The failed war on poverty

Here are some facts on the U.S. war on poverty. Most of these facts are taken from this paper here.

–The U.S. currently spends more than $1 trillion per year on anti-poverty programs. This is more than we spend on Defense.

–The U.S. has spent more than $15 trillion since the “war on poverty” was declared in the 1960s, yet the poverty rate is only slightly lower than it was then.

–There are 126 federal programs dedicated to the “war on poverty.”

–Spending on anti-poverty programs has skyrocketed during the Obama administration, yet the poverty rate is increasing.

The United States spends about $60,000 per three-person family on anti-poverty programs. You are reading the graph below correctly: we spend more than three times the poverty threshold on anti-poverty programs per family, yet poverty is increasing.

Just to re-emphasize the point, take a look at this graph on anti-poverty spending. Yes, this is in constant dollars. Next time somebody says we don’t spend enough on welfare programs or blathers on about “equality,” you may want to show him this graph. How can anybody in his right mind think we are not spending enough on anti-poverty programs?

So, what are the solutions?

1)Send welfare programs to the states. This is what welfare reform in the 1990s did, and you will see from the first graph above, that the poverty rate plummeted as states experimented with new programs.

2)Emphasize economic growth. The poverty rate falls when the economy grows and it increases when the economy slows or goes into recession. Look at the first graph. The economy was growing strongly in the late 1980s and late 1990s, and the poverty rate went down.

3)Emphasize private anti-poverty programs and de-emphasize government solutions. The poverty rate decreases when people see charity as a temporary program to help people get back on their feet. A dependent entitlement society creates a generation of people unable to support themselves.

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About Geoff B.

Geoff B has had three main careers. Some of them have overlapped. After attending Stanford University (class of 1985), he worked in journalism for several years until about 1992, when he took up his second career in telecommunications sales. In 1995, he took up his favorite and third career as father. Soon thereafter, Heavenly Father hit him over the head with a two-by-four (wielded by the Holy Ghost) and he woke up from a long sleep. Since then, he's been learning a lot about the Gospel. He still has a lot to learn. Geoff's held several Church callings: young men's president, high priest group leader, member of the bishopric, stake director of public affairs, media specialist for church public affairs, high councilman. He tries his best in his callings but usually falls short. Geoff has five children and lives in Colorado.

32 thoughts on “The failed war on poverty

  1. Is it a failed war on poverty, or a failed economic system incapable of providing meaningful and self-supporting work at a living wage to those who would love nothing more than to be able to stand up on their own two feet?

  2. Mark N, interesting to note you don’t address any of the data above but attack “the system.” If you want to discuss “the system,” I suggest you go back to the progressive era and discuss the formation of the Fed, a true secret combination that has done more to destroy wealth than anything else in “the system.” We have tried to change “the system” and tried to implement “equality,” and as I show above we have sent $15 trillion down a rat hole.

  3. The current system is proving that it does not work. The reality is, we will probably always have poor people. There are some people who will never want to work, but always prefer to be on the dole. I’ve known many people like that over the years.

    However, there are many who would love the chance at a decent wage/training/etc. In the current environment, most welfare spending is towards maintaining people in a federal poverty level system (food stamps, etc). It is not really focused on improving the economic environment. If it were, we would see friendly regulations and taxation towards small business and oil companies, etc.

    The states managing the recession best are those that 1) are not spending vast amounts on welfare, 2) are living within their means, and 3) are encouraging businesses to expand in their areas.

    Then you have places like California, which is deep in debt, but still wanting to spend more hundreds of billions more money it does not have on things like high speed rail. Taxes are high, so many companies are moving away from California. Regulations are stringent, which also pushes business, movie stars and others to find elsewhere to live. California is an example of how not to do things.

    Yet, Pres Obama is going in that same direction. When Medicare and Social Security go bankrupt and we have a deficit so big we cannot pay it off and provide for the poor at the same time, you will see a forced change on America. Entitlement programs will suddenly be forced to work on less money, otherwise money will suddenly become deflated- wherein what you can buy today for $1 will then cost $3 or more. Remember when gas was less than $2 a gallon three years ago? Our gas dollar has devalued by half since then. Food has also skyrocketed in price. Our dollar devalues more, all because of our debt and related issues. In essence, the poor will get poorer, even if we keep paying them what we do now; simply because prices will drive their spending power down.

