic Forum on Wednesday (22 January), the British development charity, Oxfam, has issued a new report on global inequality. According to its findings, the wealth of the world’s 85 richest people – €81.2 trillion – amounts to that of the poorest half of the world population, or 3.5 billion people. …”In Europe, austerity has been imposed on the poor and middle classes under huge pressure from financial markets whose wealthy investors have benefited from state bailouts of financial institutions,” the charity said. Financial deregulation in the US has contributed to the situation, in which the richest one percent of the population has more money than ever since 1933.  …The charity said Davos participants should reverse the trend and pledge to support higher taxes for the rich, while refraining from using their wealth to seek political favours.

There are several parts of this excerpt that deserve attention, including passages that are correct (such as bailouts giving undeserved money to the rich) and passages that are nonsensical (the financial crisis was caused by intervention, not deregulation).

But I want to focus solely on the inequality issue. Let’s assume Oxfam is right and that the world’s 85 richest people have $81.2 trillion of wealth. The group obviously wants us to think this accumulation of wealth is bad and that it somehow comes at the expense of the rest of us.

Tim Carney of the Washington Examiner hits the nail on the head, explaining that there’s a big difference between honest wealth and riches obtained through government coercion.

…is it a bad thing for a country to have some really rich people? Again, it depends on how they got rich. Sutirtha Bagchi of the University of Michigan’s business school and Jan Svejnar of Columbia’s School of International and Public Affairs studied how inequality correlates with economic growth. In general, more inequality meant slower growth, and less inequality meant faster growth. But in many countries, over various time periods, growing inequality had no effect on economic growth. The new study suggests that an increase in inequality hurt the economy when the rich were getting rich through political connections. That is, inequality hurts the economy when “a large share of the national wealth is held by a small number of politically connected families,” as the authors put it. …Bagchi and Svenjar took pains to classify political billionaires as narrowly as possible. …The political billionaires were only people who “would not have become a billionaire in the absence of political connections that resulted in favoritism and/or explicit government support.”

The oft-missed lesson here is that undeserving wealth generally is obtained because of big government.

Which reminds me of a very astute observation by a former Cato colleague, who wrote that, “…the more power the government has to pick winners and losers, the more power rich people will have relative to poor people.”

Carney continues, pointing out that wealth obtained through markets is good. Such success creates a bigger pie and helps boost living standards for everyone.

But wealth achieved via government is cronyism, and that contributes to economic stagnation.

When a country’s wealthiest got wealthy through market means, the resulting inequality has no negative effect on economic growth. This jibes with what we know about free markets. If people can get rich by providing valuable things at good prices, then society will get more valuable things at good prices—and people across the income spectrum benefit. But if people get rich by pocketing subsidies and using the state to crush competitors, then they gained their wealth at the expense of everyone else. Bill Gates became a billionaire by making and selling something that makes regular people more productive and more connected. Buffett got rich largely by providing capital to underfunded but well-run businesses. If Bagchi’s and Svejnar’s findings are correct, then the bottom line is this: Inequality itself doesn’t hurt the economy. Cronyism hurts the economy.

I fully agree with Tim’s analysis, though I would have drawn a distinction between the younger Warren Buffett, who was a savvy investor and the older Buffett, who has climbed into bed with the political elite.

The bottom line is that the poor aren’t poor because of honest rich people. The poor are suffering because of big government, including the cronyism that lines the pockets of dishonest companies and individuals that feed at the public trough.

Unfortunately, many insider leftists are perfectly content with those policies and they use inequality to distract voters from the real problem.

There are honest leftists, of course, and they presumably would be outraged by the sleaze in national capitals. Their problem is that they genuinely think the economic is fixed pie. Or they think that inequality is such a bad thing that they would be willing to reduce incomes for the poor if it meant the rich suffered even more.

If you don’t believe me, watch this marvelous video of Margaret Thatcher debunking the left.

And my old grad school colleague Steve Horwitz also has some very sage observations on income inequality and class warfare.

P.S. In its report on inequality, Oxfam also went after tax havens and said more revenue for government would help reduce poverty.

Oxfam also estimated that €15.5 trillion of the wealth is hidden from the taxman in offshore accounts, at a time when governments are cutting public spending. …tax avoidance by EU and US corporations in Africa is depriving its governments from resources which could be use to fight poverty.

I wrote a study years ago exposing Oxfam’s sloppy methodology on tax competition issues. No wonder they’ve been labeled as being part of the “tax taliban.”

But what really irks me about that passage is the assumption that bigger government reduces poverty. That’s nonsense. The data shows that growth is the best way of helping the poor.

Christie JokeP.S. I wrote yesterday about Chris Christie’s problems in New Jersey. I said his real challenge was the need to reduce the burden of government, not the bridge scandal.

But I’m a sucker for good political humor, so enjoy this image that appeared in my inbox.

P.P.S. Since Oxfam criticized tax havens, I can’t resist calling your attention to my video tutorial on tax competition and tax havens.

Simply stated, we need some external check on the greed of the political class.

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I’ve shared many charts over the years, but two of the most compelling ones deal with poverty.

Poverty Rate DataThe 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.

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The welfare state is a nightmare.

Programs such as Medicaid are fiscal catastrophes. The food stamp program is riddled with waste. The EITC is easily defrauded, even sending checks to prisoners. And housing subsidies are a recipe for the worst forms of social engineering.

The entire system should be tossed in the trash.

But what’s the alternative? Some libertarians argue that we should eliminate the dozens of Washington programs and replace them with a government-guaranteed minimum income. I address this issue in an essay for Libertarianism.org.

Some libertarians argue that the state should provide a minimum basic income, mainly because this approach would be preferable to the costly and bureaucratic amalgamation of redistribution programs that currently exist. It’s hard to disagree with the notion that the current system is a failure. The Cato Institute’s Michael Tanner has produced a searing indictment of the modern welfare state, pointing out that more than $1 trillion is spent every year on redistribution programs for the ostensible purpose of alleviating economic hardship, yet (or more likely as a result) the poverty rate is at an all-time high. Perhaps one reason poverty remains high is that such programs make leisure more attractive than work, as painstakingly illustrated in a study produced by Tanner and Charles Hughes. Moreover, welfare programs create very high implicit marginal tax rates, making it very difficult for poor people to improve their living standards by engaging in additional productive behavior. It’s almost as if the system was designed to create permanent dependency.

In other words, it seems that nothing could be worse than the current system. And if you want more evidence, here’s a very powerful video on the failure of the modern welfare state.

But what about the idea of trashing what we have today and instead offering everyone some sort of basic income? As I noted in my essay, there are “…some very iconic libertarian figures who support at least some version of their approach, including Milton Friedman, Friedrich Hayek, and Charles Murray.”

I agree, but only sort of. I like the idea of radical reform, but I think there’s a better road to Rome. It’s called federalism.

The bottom line for advocates is that anything would be better than the current system, so why not try something new? They’re right, but there’s actually a better way of approaching the issue. Why not take all income-redistribution programs, put them into a single block grant, and then transfer the money – and responsibility – to state governments?

Here’s my argument for decentralization and federalism.

In an ideal world, the block grant would gradually diminish so that states would be responsible for both the collection and disbursement of all monies related to welfare. But that’s a secondary issue. The main benefit of this federalist approach is that you stop the Washington-driven expansion of the welfare state and you trigger the creation of 50 separate experiments on how best to provide a safety net. Some states might choose a basic income. Others might retain something very similar to the current system. Others might try a workfare-based approach, while some could dream up new ideas that wouldn’t stand a chance in a one-size-fits-all system run out of Washington, DC. And as states adopted different systems, they could learn from each other about what works and what doesn’t work. And since it’s easier to influence decisions that are closer to home, taxpayers at the state level almost certainly would have more ability to impact what happens with their money.

And here’s the bottom line on why a federalist approach is the libertarian solution to the welfare state.

It also will satisfy the libertarian desire to get Washington out of the business of income distribution, while presumably producing a system that actually does a better job of helping the less fortunate escape government dependency. In other words, all the advantages of the basic income plan without the potential system-wide downsides.

