Home > Economic policy > The US government didn’t lose the War on Poverty: it changed sides

The US government didn’t lose the War on Poverty: it changed sides

March 14th, 2015

I made this observation in comments on a Crooked Timber post, and got some pushback, so I thought I’d take a look back at the data

US Households in Poverty, 1959-2013

US Households in Poverty, 1959-2013

Both the number and the percentage of families in poverty dropped sharply during the 1960s when the “War on Poverty” was being waged actively, and remained near their all-time lows through the Nixon and Carter years until 1979, when the Volcker recession hit, followed by the election of Ronald Reagan. These events can reasonably be said to mark the point at which the government unequivocally changed sides.

The number of households in poverty has risen steadily since then and is now higher than in 1959, the year for which the poverty level was first defined by Mollie Orshansky. The poverty rate has remained consistently higher than in the 1970s, except for a brief deep at the peak of the late-1990s boom.

A quick note on the data: Unlike most other countries, the US uses an absolute poverty line, rather than a measure set relative to median income. Orshansky estimated a food budget that was adequate but austere by the standards of 1960, then multiplied the cost by 3 on the basis that the food share of a poor families budget should be 1/3. It’s been adjusted for inflation since then, but not increased in real terms. It might be argued that the CPI overstates inflation somewhat. But much the same point applies to measures of GDP per person which has increased dramatically over the 35 years since the US government stopped fighting poverty and started fighting the poor.

The measure includes cash transfers, but not some non-cash benefits, notably including the Supplemental Nutrition Assistance Program (food stamps) the Earned Income Tax Credit introduced in 1975 . The result is to understate the progress made on poverty reduction since the 1960s, but not to change the basic story. Food stamps have been under attack from the right since the early years of the Reagan Administration. EITC had bipartisan support until the 1990s, but is also now under attack.

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  1. Jim Rose
    March 14th, 2015 at 14:20 | #1

    John, graph needs fixing

  2. Ivor
    March 14th, 2015 at 14:42 | #2

    The fact that USA fixed a poverty line so crudely, in 1960, and then only increased it by CPI since then shows the real face of capitalism and the complete bankruptcy of both the Democrats and Republicans.

    And the complete failure of social democratic politics based on trade unions, social movement, journalists and academics.

    We need a complete reassessment based on Marxism.

  3. Ivor
    March 14th, 2015 at 14:43 | #3

    The graph works fine, if you right-click on it and “open in new tab”

  4. J-D
    March 14th, 2015 at 14:49 | #4

    I get the impression that in the sentence beginning ‘Both the number of families in poverty dropped sharply …’ the words ‘and proportion’ have been accidentally omitted between ‘the number’ and ‘of families’.

  5. John Quiggin
    March 14th, 2015 at 15:05 | #5

    Problems fixed, I hope. Some more edits coming

  6. paul walter
    March 14th, 2015 at 16:07 | #6

    Seems to be an aenemic civilisation, something that cannibalises its own and itself .. more of, can’t see because they blindfolded themselves stuff.

    Geez, people are strange creatures.

  7. Ikonoclast
    March 14th, 2015 at 16:09 | #7

    I am reading Piketty at the moment (“Capital in the 21st Century”) and I am not very far into his tome. Piketty’s basic thesis, if correct, has significant implications for this debate. His thesis seems to me (on a very incomplete reading so far) to be;

    (1) Low rates of growth are historically normal or usual;
    (2) In these periods r>g (returns on capital are greater than growth rate);
    (3) The period where g>r was an anomolous event historically speaking;
    (4) We are returning to the standard situation where r>g.

    Piketty appears to place little or no emphasis on general limits to growth theory, climate change etc. as limiters of economic growth. He does appear to place an emphasis on the slowing and then cessation of demographic growth as a factor. The other factor (I am guessing because I have not read far enough) is a kind of theory of secular stagnation or a “diminishing returns of technology” argument. Feel free to correct me if you have finished his book.

    From my stance as a hardline limits-to-growther, Piketty’s argument only gains power when we consider LTG, climate change, resource depletion, environment destruction, species extinctions and so on. Inequality and poverty will increase even more rapidly once r>-g. I’ve changed the formula for rhetorical effect. Indeed, the current financialisation of the economy might well be a necessary pre-condition for maintaining a positive r in the capitalists’ enclaves when g is a negative value.

    Such a situation of “maintaining a positive r somewhere in the capitalists’ enclaves when g is a negative value” is something that will not indefinitely sustainable. But it could be sustainable for those in the enclaves for quite a long time. I think it will also imply as well as r>-g another equation called R(en) > R(ex). This means rounds of ammunition expended by the enclaves greater than rounds of ammunition expended by the exclaves. While and only while R(en) > R(ex) can the situation be maintained in favour of the rich enclaves. Indeed, I expect the enclaves will need to keep R(en) > R(ex) x 100 to maintain parity. Is this dark comedy or dark quantification?

  8. Tim Worstall
    March 14th, 2015 at 18:40 | #8

    Good Grief John, this is a monstrous misrepresentation and you know it because it’s been pointed out to you before.

    “A quick note on the data: Unlike most other countries, the US uses an absolute poverty line, ”

    Quite so.

    “The measure includes cash transfers, but not some non-cash benefits, notably including the Supplemental Nutrition Assistance Program (food stamps) the Earned Income Tax Credit introduced in 1975 .”

    Also quite so.

    “The result is to understate the progress made on poverty reduction since the 1960s, but not to change the basic story.”

    Absolutely not so.