  4. D&C 49:20 

    20 But it is not given that one man should possess that which is above another, wherefore the world lieth in sin.

    We have the Book of Mormon, we have the New Testatment, we have the Doctrine and Covenants. All of them point the way to the economic system that the Lord wants us to live under. Since we’re not advancing to that goal, I suppose you could say that we’re throwing money down a rat hole.

  5. Mark N, this particular verse needs to be read in context, but if your point is the scriptures make it clear that all people should voluntarily give of their substance to other people, I will agree 100 percent. Note the word “voluntarily.” There is nothing voluntary about forcing people to pay taxes so some people (government bureaucrats and other elitists) can take some of the money and give a small portion of it to the poor, who overwhelmingly remain dependent on such programs the rest of their lives. The contrast between voluntary consecration (definitely a good thing) and forced government bureaucratic confiscation of money from people who don’t want to give (not a good thing) could not be more clear. For more, please read Elder Uchtdorf’s talk from October 2011 conference.

    http://www.millennialstar.org/welfare-systems-that-truly-help-the-poor/

  6. We spend good money feeding the hungry and clothing the naked, and next week or month we have to do it all over again. Seems kind of useless, doesn’t it? And then there’s immigration.

  7. Yes, we all know that the Lord would like us to do things of our own free will and choice.

    On the other hand, we have the example of Ananias and Sapphira.

  8. Satan proposed equality of outcome (i.e., salvation for all) that would have been accomplished by compulsion (never mind that it could not have succeeded). It was his counterfeit plan to the Father’s plan for free agency which, we know, produces inequality of outcome (we will be rewarded according to our works, within the appropriate degrees of glory in the hereafter).

    Likewise, the same “war in heaven” has been continued here on earth. The same counterfeit is proposed: equality by compulsion. Socialism, whether of the so-called democratic type or imposed by despots, has and will always fail in its goals. Compulsion never produces a moral or virtuous people, which is especially true of those doing the compelling.

    The law of consecration, on the other hand, has always been based on voluntary compliance with the will of God. It is precisely this plan that was instituted both in the New Testament period and that will ultimately bring about the establishment of Zion (one heart, one mind, and no poor among them) in the present dispensation. Compulsion is incapable of producing a people of one heart and one mind since charity is a personal and spiritual enterprise that results in a change of the inner man only when engaged in voluntarily & by force of one’s own will.

    To quote President Ezra Taft Benson: “The Lord works from the inside out. The world works from the outside in. The world would take people out of the slums. Christ takes the slums out of people, and then they take themselves out of the slums. The world would mold men by changing their environment. Christ changes men, who then change their environment. The world would shape human behavior, but Christ can change human nature.” (“Born of God,” First Presidency Message, Ensign, July 1989, p.2)

    We fought a war for free agency, not because it was easy or egalitarian (at least before we change our natures through the application of gospel principles), but because it was the only system that would actually work.

  9. We are confronted with clear data telling us that the war on poverty has failed to help the poor.

    We can draw two conclusions:

    1. Quit bothering to try to help the poor; it’s pointless.

    2. Find a different way to help the poor that actually works.

    Option (1) is in gross violation of the precepts of the Book of Mormon, the New Testament, and the Doctrine and Covenants. Fortunately for the welfare of their souls, nothing either Geoff B. or anyone else here has said suggests that they advocate Option (1). On the contrary, Geoff B. is presenting some ideas for Option (2).

    The Doctrine and Covenants tells us that the idler shall not eat the bread or wear the garment of the laborer. My reading of Doctrine and Covenants is that the United Order emphasizes proving means of production to willing laborers, and largely restricts redistribution to the elderly, the infirm, widows, and orphans, who are unable to make use of means of production. While it’s never spelled out quite this way, the strong implication is that the able bodied man who is given adequate means of production but still somehow manages to not be productive can go suck rocks.

    The trick is in providing the means of production. In Joseph Smith’s day, that largely meant providing adequate farmland to support a family. Nowadays, in our post-agrarian economy, it means providing capital for creating productive enterprises. Another part of it is providing willing laborers with human capital, which will mostly take the form of education. PEF strikes me as an excellent model for this approach.

    But I don’t think the government is capable of duplicating PEF. The incentive structure is all wrong.

  10. Martin, I linked the source in the first paragraph on this post, but it is here:

    http://www.scribd.com/fullscreen/88767476

    I encourage you to read the whole thing. It is one of the best pieces I have ever read on this subject, and I have been studying it since the early 1980s.