By the way, I explain in the article that the 1996 welfare reform legislation was a test case for the decentralization model. The analogy isn’t perfect, I admit, but there’s a very strong case to be made that replacing the federal welfare entitlement with a block grant was good for taxpayers and good for the poor…and that it shows why states do a better job of dealing with redistribution than Washington.

Last but not least, I’m just a policy wonk, but I think the federalism strategy also has political appeal. As just noted, it worked with welfare reform. And I suspect a lot of non-libertarians and non-conservatives will intuitively understand that you’ll get better results if you allow diversity and experimentation at the state level.

P.S. There would be some bad news if we decentralized the welfare state. It could mean an end to the Moocher Hall of Fame.

P.P.S. Replacing the welfare state with a (hopefully shrinking) block grant only addresses the problem of “means-tested” programs. If you also want to solve the problem of old-age entitlements, that requires Medicare reform and Social Security reform.

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Forget the debate over whether Obama is a socialist.

Now we’re discussing whether Jesus is for big government. Or, to be more accurate, the Pope has started a debate about whether free markets are bad, particularly for the poor.

Samuel Gregg of the Acton Institute wrote about the underlying theological issues in an article for National Review, but I hope I also contributed to the secular aspect of the debate in this BBC interview.

The first thing I said was the rather obvious point that there’s a lot more to life than accumulating wealth.

My most important point was that capitalism is the only successful model for creating broadly shared prosperity and I used examples from the Pope’s home region of Latin America to show that nations with more economic liberty are far more successful.

But I emphasized that supporters of freedom have a challenge because many people mistakenly associate capitalism with cronyism and bailouts for big business. In reality, free markets are a system based on voluntary exchange and private property, which means no special favors for any industry or company.

To bolster my point that economic growth is the best way to help the poor, I cited Hong Kong as a role model, both for creating growth and for enabling upward mobility.

My second most important point, which came near the end of the interview, was that genuine compassion is when you give away your own money, not when you vote for politicians who will use coercion to redistribute other people’s money. I should have used the opportunity to cite the data showing that Americans are far more compassionate – in the right sense – than their European counterparts.

I’m sure “Libertarian Jesus” would have agreed.

Now we need to get others to climb on the freedom bandwagon. I suspect the Pope will be more receptive to that message than politicians, though the Vatican sometimes has been very good on these issues and at times very disappointing.

P.S. I was worried I made up a word when I stated that I wanted to make a “theologic” point, but it’s actually in the dictionary, so I got lucky. But even if it turned out it wasn’t a word, it wouldn’t have been nearly as embarrassing as the time in the 1990s when I wanted to say “annals” and pronounced it “anals.”

P.P.S. Thomas Sowell has some insightful analysis on whether Obama is a socialist.

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Sometimes you find support for capitalism and small government in some rather unexpected places.

I was surprised, for instance, when I found out that Gene Simmons, the lead singer for Kiss, stated that, “Capitalism is the best thing that ever happened to human beings. The welfare state sounds wonderful but it doesn’t work.”

That’s pretty hard core.

Bad news for Denmark’s Lazy Robert?

Or what about the Finance Minister of Denmark’s left-wing government, who admitted that, “We live in a world of global competition for jobs… That requires a modernization of the welfare state.”

That’s not hard core, to be sure, but it certainly suggests that he understands the need to reduce the burden of government spending.

And my jaw hit the floor when I read that former KGB bigwig Vladimir Putin remarked that, “Many European countries are witnessing a rise of [the] dependency mentality when not working is often much more beneficial than working. This type of mentality endangers not only the economy but also the moral basics of the society.”

I’m not about to take lessons in societal morality from a strongman like Putin, but it’s nonetheless surprising that he recognizes that handouts can turn people into supplicants.

So after reading all these examples, perhaps you won’t be overly shocked to learn that Bono, head of the famous U2 band, is a supporter of capitalism. He’s no Milton Friedman, as you’ll see, but check out this quote from an interview in the Guardian.

My father was Labour, classic Dublin Northside household. And I still carry that with me. And though I believe that capitalism has been the most effective ideology we have known in taking people out of extreme poverty, I don’t think it is the only thing that can do it, and in some ways I wish it wasn’t.

Even with his caveats, it’s big news when one of the world’s leading anti-poverty campaigners acknowledges that free markets are the best tool for improving the lives of poor people.

“Please don’t use naughty words like capitalism in my presence”

Bono’s comments sort of remind me of when the former leftist president of Brazil remarked that, “…it was necessary to first build capitalism, then make socialism, we must have something to distribute before doing so.”

Neither Lula nor Bono are libertarians, of course, but at least their views are rooted in reality. Which is more than can be said for many of the people in Washington who have never produced anything and have no idea how markets actually work.

Perhaps even more stunning is the fact that Bono defends tax competition and fiscal sovereignty.

…at the heart of the Irish economy has always been the philosophy of tax competitiveness. Tax competitiveness has taken our country out of poverty. People in the revenue accept that if you engage in that policy then some people are going to go out, and some people are coming in. It has been a successful policy. On the cranky left that is very annoying, I can see that. But tax competitiveness is why Ireland has stayed afloat.

Wow, there’s no ambiguity to that statement. I’d like to think he’s knowledgeable about the benefits of tax competition because he’s watched my videos or read my writings, but the real story is that he lived through and personally experienced the Irish miracle.

He saw his relatively poor country become very successful, in large part because of big improvements in tax policy. And he obviously understands the importance of maintaining Ireland’s low corporate tax rate (which I’ve also argued is very important to keep Ireland from sinking further into statist stagnation).

Let’s close with a couple of additional examples of folks on the left who have confessed some very un-PC thoughts, such as the New York Times columnist who bravely wrote that, “This is painful for a liberal to admit, but conservatives have a point when they suggest that America’s safety net can sometimes entangle people in a soul-crushing dependency. …Most wrenching of all are the parents who think it’s best if a child stays illiterate, because then the family may be able to claim a disability check each month.”

“We’ve learned from you that communism doesn’t work”

Perhaps most amazing is that a high-ranking official from China’s communist government stated that, “If you look at the troubles which happened in European countries, this is purely because of the accumulated troubles of the worn out welfare society. I think the labour laws are outdated. The labour laws induce sloth, indolence, rather than hardworking. The incentive system, is totally out of whack.”

Last but not least, surely it’s big news that even Fidel Casto confessed that, “The Cuban model doesn’t even work for us anymore.”

P.S. Sometimes even Obama says reasonable things, such as the time he remarked that “No business wants to invest in a place where the government skims 20 percent off the top.” Or the time he said that it was best to ““let the market work on its own.” Unfortunately, when you read the fine print and look at the context, there’s no indication that the President actually has learned anything about economics.

P.P.S. My favorite examples of liberals crossing the ideological aisle are Justin Cronin and Jeffrey Goldberg, both of whom wrote very powerful anti-gun control columns.

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Political cartoonists like Michael Ramirez and Chuck Asay are effective because they convey so much with images.

But we need more than clever cartoons if we’re going to educate the general population about how government harms the economy and undermines freedom.

He just turned 83, and let’s hope he has another 20 years of columns to write

And that’s why Thomas Sowell is so invaluable. He’s one of the nation’s top economic thinkers, but he also writes for mass audiences and his columns are masterful combinations of logic and persuasion.

His latest column about poverty is a good example. In this first excerpt, he succinctly explains that official poverty is not the same as destitution.

“Poverty” once had some concrete meaning — not enough food to eat or not enough clothing or shelter to protect you from the elements, for example. Today it means whatever the government bureaucrats, who set up the statistical criteria, choose to make it mean. And they have every incentive to define poverty in a way that includes enough people to justify welfare state spending. Most Americans with incomes below the official poverty level have air-conditioning, television, own a motor vehicle and, far from being hungry, are more likely than other Americans to be overweight. But an arbitrary definition of words and numbers gives them access to the taxpayers’ money.

He then makes a very important point about economic incentives.