    The change has been, largely, to shift the poverty measurement from measuring poverty (in that absolute, American sense, not the relative one that everyone else uses) rates after government poverty alleviation attempts to poverty before government poverty alleviation attempts.

    Before the mid-70s, as you say with the EITC, poverty alleviation was largely cash payments to the poor. Under the American system of measuring poverty this is counted as income to the household before deciding who is still below the poverty line.

    Since then there’s been a bipartisan move to have poverty alleviated by transfers in goods and services and through the tax system. None of which is counted as household income when deciding how many people are still below the poverty line. Cash welfare transfers were largely wiped out under Clinton (with however much Republican pushing you want to ascribe to it). Meaning that pretty much all poverty alleviation is now through either the tax system or in goods and services.

    These sums are substantial. From memory, $80 billion odd in SNAP (food stamps), $80 billion again in EITC, tens of billions in Section 8 vouchers and there’s an alphabet soup of other programs (free and reduced price school lunches for example). And of course the biggie, Medicaid (yes, this should be counted, as Orshansky’s numbers inculded whatever the household might have to pay for medical care) at some hundreds of billions.

    This is a fair old chunk of change. Even if we leave Medicaid out of it there’s $200 billion odd in transfers not being recorded (at minimum). Which do alleviate poverty but which are not being recorded as doing so.

    Just to use round numbers for the heck of it, if there’s 20 million households in poverty and there’s $200 billion being transferred to them (excluding health care) then that’s $10,000 a year per household. Which is going to bring some portion of those households up above that poverty line. And yes, those transfers do indeed bring some households up above that poverty line.

    Just like tax credits, housing benefit and so on in other countries bring some households up above the local poverty lines.

    Two things follow from this. The first being that we cannot compare the US poverty numbers with those of other countries. Firstly, because they are using that absolute number not the relative one we all use (below 60% of median income, adjusted for household size and usually after housing costs). Secondly, and much more importantly, because everyone else’s poverty numbers are after poverty alleviation attempts. They are after all influences of the tax and benefits systems. The US measurement is before pretty much all poverty alleviation attempts.

    Also, we cannot compare the US poverty numbers over time. Because the early numbers are poverty after poverty alleviation attempts and the more recent ones are poverty before poverty alleviation attempts.

    And the difference is significant. Using, that admittedly strange, US absolute poverty definition the poverty rate for children after the tax and benefits in kind system is something like 2 or 3%, not the near 20% reported in the sort of figures you’re using.

    The US poverty alleviation system is actually very good at reducing poverty among children, when we measure the effect of that system (by their strange measures of course).

    Yes, the US is more unequal than most other countries, meaning that relative poverty is higher even after poverty alleviation attempts. And yes, delivering benefits in kind is inefficient (recipients would value the cash more highly).

    It’s entirely possible to insist that the US should do more poverty alleviation. Or do it differently. But it is flat out wrong to try and say that US poverty levels are comparable to where they were in the 1960s. Simply because what is being measured at the two different dates is entirely different.

    “but not to change the basic story.”

    That’s the bit that is wrong. The basic story has changed entirely.

  9. Ikonoclast
    March 14th, 2015 at 19:50 | #9

    @Tim Worstall

    I wonder if you could provide a link to copies of the original ASI Omega Project papers? Now, that’s an interesting part of economic history.

  10. Tim Worstall
    March 14th, 2015 at 19:54 | #10

    I have no idea what the Omega Project is, let alone where the original papers might be.

    But a nice piece of whatabbouttery nonetheless.

  11. Ikonoclast
    March 14th, 2015 at 20:03 | #11

    @Tim Worstall

    “The ASI’s Omega Project (1981–83), led by Peter Young, produced a series of 19 papers shadowing each Department of State, and advocated such things as the compulsory contracting-out of most local services such as refuse collection, the replacement of much of the welfare state by private insurance, and further privatisation of public sector services and industries, including aspects of police services.[9][10][11] The Omega Project was very influential, and many of its recommendations were adopted as policy and enacted into legislation.” – Wikipedia.

  12. Tim Worstall
    March 14th, 2015 at 20:09 | #12

    Don’t think I’ll worry too much about that. I was somewhere between doing A Levels and waiting table in Alexandia VA at that time. At least a couple of decades before I got involved at the ASI.

  13. Ikonoclast
    March 14th, 2015 at 20:13 | #13

    @Tim Worstall

    Interesting. Can I assume you are not much interested in the history of political and economic thought? Have you read Adam Smith?

  14. Tim Worstall
    March 14th, 2015 at 20:19 | #14

    Political thought, not so much. Economics rather more: as you can see from my comment up above on US poverty statistics. And yes, I have read Smith, thank you.

  15. Ikonoclast
    March 14th, 2015 at 20:36 | #15

    I’ve gone a bit off-topic. This link might help bring some facts to the table.

    http://www.childrensdefense.org/library/state-of-americas-children/2014-soac.pdf?utm_source=2014-SOAC-PDF&utm_medium=link&utm_campaign=2014-SOAC

    The table on page 13 indicates the situation is like the curate’s egg; good in parts but also bad in parts.

    My personal opinion based on that table is that matters re. child poverty mostly seem better in 2012 than in 1964. This seems to contradict J.Q.’s graph. I don’t understand the reasons for the discrepant pictures of child poverty.

    On the other hand, I think economics in the US have taken a turn in the last few decades (concentration of wealth, stagnation of wages and so on) which will see the improvements of 1964 to 2012 undermined in the future. In other words, things will slide the other way. The inequality ratio is going off the charts now.