    Vader and John M, great comments.

    I am perplexed by John Mansfield’s comment #7, and I am not sure I understand it. It seems to imply that spending $1 trillion a year and having 126 programs is somehow justified. I wonder: would spending $100 billion a year and having 15 programs instead be enough if it were more efficacious and actually helped the poor? We know private voluntary programs are significantly more effective than big government bureaucracies — shouldn’t that be where we concentrate our efforts?

  11. We spend good money feeding the hungry and clothing the naked, and next week or month we have to do it all over again. Seems kind of useless, doesn’t it? And then there’s immigration.

    Mansfield,
    you have a point. Poverty is perennial, and so, therefore, is our obligation to help the poor.

    But once you realize that about poverty, you realize that having a “war on poverty” is silly. And if the war on poverty is silly, then the whole command-and-control, highly staffed, hierachical (in a word bureacratic) and mobilization-of-resources aspects of our relief efforts are also silly.

  12. This seems like an excellent time to quote the 19th century economist Frédéric Bastiat:

    Socialism, like the ancient ideas from which it springs, confuses the distinction between government and society. As a result of this, every time we object to a thing being done by government, the socialists conclude that we object to it being done at all. We disapprove of state education. Then the socialists say we are opposed to any education. We object to a state religion. Then the socialists say we want no religion at all. We object to state-enforced equality. Then they say that we are against equality. And so on, and so on. It is as if the socialists were to accuse us of not wanting people to eat because we do not want the state to raise grain.

    Applying this to Latter-day Saints, I would say that all Latter-day Saints should want to help the poor. The issue is how to do it in a)the most moral way b)the most efficacious way and c)the way that does not create dependency that ends up hurting the poor. (h/t to Connor Boyack for reminding me of this quotation from Bastiat).

  13. The Cato paper does well to point out significant inefficiencies (including some structural) in government social welfare programs, but concludes that poor people should just “get jobs” instead. The notion that people are poor because they lack a work ethic is one area where libertarianism fundamentally misapprehends human nature.

    The other recommendation of the paper is to provide tax breaks to job creators. Since tax breaks to the poor are some of the biggest items the Cato paper is counting as anti-poverty “spending,” the shift of these credits and deductions to the rich is more of a distributional question than one about the propriety of government social welfare programs. And thus the Cato paper is revealed to be advocating for certain private interests (the capitalists who fund it) against certain others (poor people).

    Extensive government support (in the form of recognition of property rights, some regulation to remove the need for more uncertain litigation, and support of the currency, banking, transportation and financial systems) is a necessary precondition to modern day capitalism. Therefore it is not illegitimate to propose that the same government system is the medium by which society provides a minimal safety net for those whom capitalism leaves behind.

  14. DCL, you get brownie points for (apparently) actually reading the Cato paper, but demerits for picking out the two things you don’t like among the gems that are there. Are you OK with the massive increase in government spending and the duplication that is taking place among 126 federal programs? Is there even a few bucks here and there that can’t be cut? How about duplication between federal and state programs? How about the suggestion of moving these programs to the states to more appropriately bring the aid closer to the recipients? There is a lot more there than just saying the poor should “get jobs” and that tax breaks should be given to job creators.

    Big government types always engage in misdirection. If you make 100 central points, they concentrate on the one or two that they considerable questionable rather than the 100 points under discussion. The primary point of this paper is the following: government is spending more money on anti-poverty programs than it ever has, yet there has been no appreciable decrease in the poverty level. I would love a big government type to address *that issue* and how we can resolve it rather than picking around the edges at the irrelevant.

  15. Government welfare is very inefficient. So is private giving (think canned food drives, cash given to hobos who spend it on beer/drugs, etc.)

    The article admits that poor people are unquestionably better off with the programs. And it is some success to note that poor folks rarely actually die of starvation in this country (as they undoubtedly would in the libertarian dystopia). So the programs have some value.

    But the efficiency isn’t your argument, Geoff. Its the legitimacy of the very project. I maintain that a minimal social safety net is a legitimate aim of our constitutional republican democracy as long as it is mediated through those institutions. It is your rejection of the idea that government can even embark on this project that I don’t find support for in the Cato paper.

  16. DCL, better, but not quite there yet. Again, you are not addressing the arguments involved. One more time: government spending on welfare programs has skyrocketed, and we have spent $15 trillion, but the poverty rate is close to where it was in the 1960s before the war on poverty began.