Even when they have the potential to become productive members of society, the loss of welfare state benefits if they try to do so is an implicit “tax” on what they would earn that often exceeds the explicit tax on a millionaire. If increasing your income by $10,000 would cause you to lose $15,000 in government benefits, would you do it? In short, the political left’s welfare state makes poverty more comfortable, while penalizing attempts to rise out of poverty.

Since columnists are limited to about 800 words, Sowell doesn’t have leeway to give details, but his explanation of how the government traps people in poverty is the rhetorical version of this amazing chart.

He concludes with some powerful observation about who really benefits from the welfare state.

…the left’s agenda is a disservice to [the poor], as well as to society.  …The agenda of the left — promoting envy and a sense of grievance, while making loud demands for “rights” to what other people have produced — is a pattern that has been widespread in countries around the world. This agenda has seldom lifted the poor out of poverty. But it has lifted the left to positions of power and self-aggrandizement, while they promote policies with socially counterproductive results.

But his main message (similar to this video and illustrated by this chart) is that the welfare state hurts the poor even more than it hurts taxpayers.

P.S. As a big fan of Professor Sowell, I’ve cited his columns more than 20 times. My favorite examples of his writing can be viewed here, here, here, here, here, here, here, here, hereherehereherehereherehereherehereherehere, and here. And you can see him in action here.

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With many European nations already in the midst of a fiscal crisis caused by excessive government, and with most other industrialized nations heading down the same path thanks to aging populations and poorly designed entitlement programs, this would be a good time for supposed experts to propose ways to rein in the welfare state.

But the bureaucrats at the Organization for Economic Cooperation and Development don’t get distracted by trivial details such as real-world events and evidence. The Paris-based bureaucracy is funded by governments and it predictably endeavors to keep its paymasters content by embracing proposals that increase the size and scope of government.

This attitude is quite apparent in the OECD’s new report on Inequality and Poverty in the United States. Here are some of the key recommendations.

1. More education spending and centralization – The report states that “more resources need to be directed towards disadvantaged students” and that a goal should be “upgrading the teaching profession…by raising its low pay.” Education spending-performance chartYet as illustrated by this remarkable chart, education spending in America has skyrocketed without any positive impact. Moreover, the United States already spends more than per capita than almost any other nation and gets very poor results. The OECD report also supports more centralization, urging lawmakers to “replace the local-property tax system of financing schools by state-level financing.”

2. More class-warfare taxation – The report frets about the “effectiveness of the capital income tax as a redistribution instrument” and suggests “raising the corporate income and/or capital income taxes at the personal level.” In addition to those class-warfare policies, it endorses more double taxation of income that is saved and invested, suggesting that “tax breaks to encourage the accumulation of individual private pensions could…be phased out or progressively more tightly capped.” The report even calls for making some features of the death tax more onerous, urging that “capital gains on bequeathed assets…should be taxed to avoid undermining the effectiveness of the gift and estate tax.”

3. More welfare spending – The report complains that “cash transfer programmes…reduce poverty…less than in other OECD countries” and suggests that “government should restore the inequality-reducing power of the transfer system.” Since welfare spending in the United States is at record levels, it’s unclear what the bureaucrats mean by “restore,” but it’s quite clear that they want more spending on programs that have undermined the fight against poverty.

Sounds almost as if the OECD report could have been written by a couple of interns from Obama’s reelection campaign.

Though, to be fair, the analysis in the study at times is sound. The problem is that the OECD’s bureaucrats lean strongly to the left whenever it is time to make policy recommendations.

But at least they’re not as far to the left as some of the crowd in Washington. Can you imagine this analysis being uttered by somebody associated with the Obama Administration?

…an increase in the progressivity of the taxation of capital  income and wealth reduces the incomes of US households across the income distribution. Such a reform can thus, while lowering income inequality, make the majority of the population less well off. …high marginal tax rates create inefficiencies by distorting both the labour-leisure choice (i.e. by discouraging labour supply) and the choice between consuming now or in the future (i.e. by discouraging saving), with harmful effects to economic growth.

That’s a nice endorsement of lower tax rates and less double taxation, at least in theory.

Now that I’ve said something nice about the report, I want to close by pointing out something grotesquely dishonest. The bureaucrats who authored the report assert that “relative poverty” in the United States is “among the highest in the OECD.”

They even included this chart showing that the United States has one of the worst rates of “relative poverty.”

OECD Junk Poverty Data

But if you read the fine print, you may notice one itsy-bitsy detail. The chart isn’t a measure of poverty. Not even close. Indeed, the chart wouldn’t change if all of the people of any nation (or all nations) suddenly had 10 times as much income.

That’s because the OECD is measuring is relative income distribution rather than relative poverty. And the left likes this measure because coerced redistribution automatically leads to the appearance of less poverty.

Even if everybody’s income is lower!

As I explained last year, this crazy approach makes it seem as if there’s more poverty in America than in nations such as Greece, Portugal, Hungary, and Turkey.

The final insult to injury is that American taxpayers are financing the biggest share of the OECD’s budget. Sort of like having tax dollars get diverted to the research staff at the Democratic National Committee.

But with one irritating difference. OECD bureaucrats get tax-free salaries, so they don’t suffer the consequences of the policies they want to impose on the rest of us. Nice work if you can get it.

P.S. If you want other examples of OECD bias, there are plenty.

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Remember Julia, the mythical moocher created by the Obama campaign to show the joys of government dependency? As illustrated by this Ramirez cartoon, Julia symbolizes the entitlement mentality.

Unfortunately, there are many real-life Julias.

I wrote a couple of years ago about Olga, a Greek woman who petulantly believed that government was responsible for her empty life.

But we don’t know any details about Olga other than her desire to mooch, so the best real-world examples of Julia may be from England. We have Natalija, a Lithuanian immigrant who has quickly learned bad habits of dependency, and Danny and Gina, two native-born scroungers.

Natalija, Danny, and Gina all decided to get a free ride from taxpayers, largely because overly generous handouts meant that they could enjoy higher living standards by staying at home and watching TV rather than living productive lives.

And if these info-graphics are any indication, there must be lots of people in the United Kingdom who make similar calculations.

No wonder English employers sometime have a hard time filling slots. Why climb the economic ladder when government is providing a comfy hammock?

Unfortunately, the same misguided policies exist in the United States. I shared a remarkable chart last year showing that a household would be better off with $29,000 of income rather than $69,000 of income because of the combined impact of both taxes and redistribution programs.

Now, courtesy of some first-rate journalism by a local television station, we have a powerful example exposing how the system operates. We learn the story of Kristina, who chooses to earn less money in order to keep the taxpayer-funded gravy train rolling.

We’ve all heard the line that America is becoming an entitlement society or welfare state, with half of U.S. households now receiving some type of government benefit. But a CBS 21 News investigation has taken that stat one step further to show you how much people are actually getting for free. A few years ago, reporter Chris Papst worked with a single mom who had two children. She turned down a raise because she said the extra money would decrease her government benefits. It was hard to understand why she did that, until Chris started working on this story. “You do what you have to do as a single mom,” explained Kristina Cogan. “And that’s what I did.” ……she admits living a life off the government can be comfortable. “If you’re going to get something for free, are you going to work for it?” Cogan explained. “It kind of like sucks you in.”

Here are some of the horrific details.

For this story, CBS 21 researched what government programs are available to a single mother of two making $19,000 a year. What we found was incredible. Our family would be eligible for $14,976 in free day care, another $13,400 for Head Start and Early Head Start, $7,148 in housing vouchers, $6,500 for weatherization projects, $400 to pay heating bills, $480 a year for a cell phone, with an extra $230 for a land line, and $182 in free legal advice. The family would get more than $6,028 in food assistance and another $6,045 in medical assistance. The mother is eligible for $5,500 in Pell Grants for school with an additional $12,000 for the Education Opportunity Grant; SMART Grant; and TEACH Grant. Our family would also get $6,800 in tax credits, and $1,900 in withholding would be returned. Add it up and this family can get $81,589 in free assistance.