  16. TerjeP
    March 14th, 2015 at 21:05 | #16

    There was a very big policy difference between the era before 1970 and the era afterwards. Much of the latter being an era of loose money and high inflation.

  17. TN
    March 14th, 2015 at 21:57 | #17

    Thanks for the through post, Tim. I thought it was a bit strange when John said the latter measures didn’t include the US EITC, but the importance of the other things not included – assuming you’re right – does change the picture significantly.

  18. March 14th, 2015 at 23:11 | #18

    And in such a rich country, the question is, “Why are any families in poverty?”. OK, I know some will be because they cannot help themselves and cannot manage their lives. But 10%? There is no excuse for this level of poverty – even if the stats are a bit dodgy…

  19. James Wimberley
    March 15th, 2015 at 02:56 | #19

    Waiting for JQ’s rejoinder to Tim W. Meanwhile, what the graph does not show is what you would expect using an absolute poverty line, viz. a steady decline. You would expect this without any anti-poverty measures at all, just from any growth that was reasonably distributed.

    The relative poverty people have a point. Social inclusion or exclusion depends on access to goods that most other people have, like mobile phones and, in the US, cars. The 12% of families in poverty today are worse off than the 12% in poverty in 1980. So flatlining is failure.

    Food stamps were part of the New Deal, and expanded by LBJ. Medicaid was also a Great Society programme. So they can’t comprise much of Tim’s alleged recent shift to in-kind and tax benefits as an explanation for the bad trend in the measured poverty headcount. The point can only apply to the EITC.

  20. Tim Worstall
    March 15th, 2015 at 03:58 | #20

    “like mobile phones and, in the US, cars.”

    75% of the poor in the US do a have car and 96% with cellphones.

    There’s a little wrinkle here. Orshansky took 3 timesthe food budget. Yet food budgets of the poor are some 12% of total income these days. So there is more for other things. Just because food has declined in price faster than the general inflation rate over the decades.

    “Food stamps were part of the New Deal, and expanded by LBJ.”

    Well, yes. 4 or 5 million people under LBJ, 15 million under Ford, exapanded again in 85 and 87, 45 million people served now, That’s faster than the expansion of the population.

    Further, don’t forget, cash welfare declined from the 60s to near extinction in the 90s.

  21. J-D
    March 15th, 2015 at 06:27 | #21

    @Tim Worstall

    If people are spending a smaller fraction of their income on food and a larger fraction on, say, for example, rent, one might interpret that this way ‘people don’t need to spend as much on food, so they can afford to spend more on rent’ but one could also interpret it this way ‘people are being forced to spend more on rent, so they can’t afford to spend as much on food’. If people are spending less on food but are still as well-fed, that’s good; but if they’re spending less on food and are less well-fed, that’s not so good.

  22. Tim Worstall
    March 15th, 2015 at 06:40 | #22

    “If people are spending less on food but are still as well-fed, that’s good; but if they’re spending less on food and are less well-fed, that’s not so good.”

    You’ve noted the rise in obesity in recent decades? And back in the 50s, 60s, the poor were not actually geting enough calories?

  23. J-D
    March 15th, 2015 at 09:38 | #23

    @Tim Worstall

    I don’t find my personal memories a good guide to change over recent decades in the population as a whole (not even the Australian population as a whole, let alone the US population, which is the one we’re discussing). Are you relying on your personal memories as a basis for your judgements? If not, what are you relying on?

  24. Garry Claridge
    March 15th, 2015 at 09:56 | #24

    From the time of Bob Hawke’s statement about poverty, I doubt that we have improved much here. Last year the ACOSS report suggested 13.9% of Australians live in poverty.

    Perhaps, as a priority, addressing poverty in government policy will add other benefits to our economy as a whole? Could be worth a go!

  25. Ikonoclast
    March 15th, 2015 at 10:35 | #25

    From the Children’s Defense Fund Report:

    “How the USA ranks among industrialised countries.

    1st in GDP.
    1st in number of billionaires.
    Second to worst in child poverty rates just ahead of Romania.
    Largest gap between rich and poor.

    1st in military spending.
    1st in military weapons exports.
    1st in number of people incarcerated.
    Worst in protecting children against gun violence.

    30th in pre-school enrollment rates.
    24th in reading scores for 15 year olds.
    28th in science scores for 15 year olds.
    36th in maths scores for 15 year olds.

    1st in health expenditures.
    25th in low birthweight rates. (sic) (I think they mean 25th in healthy birthrate weights)
    26th in immunization rates.
    31st in infant mortality rates.
    2nd to worst in teenage births just ahead of bulgaria.”

    And so it goes. I think we can be certain that the USA is storing up massive social problems for itself in the near future. The US is the only country in the world (not counting Somalia which does not have a legally constituted government) that has failed to ratify the UN convention on the Rights of the Child.

    Almost half the children in the US now (about 47%) are children of colour. More than 50% of children under 2 in the US are children of colour. I assume this means Black, Amerindian and Hispanic. 72 nations including Sri Lanka, Cuba and Romania have lower infant mortality rates than Black children in the US. Compared to Black US infants, 132 nations have a lower incidence of low bithweight including the Congo, Cambodia and Guatemala.

    Something is seriously wrong in the richest country in the world. That is very clear. Rich, old white men apparently care only for rich, old white men and absolutely nobody else. That’s Western laissez-faire capitalism for you. If the system properly and fairly distributed the rewards for production in the first place, there would be considerably less need for welfare redistribution.