    I make three arguments in the OP on how we can improve the system. If you want to actually address this post (and not a straw man) you can 1)try to argue that spending $15 trillion was worth the effort 2)try to argue that spending three times the poverty level per family is efficient or 3)try to address the three arguments I made in the OP for improving the system. Addressing 1-3 would be an excellent response.

  17. I agreed with your efficiency arguments in the first sentence of my #17. Since that there are inefficiencies is a non-controversial point, I will leave it there. The War on Poverty is as bankrupt an idea as the War on Terror.

  18. “The war on poverty is as bankrupt an idea as the war on terror.” On that we agree. I would also throw in the war on drugs and we have a triple bankruptcy.

  19. DCL,

    ‘The Cato paper does well to point out significant inefficiencies (including some structural) in government social welfare programs, but concludes that poor people should just “get jobs” instead. The notion that people are poor because they lack a work ethic is one area where libertarianism fundamentally misapprehends human nature.’

    I assume you are thinking about this paragraph from the Cato paper:

    “But more important, the concept behind how we fight poverty is wrong. The vast majority of current programs are focused on making poverty more comfortable—giving poor people more food, better shelter,health care, and so forth—rather than giving people the tools that will help them escape poverty. And we actually have a pretty solid idea of the keys to getting out of and staying out of poverty: (1) finish school; (2) do not get pregnant outside marriage; and (3) get a job, any job, and stick with it.”

    I’m having difficulty picturing a way out of poverty that does not involve getting a job. I imagine you probably agree with that, but either believe that getting a job is far from sufficient, or believe that libertarians have misidentified the reasons why the poor do not get jobs. Am I with you so far? I’ll examine these ideas further after I’m sure they’re actually the ideas you hold.

    Incidentally, I’m not personally a libertarian, though there is some accidental overlap between libertarianism and my conservatism. And I do mean accidental: I am reasonably convinced that libertarianism is, at its roots, an ideology of the Left. We can discuss this some other time, since it’s not crucial to the present discussion.

    ‘The other recommendation of the paper is to provide tax breaks to job creators. Since tax breaks to the poor are some of the biggest items the Cato paper is counting as anti-poverty “spending,” the shift of these credits and deductions to the rich is more of a distributional question than one about the propriety of government social welfare programs. And thus the Cato paper is revealed to be advocating for certain private interests (the capitalists who fund it) against certain others (poor people).’

    This is true only if the shifting of tax breaks from poverty programs to job creators is a zero sum policy change, and if the poverty programs are actually in the interest of the poor. I very much question both assumptions. I am no friend of corporate welfare, and I am dubious about the value of reducing the tax burden of job creators per se, but I can imagine that there might be some reforms of the tax code that would reduce dead weight and distortion of market signals that would increase economic efficiency and create jobs. If so, this is not a zero sum policy change. Likewise, the whole point of the Cato paper and its statistics is that the massive spending on poverty programs has not helped reduce poverty, so it seems to follow that reducing this spending should not increase it, either.

    ‘Extensive government support (in the form of recognition of property rights, some regulation to remove the need for more uncertain litigation, and support of the currency, banking, transportation and financial systems) is a necessary precondition to modern day capitalism.’

    I agree. But the devil is in the details. Just what restrictions should property rights put on government action? What regulations are likely to reduce deadweight from reduction of litigation than to increase it from the regulations themselves? (And I have not noticed any marked reduction in litigation as regulations have multiplied.) Should we have a fiat currency and, if so, how should the money supply be determined? What reserves should various kinds of banks be required to hold? And so on. I believe that the importance of these details means that conservative, not libertarian or progressive, reforms are called for. We can discuss this at greater length if you are unclear on the distinction.

    ‘Therefore it is not illegitimate to propose that the same government system is the medium by which society provides a minimal safety net for those whom capitalism leaves behind.’

    Non sequitur. It simply doesn’t follow. My doctor is splendid at keeping me healthy, but it would never even cross my mind to ask him to do my plumbing. The fact that government is a powerful and potential beneficial institution for carrying out certain social functions does not prove it has the potential for effectively carrying out other unrelated functions. I believe the social safety net is far better left in the hands of the Church, which is a very different institution with very different strengths.

  20. The key to understanding poverty, IME, is understanding the collusion of forces that keeps people there. I’ve worked with federal, state, and private programs over the years, and spent my life savings and my soul the past year developing a privatized effort. I believe that the key to “taking the slums out of people” is providing vision and opportunity in a context that allows people to “grow from grace to grace.”