There’s nothing in the story to suggest that Ms. Cogan is utilizing all these programs, but the plethora of available goodies certainly helps to explain why so many people decide it’s easier to be moochers rather than producers.

Which also explains why the welfare state is a recipe for ever-increasing dependency, as shown by this famous set of cartoons.

Which also causes a sluggish economy, as illustrated by this Chuck Asay cartoon.

No wonder the share of households taking something from the government has been increasing. And no wonder the poverty rate stopped falling once the government’s so-called War on Poverty began.

P.S. Most stories about welfare are pathetic, as we see from this dependency contest featuring the “Connecticut Kid” vs the “English Loafer.” But the welfare state also breeds more bizarre behaviors.

P.P.S. Are you subsidizing bad behavior? Click here to see a map revealing which states offer the most extravagant welfare benefits.

P.P.P.S. Share this video to help others understand the high cost of the welfare state.

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I’ve written and pontificated about the problem of government-created dependency and how the welfare state traps people in poverty.

I also shared this dramatic chart showing how redistribution programs create shockingly high implicit marginal tax rates for those with modest incomes.

But when a liberal writer for the New York Times basically comes to the same conclusion, that’s a sign that there may finally be some consensus about the need for reform.

Here’s some of what Nicholas Kristof wrote, beginning with an acknowledgement of the welfare state’s perverse incentives.

This is what poverty sometimes looks like in America: parents here in Appalachian hill country pulling their children out of literacy classes. Moms and dads fear that if kids learn to read, they are less likely to qualify for a monthly check for having an intellectual disability. …This is painful for a liberal to admit, but conservatives have a point when they suggest that America’s safety net can sometimes entangle people in a soul-crushing dependency. …Some young people here don’t join the military (a traditional escape route for poor, rural Americans) because it’s easier to rely on food stamps and disability payments. Antipoverty programs also discourage marriage: In a means-tested program like S.S.I., a woman raising a child may receive a bigger check if she refrains from marrying that hard-working guy she likes. Yet marriage is one of the best forces to blunt poverty. In married couple households only one child in 10 grows up in poverty, while almost half do in single-mother households. Most wrenching of all are the parents who think it’s best if a child stays illiterate, because then the family may be able to claim a disability check each month.

Lives ruined by dependency?

He then gives an example of the SSI program for kids and how it has ballooned over time .

About four decades ago, most of the children S.S.I. covered had severe physical handicaps or mental retardation that made it difficult for parents to hold jobs — about 1 percent of all poor children. But now 55 percent of the disabilities it covers are fuzzier intellectual disabilities short of mental retardation, where the diagnosis is less clear-cut. More than 1.2 million children across America — a full 8 percent of all low-income children — are now enrolled in S.S.I. as disabled, at an annual cost of more than $9 billion. That is a burden on taxpayers, of course, but it can be even worse for children whose families have a huge stake in their failing in school. Those kids may never recover: a 2009 study found that nearly two-thirds of these children make the transition at age 18 into S.S.I. for the adult disabled. They may never hold a job in their entire lives and are condemned to a life of poverty on the dole — and that’s the outcome of a program intended to fight poverty.

By the way, you won’t be surprised to learn that the disability program for adults also has expanded dramatically. The simple lesson (though folks in Washington seem oblivious) is that if you subsidize self-destructive behavior, you’ll get more of it.

Kristof is honest enough to recognize the problem, but that doesn’t mean he agrees with libertarians about the solution.

I don’t want to suggest that America’s antipoverty programs are a total failure. On the contrary, they are making a significant difference. Nearly all homes here in the Appalachian hill country now have electricity and running water, and people aren’t starving. …kids…have replaced the elderly as the most impoverished age group in our country. Today, 22 percent of children live below the poverty line. Of American families living in poverty today, 8 out of 10 have air-conditioning, and a majority have a washing machine and dryer. Nearly all have microwave ovens. What they don’t have is hope. …A growing body of careful research suggests that the most effective strategy is to work early on children and education, and to try to encourage and sustain marriage. …Early interventions are not a silver bullet, and even programs that succeed as experiments often fall short when scaled up. But we end up paying for poverty one way or another, and early childhood education is far cheaper than adult incarceration. …Look, there are no magic wands, and helping people is hard.

I don’t think his hopes of early childhood education are a silver bullet, particularly if it results in a program run from Washington. But I’ll also admit that libertarians don’t really have a solution.

To a large extent, this is an intergenerational problem, with kids learning bad habits from adults. And that’s true for inner-city blacks and rural whites, as well as every demographic in between. I’m happy to make the case that the welfare state helped to create the problem (or at least subsidized it and made it worse), but simply ending the welfare state probably won’t make everything better.

It’s a lot easier to squeeze the toothpaste out of the tube than to put it back in. Once social capital erodes, it very difficult to restore it. That’s why it’s a mistake to create new programs in the first place. As this famous set of cartoons illustrates, welfare state programs always start small, but that’s not where they end up.

P.S. When the welfare state destroys the lives of children, there’s no room for any humor. But at least we can laugh about the absurdity of disability programs for adults. This joke captures the perverse incentives of the programs, but these real-world horror stories about Diaper Man and Footless Hans are only funny in a twisted way. And this Greek story about rewarding pedophiles with disability payments is beyond satire.

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I’ve previously shared an amazing chart put together by a Cato colleague showing that massive increases in spending and staff have had no positive impact on educational performance.

Now here’s a chart that is equally remarkable, showing that we spend about $60,000 on various welfare programs for every poor household in America. And what are we getting for that giant expenditure of money? Well, as this other chart shows, our progress in the fight against poverty came to a screeching halt right about the time that the politicians in Washington launched the so-called War on Poverty.

This video contains more analysis, for those who want to learn about the best way of actually reducing poverty. It’s important to remember, after all, that the welfare state has a human cost that is just as important as the fiscal cost.

If you want more powerful pictures and info-graphics, here are some of my favorites.

And I suppose I should share, once again, my favorite poster about government.

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It’s not often that I read something by Paul Krugman and think, “Good point, I hope he’s correct.”

After all, I had to correct Krugman’s inaccurate analysis of Estonia, and also point out the errors in what he wrote about the United Kingdom. And I also noted mistakes he made when writing about Canada and France.

And let’s not forget his absurd assertion that it would be good for the U.S. economy if aliens threatened to attack!

It certainly seems as if he specializes in making mistakes.

But he has just written something that sort of makes sense.

In pushing for draconian cuts in Medicaid, food stamps and other programs that aid the needy, Mr. Ryan isn’t just looking for ways to save money. He’s also, quite explicitly, trying to make life harder for the poor — for their own good. In March, explaining his cuts in aid for the unfortunate, he declared, “We don’t want to turn the safety net into a hammock that lulls able-bodied people into lives of dependency and complacency, that drains them of their will and their incentive to make the most of their lives.”

To be more specific, I hope Krugman is right in that Ryan wants “to make life harder for the poor” if the alternative is to have their lives stripped of meaning by government dependency.  And I agree that it will be “for their own good” if they’re motivated to join the workforce.

To be sure, Krugman wants readers to reach the opposite conclusion. Even though the War on Poverty seems to have put an end to the progress we were making (see this remarkable chart), Krugman equates spending money with compassion.

And I suppose I should point out that he is completely wrong (using dishonest Washington budget math) when writing about “draconian cuts” since Cong. Ryan is merely proposing to slow down how fast government spending is growing.

P.S. For those who want more information, watch this video to learn about how government anti-poverty programs hurt the poor.

P.P.S. Check out this map to see how various U.S. states subsidize poverty.

P.P.P.S. To get your blood boiling, read this horrifying post about how a left-wing international bureaucracy conspiring with the Obama White House to redefine poverty in ways that make America look bad.

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In a recent post about Brian Ross and the despicable behavior of ABC News, I included examples of what I categorized as deliberate and accidental media bias.

Here’s a good (or perhaps I should say bad) example of accidental bias, demonstrating how statist premises get incorporated into news reports.

Here’s how the Associated Press began a recent story about expected increases in the poverty rate.