  26. Ikonoclast
    March 15th, 2015 at 10:36 | #26

    From the Children’s Defense Fund Report:

    “How the USA ranks among industrialised countries.

    1st in GDP.
    1st in number of billionaires.
    Second to worst in child poverty rates just ahead of Romania.
    Largest gap between rich and poor.

    1st in military spending.
    1st in military weapons exports.
    1st in number of people incarcerated.
    Worst in protecting children against gun violence.

    30th in pre-school enrollment rates.
    24th in reading scores for 15 year olds.
    28th in science scores for 15 year olds.
    36th in maths scores for 15 year olds.

    1st in health expenditures.
    25th in low birthweight rates. (sic) (I think they mean 25th in healthy birthrate weights)
    26th in immunization rates.
    31st in infant mortality rates.
    2nd to worst in teenage births just ahead of bulgaria.”

    And so it goes. I think we can be certain that the USA is storing up massive social problems for itself in the near future. The US is the only country in the world (not counting S o m a l i a which does not have a legally constituted government) that has failed to ratify the UN convention on the Rights of the Child.

    Almost half the children in the US now (about 47%) are children of colour. More than 50% of children under 2 in the US are children of colour. I assume this means Black, Amerindian and Hispanic. 72 nations including Sri Lanka, Cuba and Romania have lower infant mortality rates than Black children in the US. Compared to Black US infants, 132 nations have a lower incidence of low bithweight including the Congo, Cambodia and Guatemala.

    Something is seriously wrong in the richest country in the world. That is very clear. Rich, old white men apparently care only for rich, old white men and absolutely nobody else. That’s Western laissez-faire capitalism for you. If the system properly and fairly distributed the rewards for production in the first place, there would be considerably less need for welfare redistribution.

  27. Donald Oats
    March 15th, 2015 at 13:48 | #27

    Personally, I don’t think there is a meaningful definition of poverty which can be used across long time periods. We can measure a range of things relevant to our current period, and decide on thresholds for those items, e.g. necessity of a mobile phone and monthly fee cf necessity of quill, ink, paper, stamped envelope—the 18th century equivalent. Perhaps it is better to speak in terms of the factors which we currently deem necessary for a minimal existence in the current period, rather than rolling it up into a single metric.

    Absolute poverty makes sense if we restrict it to access to the minimal food necessary to survive, and perhaps the cost of a roof over the head. If more is included, it becomes a more relative definition, rather than absolute; it’s a bit like breaking out fixed overheads from the variable ones, except that because of the historic data we must also consider what is necessary in relation to the time period in question. Noone needed a mobile phone to seek employment in 1995, but in 2015 it would be very challenging indeed; same goes for email/fb/vchat etc. Some means of instant-everywhere contact is virtually essential for job seekers today.

    Nevertheless, I’d agree with the thesis given in the blog post: the indolent, the impoverished, the incapable, they are the targetted enemies of the state, rather than being the needy requiring external aid. Western governments are becoming more and more selfish in the way they behave, and yet they still bleed money…which in a real world would imply that being selfish isn’t in any way necessary, or sufficient to maintaining balanced budgets. In a world predicated on deregulated economies, the minimum wages simply don’t match the actual needs of the wage earners; nor are there necessarily sufficient jobs to accommodate them. Governments can perform a useful function here, but we choose not to.

    If we look at capitalism’s historic data through the prism of the rational mind, we can see that the market imperative inflates the salary/bonuses of CEOs and similarly placed people to ratios way beyond what seems necessary to attract people to this line of work. In other words, if we imagined a world in which the spread of income from bin-man to CEO were 5:1, it is easy to believe we would still get enough people putting their hand up to be a CEO for the business world to continue as before: a CEO is rarely doing that job because of the income they make, rather, they do the job because they have a passion for it. The trouble starts with the fact that people in positions of power, be it a CEO or a politician, can and do influence the environments in which they operate, and do so to their own advantage; this doesn’t contradict the fact that they are passionate about their work. A bin-man has virtually no power to change their environment in which they work; they are merely responders not shapers (of course they can decline the work, but the real world requires food on the table, so…).

    Inevitably, power embeds power into the economic fabric. I have no idea how an economics academic would go about examining that sort of narrow employment market (of powerful roles like executive positions, political roles, etc), but it sure would be interesting.

  28. Tim Worstall
    March 15th, 2015 at 15:01 | #28

    @J-D
    I’m working from a detailed knowledge of how those US poverty statistics are put together….

  29. Tim Worstall
    March 15th, 2015 at 15:08 | #29

    @Ikonoclast

    From memory the CDF is using the usual relative poverty measurement there. For the US this is found in the new “supplemental poverty measure”. This is how you get so many “poor people” in a country with GDP per capita of $10,000 a year compared to one with $54,000 a year (Or, PPP adjusted, $17k and $54k).

    It’s not really a measure of poverty that, it’s a measure of inequality. Useful and important no doubt, but they’re not quite the same thing.

  30. Jim Rose
    March 15th, 2015 at 15:36 | #30

    American poor live in larger houses than EU middle class

  31. Ikonoclast
    March 15th, 2015 at 16:12 | #31

    @Jim Rose

    Source please.