    Every single current program that is failing is trying to hack away at one part of the problem without acknowledging that there are many interconnected issues. Housing is the most expensive, so it’s often not addressed at all. The wait for housing assistance is prohibitive (in my area it’s between 18m and 2y). But refuse to handle housing and you have another boatload of issues (cohabitating families, health problems, inadequate personal safety, losing jobs, poor parenting, etc.) Address hunger, and you fail to address addiction, family stability, poor education, lack of job training, etc. Address job training alone and, you get the picture.

    But put the government in charge of the problem and you have the constant issue of goals displacement. The assumption that people will work the system drives the mandates and creates a culture of expected abuse, in which no one can thrive or make real change.

    I genuinely believe that the answer is to build community. Break down the walls between the poor and “the rest of us” just as we do in organizations that are successful with behavior modification: churches. Build small complexes from donation and community support, set up job mentoring programs with local businesses, expect residents to pay their own rent from their income, reward those who voluntarily release themselves from government support (food stamps, medicare), set up health care networks, and task each group with filling responsibilities to support one another.

    I have been told over and over that it’s pie-in-the-sky, but when we hash details, people acknowledge that it could work, and once it begins to work it will develop momentum. I refuse to give up until I build one of these and see the vision come to fruition. People don’t want to be poor. It just takes more than most of us want to invest to help them.

  21. Vader, I’m glad that my comments engendered your excellent questions as I think that a discussion of them would be more interesting. Geoff, though, has shown an intention to curtail the discussion more narrowly, so I will just give a few quick reactions.

    Agree with your tax shifting critiques, but my overall point is that Cato wants to count tax breaks for the poor as government spending, but doesn’t want to call tax breaks for “job creators” anything of the sort.

    Agree also with your comments about the appropriate level of government involvement in the economy and think that would be an interesting discussion.

    Regulation be more efficient that litigation when the cost of litigation is higher than the deadweight loss of complying with the regulation (i.e. transaction cost critique of the Coase Theorem – too much to digest here). This happens a lot. If a factory has 100 nearby landowner plaintiffs and the government comes in and says that as long as certain guidelines are met none of them may sue for health damages, then there is the potential for that to be an efficient regulation as opposed to separately litigating 100 different claims.

  22. DCL,

    Agree with all your more recent points, though I suspect my prudential approach to government involvement in the economy — which means the bare minimum necessary to maintain a legal framework in which a free market is possible, and to supply those public goods for which government is uniquely appropriate — differs significantly from your, particularly in those pesky details.

    But getting back to this:

    “I’m having difficulty picturing a way out of poverty that does not involve getting a job. I imagine you probably agree with that, but either believe that getting a job is far from sufficient, or believe that libertarians have misidentified the reasons why the poor do not get jobs. Am I with you so far? I’ll examine these ideas further after I’m sure they’re actually the ideas you hold.”

    Are those in fact your ideas? Because they both deserve a serious critique.

    Bonnie,

    Just so. Who was it who said we must take the slums out of the people, and then they take themselves out of the slums?

  23. @Mark N: I just wanted to address something that Mark N suggested with regards to the effort described in the New Testament to establish the law of consecration:

    Yes, we all know that the Lord would like us to do things of our own free will and choice.

    On the other hand, we have the example of Ananias and Sapphira.

    This is a distortion of what actually occurred with regards to Ananias & Sapphira, but I’ve heard it cited before as an example of force being used by the New Testament church to ensure giving to the poor. That there was absolutely no coercion involved is made clear in Acts 5:4.

    The law of consecration they had covenanted to live was an agreement to hold all things in common (Acts 2:44-45); instead, they lied as they brought their consecration to the apostles, claiming to give all they owned to the church while, in secret, holding a portion back for themselves. Their sin was in lying about their keeping their part of the covenant (full account in Acts 5:1-10).

  24. Vader, I’m sure we do differ on the prescriptive degree of government involvement in the economy, but for this post I am more interested in a descriptive position that recognizes the breathtaking degree to which the massive size of government is currently symbiotic with, and not opposed to, American business today.