The ranks of America’s poor are on track to climb to levels unseen in nearly half a century, erasing gains from the war on poverty in the 1960s amid a weak economy and fraying government safety net.

At first glance, the story seems fine. After all, I’ve already reported on the record number of people living in poverty under Obama’s watch.

But my complaint is about the latter part of the sentence, which blithely assumes that the so-called War on Poverty improved the lives of poor people.

Check out this chart, which I first posted back last September.

As you can see, the poverty rate in America was falling at a rapid clip, but progress stopped once the so-called War on Poverty began. And ever since, the poverty rate has stayed relatively constant, oscillating between 11 percent-15 percent.

To be sure, this chart doesn’t prove that Lyndon Johnson’s redistribution programs – such as Medicaid – halted the progress that was being made.

But surely these numbers show that the folks at the Associated Press were smoking crack when they wrote that the War on Poverty led to “gains.”

The left, incidentally, does have their spin on the story. They basically cherry pick two data points and make it seem as if the diminished rate of progress during that time period was because of the War on Poverty.

…poverty never fell below a 1973 low of 11.1 percent. That low point came after President Lyndon Johnson’s war on poverty, launched in 1964, created Medicaid, Medicare and other social welfare programs. “I’m reluctant to say that we’ve gone back to where we were in the 1960s. The programs we enacted make a big difference…,” Edelman said.

That’s creative, but not convincing. What the data really show is that we were making good progress before LBJ imposed all his redistribution. But that rapid progress turned into slow progress and then basically came to a grinding halt within a couple of years. If that’s evidence of success, I’d hate to see what failure looks like.

If anything, the data show the benefits of moving policy in the other direction. During the Reagan years, for instance, redistribution programs were constrained and the poverty rate began to fall. And during the Clinton years, welfare reform and other market-friendly policies led to another drop in the poverty rate.

But that’s a separate issue. The main point of this post is to expose a remarkably flawed and inaccurate bit of bias embedded in an Associated Press report. I suspect it was accidental bias, presumably from some reporter who lives in a bubble and automatically assumed that government programs are like fairy dust and have magical effects.

In reality, of course, government programs tend to make problems worse, and that’s definitely been the case with the supposed War on Poverty. We have record levels of food stamp dependency, with more and more people being trapped in lives of dependency.

But watch this video and decide for yourself.

P.S. With support from left-wing international bureaucracies such as the OECD,  the Obama White House wants to rig the poverty numbers to justify even more redistribution.

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I’m not a big fan of welfare programs, in part because I sympathize with taxpayers (check out these outrageous examples of waste) but mostly because redistribution programs subsidize poverty and trap people in lives of despair.

But as I wrote in 2010, the most perverse form of welfare is when governments give handouts to Islamo-fascist radicals. This has happened in the United Kingdom and Germany, and the video at the link about the taxpayer-financed radical cleric in Australia is absolutely horrifying.

It seems like this foolishness is happening in France as well. In a story about the recent horrific murders by Mohammed Merah, the New York Post included this blurb.

All the while, Merah, a petty criminal on welfare, was ostensibly under surveillance by French intelligence.

And a New Zealand TV station included this tidbit.

Etelin said he knew Merah since he was about 17, and described his life as typical for many teenagers and young men in poor French housing projects who get involved in criminal activity. “His mother couldn’t control him, his father was totally absent, his sister … also told me that she couldn’t exercise any influence over him,” the lawyer said.

Isn’t that so typical. Not only welfare, but also government housing, and a system of handouts that facilitates an absent father.

I’m not saying – or even implying – that welfare programs cause terrorism. Millions of people live off government and never go out and murder others. And it may turn out that Merah and his family were low-level moochers, making this aspect of the story worthy of nothing other than an asterisk.

But I am saying that welfare breeds idleness and despair, and in some cases it enables reprehensible behavior (as seen by this story about a couple of disgusting leeches who wanted to impregnate a 12-year old girl in hopes of getting a bigger handout).

For those interested, this video looks at the broader issue of welfare, and it includes this graph showing how the so-called War on Poverty has probably resulted in more destitution.

And here’s one final story, from the U.K., about the horrible human cost of the welfare state.

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Supporters of individual liberty and national sovereignty have been skeptical of the United Nations, and with good reason. With the support of statists such as George Soros, the U.N. pushes for crazy ideas such as global taxation and global currency.

But there’s another international bureaucracy, also funded by American tax dollars, that is even more pernicious. The Paris-based Organization for Economic Cooperation and Development (OECD) has the same leftist ideology as the U.N., but it actually has some ability to change policy.

As you can imagine, this always means bigger government and more statism. Here are some examples.

With this dismal track record, you probably won’t be surprised to learn that the Paris-based bureaucracy has a new propaganda initiative that seeks to bolster a left-wing redistribution agenda. And as part of this new scheme, it has put together numbers that supposedly show that there is more poverty is the United States than there is in bankrupt and backwards nations such as Greece, Hungary, Portugal, and Turkey.

This isn’t April 1, and I’m not joking. Here’s a chart, produced from the data at this OECD website, which you get to by clicking the “Poverty: Country comparisons” link on this OECD webpage.

You may be wondering whether the bureaucrats at the OECD who put together these numbers are smoking crack or high on crystal meth. Well, they certainly can afford lots of drugs since they get tax-free salaries (just like their counterparts at other international bureaucracies), but these numbers are the not the result of some ketamine-fueled binge.

Instead, the OECD is lying. The website refers to “poverty rate” and “poverty threshold” and “poverty measure,” but the OECD is not measuring poverty. Instead, they have concocted a new – and deliberately misleading – set of data that instead measures the distribution of income.

And if you’re wondering where they got this crazy idea, you probably won’t be surprised to learn that this is a scheme developed by the Obama Administration and it is designed so that “poverty” is only reduced if incomes become more equal, not if poor people become better off.

Even moderates such as Robert Samuelson recognize this is absurd, and here is some of what he wrote.

…the new definition has strange consequences. Suppose that all Americans doubled their incomes tomorrow, and suppose that their spending on food, clothing, housing and utilities also doubled. That would seem to signify less poverty — but not by the new poverty measure. It wouldn’t decline, because the poverty threshold would go up as spending went up. Many Americans would find this weird: People get richer but “poverty” stays stuck.

The most amazing thing about this crazy approach is that it makes it seem as if America has more poverty than nations such as Bangladesh, even though the average “poor” American has much higher living standards than all but the wealthiest people in the developing world.

And it also generates the laughable numbers in the OECD dataset, showing that Turkey and Portugal have less poverty than the United States.

The main thing to understand, though, is that this new approach is part of an ideological campaign to promote bigger government and more redistribution. Which is very much consistent with the OECD’s overall agenda, as this video explains.

The real outrage is that American taxpayers finance the lion’s share of the OECD budget, even though it is a hard-left organization that pushes policies that are contrary to U.S. interests.

And this is why I wrote that defunding the OECD is a minimal test of fiscal seriousness for lawmakers on Capitol Hill.

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After a series of posts making fun of libertarians (here, here, here, here, and here), it’s time to aim some humor at the left. Even if it means a lame pun in the title.

This poster is funny, but it also makes a serious point about whether there should be behavioral restrictions on people who want to live off taxpayers (sort of akin to the debate about whether food stamp recipients should be allowed to buy junk food).

My view is that the answer to the welfare problem is decentralization. Let fifty states and thousands of communities take responsibility for redistribution policy.

This will mean diversity and innovation, which will help give us answers to how to help the genuinely needy with ripping off taxpayers and/or trapping poor people in lives of dependency.

Maybe drug testing is a good idea. Maybe it’s not. But we won’t find out with a one-size-fits-all policy from Washington.

This interview and this video have more information for those who want a more detailed look at anti-poverty issues.

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The statists are making a big issue out of income inequality, hoping to convince ordinary Americans that redistribution is their only hope for a better life.

I’ve explained with a pizza analogy that this is horribly misguided because it falsely assumes the economy is a fixed pie.

Simply stated, it doesn’t make sense – or help anybody – if inequality is reduced by policies that hurt everyone, but happen to hurt upper-income people more than lower-income people.