  32. Tim Worstall
    March 15th, 2015 at 16:22 | #32

    This is interesting:

    http://marginalrevolution.com/marginalrevolution/2015/03/how-much-has-the-u-s-poverty-rate-declined.html

    “Official percent poor in 1964: 19.0%

    Official percent poor in 2013: 14.5%

    Reduction to correct for:

    Value of noncash benefits – 3.0%

    Omission of refundable tax credits – 3.0%

    Replacing CPI-U with PCE index – 3.7%

    Adjusted percent poor in 2013: 4.8%”

  33. J-D
    March 15th, 2015 at 16:46 | #33

    @Tim Worstall

    I get the feeling that perhaps I have not made myself completely clear to you, so I shall expand my point.

    I don’t see how any knowledge of how US poverty statistics are compiled, no matter how detailed, can reveal anything about how well-nourished people in the US are or were — unless the poverty statistics are compiled by studying people’s levels of nutrition, I suppose. Are you telling me that’s the case?

    You pointed to the fact that only 12% of the expenditure of poor people in the US goes on food (as opposed, presumably, to a higher percentage at an earlier time, although that wasn’t explicitly stated).

    You pointed to this fact as if it has some important relevant significance.

    But what does it signify?

    I can see two possible answers (there might be others I’m not seeing).

    One possibility is that it’s now cheaper for poor people to eat well (or adequately) than it used to be.

    Another possibility is that poor people are now eating less well (or less adequately) than they used to.

    Well, which is it? (or if it’s neither of those, what’s the other possibility I’ve missed?).

    When I asked this before, you responded by asking me questions. But it’s no good asking me — I don’t know the answer.

    If you do know, how do you know? What’s your source of information about how well nourished poor people in the US are, compared to how well nourished they used to be? Is it really the poverty statistics themselves? How does that work? Or if it’s not that, what is it?

  34. Ikonoclast
    March 15th, 2015 at 17:00 | #34

    It’s difficult making comparisons over a long period of time.

    http://www.irp.wisc.edu/faqs/faq2.htm

    More to the point, poverty in the US is now rising again and the increasing inequity in the US economy (not contested by observor above that I noticed) promises to increase poverty further.

  35. Donald Oats
    March 15th, 2015 at 19:01 | #35

    I could be mistaken—it has happened—but I think the cost of food in the USA had declined, if you accept fast food chains as legitimate food, while the cost of unprocessed food has increased. This means that when it comes to making a meal when you are income-poor, a fast food meal is cheaper per calorie consumed than an equivalent calorie meal made from fresh unprocessed ingredients. This results in the inevitable outcome that fast food becomes the mainstay and not just an occasional holiday from cooking at home. It is no accident that fast-food chains cluster in amongst other essential services like bus hubs, petrol stations, major intersections, etc. The human-geographic descriptor for such an urban area is “food desert”.

    When this is coupled with being time-poor due to the two jobs, kid, and long commutes, the fast food meals are pretty much every meal.

    In a nutshell, the wealthy eat healthy, by and large, while the poor eat sub-standard diets. This is in the (Does social class predict diet? by Nicole Darmon and Adam Drewnowskil, Am J Clin Nutr May 2008 vol. 87 no. 5 1107-1117) American context, but presumably has some validity in Australia and other capitalist countries.

  36. March 15th, 2015 at 20:03 | #36

    Pr Q said:

    Both the number and the percentage of families in poverty dropped sharply during the 1960s when the “War on Poverty” was being waged actively, and remained near their all-time lows through the Nixon and Carter years until 1979, when the Volcker recession hit, followed by the election of Ronald Reagan. These events can reasonably be said to mark the point at which the government unequivocally changed sides. The number of households in poverty has risen steadily since then and is now higher than in 1959, the year for which the poverty level was first defined by Mollie Orshansky. The poverty rate has remained consistently higher than in the 1970s, except for a brief deep at the peak of the late-1990s boom.

    Pr Q’s dig at the US government’s failures suffers from his usual problem of peering at the issue through one-eyed ideological blinkers leading to a blatant failure in making apples-to-apples comparison and the glaring omission of mentioning the US’s actual anti-poverty expenditure. Both New Left ethics and the New Right economics bear responsibility for the impoverishment of the US’s more vulnerable citizens. The US is something of an outlier in poverty reduction in the OECD due to its strikingly different demographic profile. But the US government still spends a much greater proprtion of national income on poverty reduction programs now than it did say in the mid-1970s.

    The US has been ground-zero in the battleground between a New Left Culture War-driven increased propensity to demand for welfare goods and the New Right Class War-driven reduced willingness to supply welfare goods. Thanks in some great measure to New Left victories in the Culture War the US government has to shoulder a much heavier poverty reduction burden than most other OECD countries. I blame the New Left because the Old Left tended to be anti-immigration and somewhat culturally conservative, policies that greatly improved working class living standards. Specifically the US, through a combination of top-down and bottom-up liberal cultural trends, endured a massive strain on its welfare state owing to massive increases in:

    – low-skilled immigration from mostly poor Hispanic-American countries and
    – single-motherhood, particularly amongst the poorer elements in the African-American community.

    Low-skilled immigration causes poverty directly and indirectly. It directly causes poverty because most low-skilled immigrants enter the work-force with bottom quintile income earning capacity. It indirectly causes poverty among native born citizens (whose welfare is a government responsibility) by dragging down wages, increasing the cost of housing and generally being associated with higher risk of social pathologies.

    Single mother-hood causes poverty directly and indirectly. Single mothers directly causes poverty because they have little time to accumulate human capital that leads to higher incomes. Nor can they share child-care duties to take advantage of shift-work opportunities. They also cannot capture the gains from economies of scale in consumption offered by joint-parent households. Single mother-hood is an indirect cause of poverty because it disadvantages children. Fatherless children are at a massively higher risk of being drawn into a life of crime. And Mummy’s new boyfriend is the most likely person to perpetrate sex abuse, not the ideal start in life for a child.