    My problem with the Cato prescription that the poor should just “get a job” is that, as a rhetorical device, it shifts the entire blame for poverty on the shoulders of poor persons and lets us ignore the institutional factors outside of their control that put people in poverty. In other words, the combined public and private sectors in this country do not have any way of guaranteeing full employment for anyone willing to work, and the last few years have shown the extent to which this gap can grow. So saying “get a job” when there objectively aren’t enough of them for all of the people willing to work is an incomplete prescription. (Cato knows this is incomplete, which is why they go on to suggest more corporate welfare will create the jobs needed.) What this does rhetorically, though, is perpetuate the idea that poor people are just too lazy to be bothered with work, and, oddly, that business needs government favors in order to create jobs.

  25. Geoff, here’s some expansion of my earlier comment (#7). When looking at big numbers with lots of zeros, I try to ground myself by keeping in mind what the relevant denominator is, which will slice off most of those zeros. Applying that to the first chart, the one showing spending on poverty from 1976 to 2010, the population of the U.S. increased 50% over that span. That moderates a bit the growth of government bloat. Then considering the numerator’s target, I wondered a bit about how static the population of welfare recipients has been, how many people have risen from poverty but been replaced by others, and I remembered that you love immigration of every kind, so I made a dig pointing out that importing tens of millions of impoverished people isn’t going to lower the poverty rate.

    The points raised by others is good, that since poverty is perennial, fighting a war to lick it once and for all is misguided. Also, the point about government spending on the poor exceeding by a wide margin what it would take to just give poor families enough money to not be poor any more was a nice jab at the wastefulness, even pointlessness, of government programs.

  26. DCL,

    Big government and big business are indeed alarmingly symbiotic. This is arguably the essence of economic fascism (Jonah Goldberg makes the argument in Liberal Fascism) and I would like to see it stop. I note that Adam Smith originally wrote The Wealth of Nations as an argument against government control of foreign trade under the guise of mercantilism, so one can rightly say that laissez-faire is incompatible with today’s symbiosis.

    It is a common myth that being for a free market means that one is for big business. Adam Smith was contemptuous of the businessmen of his day. I am contemptuous of many of the big businessmen of our day. Thomas Sowell has pointed out that free market capitalism is not a profit system; it’s a profit and loss system, and loss is at least as important as profit. Businesses need to be able to fail. It is likewise a myth that a free market is a market free of regulation. It is the nature of the regulations that determines whether a market is free, not their absence. You cannot have a free market without the rule of law.

    The Cato paper cites the statistic that very few of those who hold a job live in poverty. (Something like 2.6%, if I recall correctly.) So the key is geting those in poverty employed. “Just get a job” is indeed too simple, and, as you acknowledge, Cato recognizes this and recommends policies that they believe will promote job creation. The characterization of these policies as “government favors” is a rhetorical spin; one could equally rhetorically spin it as “government off their backs.” In other words, Cato would say that, no, government doesn’t need to extend favors to business to get them to create jobs; government merely needs to impose fewer burdens on business that keep them from creating jobs. The difference is that one spin assumes that businesses have already created all the jobs they naturally would, and government intervention is needed to artificially create more; whereas the other spin assumes that businesses have not created all the jobs they naturally would because of artificial barriers imposed on them by government intervention.

    At present, business profits are taxed twice; once as corporate income tax, and again when the profits are distributed to shareholders. Thus, for a shareholder in the uppermost tax bracket, his effective marginal rate is the corporate 35% plus a personal tax rate of 35%, or 70%. I consider a tax rate this high to be essentially confiscatory. European countries do it a bit differently: They impose little or no corporate tax but impose personal tax rates of around 70%, yielding an effective marginal rate remarkably close to that in the U.S. However, their approach is more politically palatable where income redistribution is more openly supported. Ironically, the high corporate U.S. tax rate is probably worse for the middle class, whose investment earnings get hit by the full 35% corporate portion of the rate regardless of their own marginal rate. Put another way, the dividends you plow back into your 401-K or IRA supposedly are tax-deferred, but only if you ignore the fact that they’ve already been trimmed by that 35% corporate rate.

    But we aren’t worrying about the middle class here, are we? The topic is the very poor, who don’t have an IRA and don’t even have a job. At present, we are in a serious recession, one of the consequences of which is that there are folks willing to work who can’t find jobs. I think we need to distinguish these folks from what is sometimes characterized as the permanent underclass. Your comment: ‘So saying “get a job” when there objectively aren’t enough of them for all of the people willing to work is an incomplete prescription.’ probably applies to these people. So far, we’ve been presented with a number of alternatives for their relief: Give them welfare support. Or give their potential employers subsidies that will create jobs. I’d throw in creating jobs directly through work programs, which hasn’t been explicitly mentioned but perhaps is a variant of “give them welfare support.” If we thought the recession was going to be brief, we could add “let them live off their savings for a time”, since their unemployment is a recent and transient phenomenon, but we lack confidence the recession will end soon.