Moreover, redistribution tends to create a “poverty trap” as people get seduced by dependency.

That’s why I’ve argued that economic growth is the best way of helping the less fortunate.

But I have to admit that Margaret Thatcher does a much better job of eviscerating the left’s agenda on this issue.

While it’s inspiring to watch Thatcher in action, it’s also painful to realize that the current crop of GOP presidential candidates seems generally incapable of making similar arguments. Can you imagine, for instance, Mitt Romney making these remarks?

Last but not least, Thatcher’s remarks remind me about Churchill’s famous quote, which is very appropriate for this discussion.

The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of misery.

And if you want real-world examples, look at this chart comparing North Korea and South Korea, or this chart comparing Chile, Argentina, and Venezuela. Now ask yourself a simple question: Which societies have generated more prosperity and higher living standards for ordinary people?

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I’ve always been proud of my Irish heritage, but now I’m having to reconsider. As is so often the case when something goes awry, the blame belongs to a politician (this Craig Ferguson joke is right on the mark).

Michael Higgins, the President-Elect of Ireland, has lived a very comfortable life sucking on the government teat. He began his adult life as a sociologist in academia. He then moved into politics, and for decades enjoyed lucrative pay as a member of the political elite (well above $100,000 annually in recent years).

Now he’ll pull in more than $300,000 per year for a largely ceremonial job as Ireland’s President. As the old saying goes, nice work if you can get it. This guy’s definitely part of the top 1 percent.

He’s also an economic illiterate or a cynical hack who apparently thinks noble poverty is a good idea for the other 99 percent.

Here’s some of what the Daily Mail reported about one of his recent speeches.

Michael D Higgins launched a savage attack on the Celtic Tiger in his first speech as President elect. In his acceptance speech, the Labour Party candidate…rejected the years of materialism and selfishness that drove the country to ruin. …Michael D declared: ‘We leave behind a narrow individualism that valued the person for what was assumed to be their accumulated wealth but neglected the connection between the person, the social, the community and the nation. …Mr Higgins called on Irish people to return to ‘co-operative and collective values’.

Isn’t this just wonderful? This pampered and cosseted member of the political elite thinks that Ireland somehow was demeaned by being the Celtic Tiger. Does this mean he wants to go back the mid-1980s, before Ireland began to reform? Back when government was consuming more than 50 percent of the nation’s output? Back when the the corporate tax rate was 50 percent? Back when other tax rates were at extortionary levels?

If that’s true, he wants to dramatically reduce the living standards of the Irish people.

Here’s a chart based on World Bank data for gross domestic product and gross national income.

Prior to the market-based reforms of the Celtic Tiger era, Ireland was a relatively poor nation with per-capita income and output well below $10,000. Today, by contrast, output and income are four or five times higher.

But here are two important caveats. First, the World Bank GDP/GNI numbers are not adjusted for inflation, so the chart overstates the rise in living standards. This World Bank data suggests that the price level in Ireland roughly doubled between 1985 and 2010, so the people of Ireland are perhaps “only” twice as rich as they were in the era before free-market reform.

The second caveat is that some of Ireland’s prosperity in recent years was hollow, the result of a real estate bubble. But even with the big decline since 2007-2008, the Irish people are still much better off than they were a generation ago.

But Mr. Higgins apparently doesn’t approve of this big jump in living standards.

He’s against “materialism,” so let’s look at some real world examples of how the lives of ordinary people have improved.

Maybe I’m just old fashioned, but I’d rather live in a “selfish” world that gives me doctors, cars, and central heating.

But to a member of the political elite like Mr. Higgins, this kind of prosperity probably spoils people and makes them uppity. Better for people to live noble lives of poverty and deprivation.

Last but not least, this post isn’t an endorsement of the “Irish model.” Yes, there are some admirable policies in Ireland, most notably the 12.5 percent corporate tax. And Ireland’s score from the Economic Freedom of the World has jumped from 6.3 in 1985 to 7.4 in 2009.

But that’s considerably below free-market jurisdictions such as Hong Kong (9.0) and Singapore (8.7).

Simply stated, government is too big in Ireland and many policies are grossly inconsistent with sound economics.

But if I get to choose between today’s Irish economy and the pre-Celtic Tiger economy of the early 1980s, it’s not a close call.

Maybe Mr. Higgins should spend a year or two living at 1985 living standards before he makes another jackass speech.

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I recently posted an excellent video showing how the War on Poverty has been a disaster for both taxpayers and poor people.

Let’s now look at a specific example of the income-redistribution racket.

Professor Thomas Sowell has a superb column, which begins by noting that the left tried to build support for more income redistribution by falsely claiming that there was a hunger crisis in America.

When that silly assertion was debunked, in part because of evidence that obesity is a bigger problem in the low-income community, the statists suddenly switched gears and invented a new crisis. Now, we are told, healthy food is too costly.

Prof. Sowell decimates this absurd argument.

Ironically, the one demonstrable nutritional difference between the poor and others is that low-income women tend to be overweight more often than others. That may not seem like much to make a political issue, but politicians and the media have created hysteria over less. The political left has turned obesity among low-income individuals into an argument that low-income people cannot afford nutritious food, and so have to resort to burgers and fries, pizzas and the like, which are more fattening and less healthful. But this attempt to salvage something from the “hunger in America” hoax collapses like a house of cards when you stop and think about it. Burgers, pizzas and the like cost more than food that you can buy at a store and cook yourself. If you can afford junk food, you can certainly afford healthier food. An article in the New York Times of September 25th by Mark Bittman showed that you can cook a meal for four at half the cost of a meal from a burger restaurant.

Seems like that should settle the argument. But give the leftists credit for creativity. They invent another problem which also requires big government.

Mr. Bittman says that the problem is “to get people to see cooking as a joy.” For this, he says, “we need action both cultural and political.” In other words, the nanny state to the rescue! Since when are adult human beings supposed to do only those things that are a joy? I don’t find any particular joy in putting on my shoes. But I do it rather than go barefoot. I don’t always find it a joy to drive a car, especially in bad weather, but I have to get from here to there. An arrogant elite’s condescension toward the people — treating them as children who have to be jollied along — is one of the poisonous problems of our time. It is at the heart of the nanny state and the promotion of a debilitating dependency that wins votes for politicians while weakening a society. Those who see social problems as requiring high-minded people like themselves to come down from their Olympian heights to impose their superior wisdom on the rest of us, down in the valley, are behind such things as the hunger hoax, which is part of the larger poverty hoax.

With his usual clarity, Sowell then points out how the politicians and bureaucrats have a big self interest in perpetuating these myths.

Those who believe in an expansive, nanny state government need a large number of people in “poverty” to justify their programs. They also need a large number of people dependent on government to provide the votes needed to keep the big nanny state going. Politicians, welfare state bureaucrats and others have incentives to create or perpetuate hoaxes, whether about poverty in general or hunger in particular. The high cost to taxpayers is exceeded by the even higher cost of lost opportunities for fulfillment in their lives by those who succumb to the lure of a stagnant life of dependency.

In other words, the people administering the programs – Walter Williams calls them “poverty pimps” – are the ones who benefit.

The biggest victims, on the other hand, are the less fortunate people who get trapped in lives of dependency and despair.

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The Center for Freedom and Prosperity has released another “Economics 101″ video, and this one has a very powerful message about the federal government’s so-called War on Poverty.

As explained by Hadley Heath of the Independent Women’s Forum, the various income redistribution schemes being imposed by Washington are bad for taxpayers – and bad for poor people.

The video has a plethora of useful information, but the data on the poverty rate is particularly compelling. Prior to the War on Poverty, the United States was getting more prosperous with each passing year and there were dramatic reductions in the level of destitution.

But once the federal government got involved in the mid-1960s, the good news evaporated. Indeed, the poverty rate has basically stagnated for the past 40-plus years, usually hovering around 13 percent depending on economic conditions.

Another remarkable finding in the video is that poor people in America rarely suffer from material deprivation. Indeed, they have wide access to consumer goods that used to be considered luxuries – and they also have more housing space than the average European (and with Europe falling apart, the comparisons presumably will become even more noteworthy).