    Both of these demographic changes were cheer-led and implemented by the New Left and both were generating higher levels of poverty well before the New Right ideological shifts that started in the late-1970s. Its no accident that Pr Q’s graphs show that the decline in the US poverty rate bottomed out in the early-1970s, a good decade before early-1980s Reaganomics started to bite. This indicates that anthropological base trumps the ideological superstructure.

    These trends were noticed by social scientists like Moynihan whose report, published in 1965, traced the disintegration of African-American families. Economists like Borjas have concluded that high rates of Hispanic immigration have cut a swathe of destruction through the low end of the US job market. Charles Murray has covered much the same ground in his various studies of the under-class and working class. Naturally Moynihan, Borjas and Murray have been subjected to massive vilification from the New Left for pointing out the obvious internal contradictions in its program. I remember Jerry Pournelle writing, on Steve Sailer’s H-BD discussion group in the early noughties, that the New Left were almost as good as the Klan in keeping the Black Man down:

    If I were a Klansman determined to keep the Blacks down I would have:
    A lousy school system that concentrates on intellectual abilities and ignores skills;
    High minimum wages so that entry level jobs are all off the books;
    Open borders to bring in lots of cheap labor to soak up the off the books jobs;
    A campaign to get Blacks to think that academic achievement was “acting White”.

    Once these exceptional anthropological factors are taken out of the equation the US government’s anti-poverty efforts look alot better relative to the golden age of the Great Society and the typical OECD country. That is to say, if you administered contemporary US anti-poverty programs to a US society with a mid-1960s demographic profile it would probably engineer an even more massive decline in poverty than actually occurred in the latter part of the 1960s.

    The fiscal data bears this out. When you look at the US governments actual and existing contemporary anti-poverty programs they do not appear to have reversed course from the mid-1960s. This CATO institute stud (2012) shows that the US government has lavished a much greater fraction of national income on anti-poverty programs now than it did in the Great Society era:

    By any measure, U.S. welfare spending has increased dramatically since 1965. In constant dollars, federal spending on welfare and anti-poverty programs has risen from $178 billion to $668 billion, a 375 per-cent increase in constant 2011 dollars, while total welfare spending—including state and local funds—has risen from $256 billion to $908 billion. Measured as a percentage of GDP, federal spending increased more than fourfold, from just 0.83 percent of GDP to 4.4 percent. Total welfare spending nearly tripled, from 2.19 percent of GDP to 6 percent (see Figure 5). And, on a per capita basis, that is per poor person, federal spending has risen by more than 900 percent, from $1,625 to $14,848, while total spending rose by a smaller, but still substantial 651 percent, from $3,032 to $19,743 (see Figure 6).

    By my rough calculations US all-of-government real per capita spending on welfare quadrupled from the four decades starting 1968 through to 2008, the last pre-GFC year. That is it grew at a steady 3.5% per annum in inflation-adjusted dollars. Even allowing for the health care inflation in Medicaid programs this does not sound like the US government “changing sides” – more like playing “catch-up”.

    What happened is that since the early-1980s the rate of welfare state growth has slowed down from the frenetic pace established in the late-1960s Great Society era. This of course coincides with a three decade Right-wing ideological backlash against welfare state overload which began with mid-1960s “law-and order” campaigns and culminated in the mid-1990s “ending welfare as we know it” and “three strikes and you are out” conservative policy victories. IMHO this Right-wing back-lash was required to get the inner-cities under some kind of civil control, with gentrification results that now speak for themselves. But over the past two decades it has gone too far, exacerbating the New Right-driven collapse in both working-class and middle-class economic prospects.

    Evolutionary conservatives such as Ross Douthat and Steve Sailer (and me in my own small way) have tried to develop a sophisticated critique of elite liberalism that combines cultural critique of the New Left’s bureaucratic tribalism and an economic critique of the New Right’s plutocratic globalism. Just today in the NYT we have Kristoff, to his credit, conceding that “Liberals blew it” by giving mocking “family values” conservatism. Douthat (“For Richer and Poorer”) rakes over the War on Poverty embers in making the point that ethical collapse can exacerbate an economic squeeze:

    SOME arguments are hard to settle but are too important to avoid. Here is one: whether the social crisis among America’s poor and working class — the collapse of the two-parent family, the weakening of communal ties — is best understood as a problem of economics or of culture….But the basic point is this: In a substantially poorer American past with a much thinner safety net, lower-income Americans found a way to cultivate monogamy, fidelity, sobriety and thrift to an extent that they have not in our richer, higher-spending present. So however much money matters, something else is clearly going on.

    But the New Left, apart from big-hearted and open-minded fellows like Kristoff, simply refuses to come to grips with its own share of responsibility in the failed War on Poverty. I have observed these trends playing out in this country at first hand in collapsed family structures in remote indigenous communities and in the immigrant-heavy suburbs of Sydney where the high cost of housing is driving poor and working class citizens into homlesslessness and childlessness. Yet the only thing one hears from the New Left on this score is the wheels of the Inquisition grinding or the sound of crickets chirping.

    The fact is that that contempoary liberal elites, both Left-liberal and Right-liberal, are not terribly interested in reducing poverty if it comes at the expense of their moral vanity or economic proprieties. As Steve Sailer pointed out: “Liberals are very good at getting what they want. Its just that what they say they want and what they want are not always the same things.”