    Giving them welfare support risks having them or their children join the permanent underclass (which I’ll get to in a moment). Subsidies to create jobs are not often effective, no matter where they’re put in the economy: In a recession, anyone getting a windfall is quite likely to use it to enhance his personal safety net, rather than increase his consumption or invest it in risky new enterprises. In other words, the problem in a recession is lack of confidence, and that very lack of confidence means that subsidies are unlikely either to increase demand or lower effective capital costs. This is true no matter where in the economy the subsidy is applied. That leaves creating artificial jobs outside the normal economy or letting folks just ride it out. Unfortunately, people are actually rather bright any time they have skin in the game; they know when the job they’re being offered is artificial, so its effects are corrosive to morale (like outright welfare) and fail to restore confidence (like subsidies.)

    What is needed to deal with the transient loss of jobs in a deep recession is a restoration of confidence, which leaves businesses more willing to make risky investments, consumers more willing to make risky purchases, and laborers more confident they can live off their savings until things get better. FDR had it right when he said that “we have nothing to fear but fear itself”; unfortunately, he then promoted policies that struck terror into the business sector, and were intended to. (Both Amity Schlaes’ The Forgotten Man and Jim Powell’s FDR’s Folly have discussed this aspect of the New Deal, from somewhat different perspectives.)

    The permanent underclass are a different matter. They remain unemployed even in good times, when the plethora of “Help Wanted” signs indicate a relatively high demand for labor. A lot of the discussion here has already touched on this, but these are the people of whom Ezra Taft Benson (thank you, Bonnie) was thinking when he make his famous quote about taking the slums out of the people. You said that ‘My problem with the Cato prescription that the poor should just “get a job” is that, as a rhetorical device, it shifts the entire blame for poverty on the shoulders of poor persons and lets us ignore the institutional factors outside of their control that put people in poverty.’ Unfortunately, much of the problem with the permanent underclass is internal; Thomas Sowell, whose parents were part of the mass migration of southern Blacks to northern cities in the early 20th century and who therefore can fairly be characterized as an escapee from the permanent underclass, has explored the cultural aspects of the permanent black underclass in his Black Rednecks and White Liberals, which of all his writings comes closest to being a crie de couer.. There are certainly institutional barriers to these people; some of those identified by Sowell include minimum wages, labor unions, and rent control, which will certainly strike some readers as paradoxical. All favor the working class at the expense of the permanent underclass. But while one cannot ignore institutional factors in the maintenance of a permanent underclass, one also cannot ignore the fact that the permanent underclass themselves need a change of heart.

    But then, don’t we all need a change of heart? That’s really where the Gospel comes in. They need it, too.

    John,

    Yeah. Poverty is not a problem to be solved; it is a perennial aspect of the human condition to be ameliorated.

  27. Vader, I think by lack of confidence you mean lack of aggregate demand. Most economic arguments still boil down to whether you see solutions on the supply-side or demand-side.
    My preferred solution to these issues is concept of a job guaranty program as promulgated by modern monetary theorists.

  28. DCL,

    I would be interested in the details of how such a job guaranty program would work.

    If you are using “guaranty” as a synonym for “guarantee”, meaning that the program guarantees a job to anyone who enrolls, then it suffers from the same problems as a big business bailout: Failure is a necessary part of the system, and trying to eliminate failure is certain to eliminate success as well.

    There is also the aspect I mentioned earlier, that a person who knows his job is artificially secured takes a blow to his morale. If the job is guaranteed in perpetuity, it distorts the labor market. If it is temporary, then like most temporary measures, the job holder puts his wages into building up his safety net rather than increasing his consumption or investment, so it doesn’t do much for aggregate demand.

    And then there’s the statistics that started off this post: A lot of strategies have been tried in the “war on poverty”, but we’ve never hit on one that works. The chief thing these approaches have in common is that they are being promulgated, controlled, and funded by the government. Which suggests, to me, that the problem is inherent in the incentive structure that any government poverty program faces. In other words, the failure of the war on poverty is due to its public choice character. I conclude that the solution needs to be non-governmental.

    Though, as John pointed out, the reason the war on poverty failed may also be because it had unreasonable expectations to begin with.

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