The most important message of the video, however, is that small government and economic freedom are the best answers for poverty. As Hadley explains, poor people can be liberated to live meaningful, self-reliant lives if we can reduce the heavy burden of the federal government.

Last but not least, the video doesn’t address every issue in great detail, and there are three additional points that should be added to any discussion of poverty.

1. The biggest beneficiaries of the current system are the army of bureaucrats that receive very comfortable salaries administering various programs.

2. The Obama Administration is looking to re-define poverty in a way that would expand the welfare state and increase the burden of redistribution programs.

3. The welfare reform legislation of the 1990s was a small step in the right direction because it eliminated a federal entitlement and shifted responsibility back to the state level. This success story should be replicated for programs such as Medicaid.

This last point is worth emphasizing because it is also one of the core messages of the video. The federal government has done a terrible job dealing with poverty. The time has come to get Washington out of the racket of income redistribution.

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The Center for Budget and Policy Priorities is a left-wing group in Washington that advocates for bigger government and higher taxes. In an effort to promote more redistribution, they recently put together a map showing how welfare benefits varied by state.

We’re supposed to look at the map and conclude that welfare benefits are too low, but I draw the opposite conclusion. I’m stunned that some states are providing welfare checks greater than 30 percent of the poverty level. And some are even sending out checks greater than 40 percent of the poverty level.

The folks at CBPP conveniently neglect to mention two critical pieces of information.

1. The poverty line is set considerably above a level that would indicate material deprivation. According to Census Bureau data, for instance, a single person with income of $11,139 is considered in poverty and a family of four with income of $22,113. That’s far above the average level of income in most nations of the world.

2. Welfare checks are just one of many forms of redistribution, and the data used to create the map do not count food stamps, Medicaid, housing subsidies and a plethora of other means-tested programs. As Robert Rector of the Heritage Foundation has documented, poor people experience surprisingly high levels of consumption.

This is not to say that life is easy for people living off the government. But it also true that the left is being disingenuous when they try to convince people that more redistribution is necessary to keep people from third world-style suffering.

The real tragedy of the welfare state, however, goes well beyond the fiscal burden. The human toll is far worse, as redistribution subsidizes dysfunctional behavior and traps people in dependency.

The problem could be partially fixed by getting the federal government out of the business of income redistribution. Welfare reform in the 1990s moved the ball in the right direction, and that success could be replicated by block-granting Medicaid and adopting other policies that put state and local governments back in charge.

But federalism is only part of the answer. The best way of dealing with poverty is economic growth, which is the point I make in this online video debate for PBS.

But welfare bureaucracies don’t have much incentive to actually reduce poverty. After all, as Walter Williams has explained, the so-called War on Poverty is a great gig for the tens of thousands of bureaucrats who get to oversee the programs.

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The Census Bureau has just released the 2010 poverty numbers, and the new data is terrible.

There are now a record number of poor people in America, and the poverty rate has jumped to 15.1 percent.

But I don’t really blame President Obama for these grim numbers. Yes, he’s increased the burden of government, which doubtlessly has hindered the economy’s performance and made things worse, but the White House crowd legitimately can argue that they inherited a crummy situation.

What’s really striking, if we look at the chart, is that the poverty rate in America was steadily declining. But then, once President Lyndon Johnson started a “War on Poverty,” that progress came to a halt.

As I’ve explained before, the so-called War on Poverty has undermined economic progress by trapping people in lives of dependency. And this certainly is consistent with the data in the chart, which show that the poverty rate no longer is falling and instead bumps around between 12 percent and 15 percent.

Poverty Rate Data

This is bad news for poor people, of course, but it’s also bad news for taxpayers. The federal government, which shouldn’t have any role in the field of income redistribution, has squandered trillions of dollars on dozens of means-tested programs. And they’ve arguably made matters worse.

By the way, just in case you think I’m being too easy on Obama, read this post about how the Administration is considering a terrible plan to re-define poverty in order to justify ever-larger amounts of redistribution.

I fully agree that he President’s policies definitely have made – and will continue to make – matters worse. But the fundamental problem is 40-plus years of a misguided “War on Poverty” by the federal government.

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I took part in a thirty-minute online Skype debate for PBS on income inequality, and they boiled it down to the 4:44 youtube video embedded below.

You probably won’t be surprised to learn that I said economic growth was the key. I don’t want to re-slice the pie. I want to make it bigger.

I wish I had used my example of Chile v. Argentina v. Venezuela. Or my more recent post on Singapore’s remarkable growth.

One thing I did mention is that the poverty rate was falling for much of U.S. history, but then stopped falling once the so-called War on Poverty began. I pointed out that this was compelling evidence that spending $trillions on income redistribution was trapping people in poverty.

Unfortunately, this part was edited out, perhaps because the lefties at PBS didn’t want more people exposed to this inconvenient truth. Here’s what wasn’t left on the editing room floor.

I’m not sure how they formatted the video, but at least it makes me look skinny.

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Every so often, I can’t resist condemning someone for grossly immoral behavior.

I beat up on Robert Murphy for stealing the value of someone else’s property.

I attacked Olga Stefou for symbolizing the looter-class mentality of Greece.

And I mocked Michael Wolfensohn for ratting out a couple of kids who were having an unlicensed (gasp!) bake sale.

We now have an addition to our rogue’s gallery of awful people. We don’t know her name, but she was interviewed on TV because one of her 11 children was in court for rioting. Here’s some of the Telegraph’s report (also a video at the link).

A 13-year-old boy has walked free from court after admitting smashing up a shop with a stolen golf club as his mother said the riots are because the government does “f*** all” for children. …She is on benefits, does not live with the boy’s father and has 10 other children, the court heard. …The boy had been caught on CCTV during the trouble at Salford Precinct spraying a fire extinguisher around before pulling down metal shutters from a Cash Converters shop. He then crawled inside and used a £100 golf club he had stolen to smash windows. The shop suffered £20,000 in damage. His mother described him as a ”good lad” who had never been in any trouble.

In addition to not knowing her name, we don’t know how long she has been on welfare (“benefits” to the Brits) or whether the boy’s father is also the father of the other ten kids.

Regardless, I imagine she gets a nice-sized check.

I may be wrong (indeed, I hope I am), but I suspect that this story is a tragic case study of a welfare system creating a dysfunctional household filled with people who have adopted an entitlement mentality.

We know this happens, as illustrated by this short interview.

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Is America filled with tens of millions of people suffering from harsh material deprivation? That’s what the pro-redistribution crowd wants you to think, but a new report from the Heritage Foundation demolishes that stereotype.

Here are some of the most remarkable findings in the study.

For most Americans, the word “poverty” suggests destitution: an inability to provide a family with nutritious food, clothing, and reasonable shelter. …Yet if poverty means lacking nutritious food, adequate warm housing, and clothing for a family, relatively few of the more than 30 million people identified as being “in poverty” by the Census Bureau could be characterized as poor. While material hardship definitely exists in the United States, it is restricted in scope and severity. …As scholar James Q. Wilson has stated, “The poorest Americans today live a better life than all but the richest persons a hundred years ago.” In 2005, the typical household defined as poor by the government had a car and air conditioning. For entertainment, the household had two color televisions, cable or satellite TV, a DVD player, and a VCR.

Here’s one of the most remarkable findings from the report.

…the typical poor American had more living space than the average European.

And here’s the key data on healthcare and nutrition.

The typical poor American family was also able to obtain medical care when needed. By its own report, the typical family was not hungry and had sufficient funds during the past year to meet all essential needs. …Consumer items that were luxuries or significant purchases for the middle class a few decades ago have become commonplace in poor households. …On average, the poor are well nourished. The average consumption of protein, vitamins, and minerals is virtually the same for poor and middle-class children. In most cases, it is well above recommended norms. Poor children actually consume more meat than higher-income children consume, and their protein intake averages 100 percent above recommended levels. In fact, most poor children are super-nourished and grow up to be, on average, one inch taller and 10 pounds heavier than the GIs who stormed the beaches of Normandy in World War II.