  37. Ikonoclast
    March 15th, 2015 at 21:55 | #37

    Here is a more balanced and fact based assessment of US “welfare”, much of which actually goes to the middle class and the rich.

    http://www.foreignaffairs.com/articles/138483/kimberly-j-morgan/americas-misguided-approach-to-social-welfare

  38. March 15th, 2015 at 22:01 | #38

    Jim Rose :
    American poor live in larger houses than EU middle class

    Many so big they don’t even have walls…

  39. Ernestine Gross
    March 15th, 2015 at 22:13 | #39

    @Ikonoclast

    Useful reference @33. Thanks. Given the information in the reference on how the statistics are collected and compiled, I don’t think the intertemporal comparison problems for the ‘official poverty statistics’ is any bigger than that for other macro-economic statistics, Tim Worstall’s arguments or verbal images not withstanding.

    Without having information on the data collection method, statistics and their graphical representation are, IMHO, as good as J.H.’s Intergenerational Report presentation – of no use at all.

    The supplemental poverty statistics as well as the Wisconsin statistics add a lot more useful information and, in a sense, this additional information makes the ‘official poverty rate’ measure useful too. I find the ‘deep poverty’ and the ‘close to poverty’ indicators particularly helpful. Data broken down by gender, age, location, ethnicity give further insights that help to reconcile anectodal evidence and snippets of media news. For example, consider the assertion by T.W. that a very high percentage of poor people have a car. Question: do they have shelter in addition or is the car the shelter (as portrayed in a TV program in Australia). Having a car and a debt isn’t quite the same as having bought one cash, is it?

    I find it difficult to interpret socio-economic statistics from countries where I haven’t spent a non-trivial amount of time. As James Wimberley reminds, the social context matters.

  40. rog
    March 16th, 2015 at 02:42 | #40

    The data is for households; if you look at individuals

    In the late 1950s, the poverty rate for all Americans was 22.4 percent, or 39.5 million individuals. These numbers declined steadily throughout the 1960s, reaching a low of 11.1 percent, or 22.9 million individuals, in 1973. Over the next decade, the poverty rate fluctuated between 11.1 and 12.6 percent, but it began to rise steadily again in 1980. By 1983, the number of poor individuals had risen to 35.3 million individuals, or 15.2 percent.

    http://www.npc.umich.edu/poverty/

  41. Julie Thomas
    March 16th, 2015 at 07:02 | #41

    Professor Quiggan,

    I am a single mother and this from Jack Strocchi seems like abuse to me.

    “Single mother-hood causes poverty directly and indirectly. Single mothers directly causes poverty because they have little time to accumulate human capital that leads to higher incomes. Nor can they share child-care duties to take advantage of shift-work opportunities. They also cannot capture the gains from economies of scale in consumption offered by joint-parent households. Single mother-hood is an indirect cause of poverty because it disadvantages children. Fatherless children are at a massively higher risk of being drawn into a life of crime. And Mummy’s new boyfriend is the most likely person to perpetrate sex abuse, not the ideal start in life for a child.”

    This man is quite ignorantly and cruelly accusing and abusing me and so many other women who have done a very good job of raising our children without the support from society and family that should have been there for us rather than the condemnation that comes from these abusive attitudes from this sort of person who assumes the right to tell us – those who live in poverty – what *we* did wrong.

    This person who cites Steve Sailor posts these lies and misinformation that create more dysfunction among single mothers and more prejudice against us among the general population and that’s okay with you?

    Whatever…

  42. Ikonoclast
    March 16th, 2015 at 08:07 | #42

    @Julie Thomas

    I too found it strange and disturbing that the single mother was being blamed. The entire society which does not support single parents properly is the cause of poverty.

    In fact, I found the entire post we are referring to very disturbing. I can’t explicitly position such a statement on the political spectrum without breaking Godwin’s Law.

  43. Ikonoclast
    March 16th, 2015 at 08:43 | #43

    @Ernestine Gross

    “I don’t think the intertemporal comparison problems for the ‘official poverty statistics’ is any bigger than that for other macro-economic statistics…” – E.G.

    On reflection I agree with this. I am currently (slowly) reading Piketty’s tome so your statement resonates.

    “Without having information on the data collection method, statistics and their graphical representation are, IMHO, as good as J.H.’s Intergenerational Report presentation – of no use at all.” – E.G.

    Again, I agree. Going a bit further, one only has to look at this whole thread to see that people are drawing very different pictures out of ostensibly the same data or rather out of different cherry-picked subsets of the data. They are also in some cases clumping together aggregates (USA’s total “welfare” spend) and not looking at where the components of that spending are delivered relative to need. IMOE (In my opinionated estimation), the upper middle class and the rich in the US are getting the lion’s share of government wealth transfers (welfare essentially) and the remnant which goes to the genuine poor is highly inadequate.

    “I find it difficult to interpret socio-economic statistics from countries where I haven’t spent a non-trivial amount of time. As James Wimberley reminds, the social context matters.” – E.G.

    Yes. Reality is multifareous and multivariate. Even the most complex statistical analysis of large and extensive societal phenomena will in a sense still be simplistic and limited compared to the actual complexity of reality. Having spent some time in a place at least gives one some concrete grounding in the reality. Statistics simplify and “chop up” or “section” reality. Without first having a good sense of the complete, intact “four dimensional” reality one cannot have any real feel for what the chopped up bits and sections (statistics) mean.