So why does this issue matter? Because the left understands that an agenda of redistribution is more likely to be successful if they can deceive the American people about the true scope of poverty. This polling data cited in the report shows why the left is so anxious to perpetuate falsehoods about how many people suffer from genuine deprivation.

…a poll conducted in June 2009 asked a nationally representative sample of the public whether they agreed or disagreed with the following statement: “A family in the U.S. that has a decent, un-crowded house or apartment to live in, ample food to eat, access to medical care, a car, cable television, air conditioning and a microwave at home should not be considered poor.” A full 80 percent of Republicans and 77 percent of Democrats agreed that a family living in those living conditions should not be considered poor.

Last but not least, we find out that a bad situation may become even worse. The left already uses a grossly exaggerated definition of poverty for political gain. But that’s not enough. As I noted in an earlier post, the Obama Administration wants to use a new methodology that would – no joke – show that there is more poverty in America than Bangladesh.

There is a vast gap between poverty as understood by the American public and poverty as currently measured by the government. Sadly, President Barack Obama plans to make this situation worse by creating a new “poverty” measure that deliberately severs all connection between “poverty” and actual deprivation. This new measure will serve as a propaganda tool in Obama’s endless quest to “spread the wealth” and will eventually displace the current poverty measure. Under the new measure, a family will be judged poor if its income falls below certain specified income thresholds or standards. There is nothing new in this, but unlike the current poverty income standards, the new income thresholds will have a built-in escalator clause. They will rise automatically in direct proportion to any rise in the living standards of the average American. …Another paradox of the new poverty measure is that countries such as Bangladesh and Albania will have lower poverty rates than the U.S.—even though the actual living conditions in those countries are extremely low—simply because they have narrower distribution of incomes, albeit very low incomes.

There is one thing that’s worth adding to all the good information cited from the study. Regardless of how the poverty rate is defined, the massive increase in federal spending on anti-poverty programs has been a terrible failure. Trillions of dollars have been spent since the “War on Poverty” began, but the poverty rate has been flat, averaging about 13 percent.

But what’s most remarkable is that the poverty rate was steadily falling before the so-called War on Poverty began. In other words, once the federal government began subsidizing poverty, we stopped making progress.

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I’ve beaten up on Newt Gingrich for his views on global warming and his attack on the Ryan budget plan, but I’m completely on his side in the faux controversy about whether it is racist to call Barack Obama the “food stamp president.”

This story from ABC News should worry everybody, regardless of whether the people getting trapped in government dependency are white, black, brown, yellow, or green with yellow polka dots.

Congress is under pressure to cut the rapidly rising costs of the federal government’s food stamps program at a time when a record number of Americans are relying on it. The House Appropriations Committee today will review the fiscal year 2012 appropriations bill for the Department of Agriculture that includes $71 billion for the agency’s “Supplemental Nutrition Assistance Program.” That’s $2 billion less than what President Obama requested but a 9 percent increase from 2011, which, critics say, is too large given the sizeable budget deficit. A record number of Americans — about 14 percent — now rely on the federal government’s food stamps program and its rapid expansion in recent years has become a politically explosive topic. More than 44.5 million Americans received SNAP benefits in March, an 11 percent increase from one year ago and nearly 61 percent higher than the same time four years ago.

Most people focus on the huge burden that the food stamp program imposes on taxpayers, which surely is significant, but there is another economic cost that is equally worrisome, and it applies to all income redistribution programs. Whenever the government gives people money simply because their incomes are below a certain level, that creates a poverty trap. More specifically, because people lose benefits for earning more income, they are penalized with very onerous implicit marginal tax rates for climbing the economic ladder.

This isn’t intuitive, so here’s a back-of-the-envelope hypothetical example. Let’s assume you are a low-income person who wants a better life and you have a chance to earn an additional $1,000. How much better off will you be, and will it be worth the costs you might incur (non-pecuniary costs such as the loss of leisure and pecuniary costs such as commuting and child care)?

To answer that question, let’s assume your official tax burden on that additional income is 10 percent for federal income tax, 15 percent for payroll tax, and 5 percent for state income tax. You may not even be aware of the employer portion of the payroll tax, so let’s drop that to 7.5 percent (actually 7.65 percent, but let’s keep this simple). And while state taxes are deductible, the vast majority of people with modest incomes don’t utilize itemized deductions. So the marginal tax rate on this additional income, depending on what assumptions you want to make, is between 20 percent and 25 percent.

So if you earn an additional $1,000, your disposable income only increases by about $750-$800. Is that worth it? Maybe, but maybe not, depending on the costs you incur to earn that income. In any event, the marginal tax rate is rather steep for a low-income person, you may be thinking.

But it gets worse. Let’s say that you lose $15 of government handouts for every $100 of additional income your earn. So when you earn $1,000 of income, you only keep $750-$800, but you also have to give up $150 of goodies from the government – meaning your effective disposable income only rises by $600-$650.

This means that your implicit marginal tax rate on earning more money is actually somewhere between 35 percent and 40 percent. In other words, your marginal tax rate is at least as high as the tax rate on rock stars and professional athletes.

Here’s a chart showing the number of food stamp recipients. It certainly looks like America is becoming a food stamp nation. But if you want to see an even more disturbing image, look at the second chart in this article from the Mises Institute. You’ll see that my hypothetical example dramatically understates the marginal tax rate on people trying to join the middle class. As a taxpayer, I don’t like the cost of the food stamp program. As an economist, I hate the high marginal tax rates caused by income redistribution programs.

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This story from the Manhattan Institute’s City Journal makes the point, excerpted below, that the welfare state subsidizes dysfunctional behavior. But read the story to understand how big government destroys lives, ruins families, and creates inter-generational poverty. A very powerful, albeit very depressing article. It’s basically the American version of this grim news report from England.

Connecticut is among the most generous of the states to out-of-wedlock mothers. Teenage girls like Nicole qualify for a vast array of welfare benefits from the state and federal governments: medical coverage when they become pregnant (called “Healthy Start”); later, medical insurance for the family (“Husky”); child care (“Care 4 Kids”); Section 8 housing subsidies; the Supplemental Nutrition Assistance Program; cash assistance. If you need to get to an appointment, state-sponsored dial-a-ride is available. If that appointment is college-related, no sweat: education grants for single mothers are available, too. Nicole didn’t have to worry about finishing the school year; the state sent a $35-an-hour tutor directly to her home halfway into her final trimester and for six weeks after the baby arrived. In theory, this provision of services is humane and defensible, an essential safety net for the most vulnerable—children who have children. What it amounts to in practice is a monolithic public endorsement of single motherhood—one that has turned our urban high schools into puppy mills. The safety net has become a hammock.

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The Census Bureau will be releasing new poverty-rate numbers on Thursday and the numbers are expected to show a big move in the wrong direction. Much of the coverage will be on how much the poverty rate increases, with 15 percent being a likely amount according to some estimate. There also will be lots of discussion about the political implications, as this Associated Press story illustrates.

The number of people in the U.S. who are in poverty is on track for a record increase on President Barack Obama’s watch, with the ranks of working-age poor approaching 1960s levels that led to the national war on poverty. Census figures for 2009 — the recession-ravaged first year of the Democrat’s presidency — are to be released in the coming week, and demographers expect grim findings. It’s unfortunate timing for Obama and his party just seven weeks before important elections when control of Congress is at stake. The anticipated poverty rate increase — from 13.2 percent to about 15 percent — would be another blow to Democrats struggling to persuade voters to keep them in power.

But the real story should be the degree to which the federal government’s War on Poverty has been a complete failure. Taxpayers have poured trillions of dollars into means-tested programs, yet the data show no positive results. Indeed, it’s quite likely that the programs have backfired. As shown in the chart, Census Bureau data reveal that the poverty rate was steadily falling in the 1950s and early 1960s, but then stagnated once the War on Poverty began. It’s possible that there are alternative and/or additional explanations for this shocking development, but government intervention may be encouraging poverty by making indolence more attractive than work.

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