  44. John Bentley
    March 16th, 2015 at 08:44 | #44

    This is the classic blame the victim caper similar to the Coalition blaming the unemployment for their predicament while promoting high levels of immigration. @Ikonoclast

  45. Ikonoclast
    March 16th, 2015 at 09:06 | #45

    Jack Strochi’s assertion that Hispanic migration into the USA causes poverty is entirely false. From the point of view of (Mexican) Hispanics migrating into the USA this migration is an escape from poverty. It actually alleviates their poverty somewhat. And what are the causes of poverty in Mexico? No doubt there are many causes but one big one that can be pointed to is NAFTA.

    It’s worth looking at the article “Immigration Flood Unleashed by NAFTA’s Disastrous Impact on Mexican Economy” by Roger Bybee, Carolyn Winter.

    http://www.commondreams.org/views06/0425-30.htm

    So, we see the way that “conservatives” (really far right wingers) shift blame from the major real cause of Mexican (Hispanic) poverty, the NAFTA, onto the victims. Impoverished Mexicans forced off their land flee north seeking a basic livelihood. Sack and pillage a neighbouring land and then blame the desperate refugees for coming to your land!

  46. Jim Rose
    March 16th, 2015 at 10:46 | #46

    testing top see if spam filter hate me

  47. Jim Rose
    March 16th, 2015 at 10:48 | #47

    Ikonoclast, cannot provide link to you on that source because the spam filter hates me when I include links so google Understanding Poverty in the United States: Surprising Facts About America’s Poor Robert Rector September 13, 2011

  48. Ivor
    March 16th, 2015 at 13:59 | #48

    I cannot see what Tim Worstall is going on about.

    Naturally, poverty before welfare is different to poverty after welfare, so what?

    And still the underlying poverty can be increasing, as before or even at greater rates than before.

    He wants to claim that:

    Official percent poor in 1964: 19.0%

    And

    Adjusted percent poor in 2013: 4.8%

    So he is seriously running the line that US poverty has declined from 19.0% to 4.8% with fabricated methodology such as “adjusting” for:

    Value of noncash benefits – 3.0%

    Omission of refundable tax credits – 3.0%

    Replacing CPI-U with PCE index – 3.7%

    While there appears to be no agreed method for measuring US poverty-rates and Worstall opportunistically refuses to look at increasing inequality and other trends, this all appears to amount to his denialism.

    Worstall’s argument does not sit well with the source cited by Jim Rose which put the US Government assessed rate of poverty at around 14% (2010).

    There is also contrary material at:

    Wikipedia Here

    It appears from Wikipedia that for decades US poverty has never dropped below 10% and has increased in recent years.

  49. rog
    March 16th, 2015 at 15:09 | #49

    Jim Rose et al have studiously missed the point that for the poor, the trickle down theory just don’t work.

  50. rog
    March 16th, 2015 at 15:17 | #50

    This is where Jim Rose gets his info: The Heritage Foundation

    http://www.sourcewatch.org/index.php?title=Heritage_Foundation

  51. rog
  52. Bruce Bradbury
    March 16th, 2015 at 15:22 | #52

    This paper Fox et al (2014) has a slightly more sanguine view of trends in US poverty rates.

    Using data from the Consumer Expenditure Survey and the March Current Population Survey, we calculate historical poverty estimates based on the new Supplemental Poverty Measure (SPM) from 1967 to 2012. During this period, poverty as officially measured has stagnated. However, the official poverty measure (OPM) does not account for the effect of near-cash transfers on the financial resources available to families, an important omission since such transfers have become an increasingly important part of government anti-poverty policy. Applying the SPM, which does count such transfers, we find that historical trends in poverty have been more favorable than the OPM suggests and that government policies have played an important and growing role in reducing poverty — a role that is not evident when the OPM is used to assess poverty. We also find that government programs have played a particularly important role in alleviating child poverty and deep poverty, especially during economic downturns.

  53. rog
    March 16th, 2015 at 15:28 | #53

    @Bruce Bradbury There is a heap of evidence based studies appearing in peer reviewed journals into the links of poverty with diabetes, obesity, crime etc etc.

    AFAIK Heritage Foundation is an opinion generator.

  54. Ivor
    March 16th, 2015 at 15:43 | #54

    Another measure of USA poverty is food stamps.

    Surely food stamps should just go to poor families and individuals.

    So, on this basis, US poverty is 20%

  55. Tim Worstall
    March 16th, 2015 at 16:52 | #55

    @J-D
    Food inflation has been lower than the general inflation for a couple of centuries now (not true year by year but over decades it is). This agricultural revolution thing.

  56. Tim Worstall
    March 16th, 2015 at 16:53 | #56

    @Donald Oats
    “while the cost of unprocessed food has increased.”

    There’s no actual evidence of that. Quite the contrary.

  57. Tim Worstall
    March 16th, 2015 at 17:00 | #57

    @Ivor

    “I cannot see what Tim Worstall is going on about.”

    At heart I am making one specific claim. JQ, in the original post, states that the transfers of goods and services, which are not included in the calculation of the poverty rate, make no difference to the basic story. My claim is that this is untrue. Those transfers are of such size and value that they significantly change the basic story.

    And that’s it, that’s my point.

    “Worstall opportunistically refuses to look at increasing inequality and other trends,”

    What do you mean I ignore inequality? I specifically mention it:

    “Yes, the US is more unequal than most other countries, meaning that relative poverty is higher even after poverty alleviation attempts.”

    “Worstall’s argument does not sit well with the source cited by Jim Rose which put the US Government assessed rate of poverty at around 14% (2010).”

    As I specifically point out, that estimation of poverty is *before* those transfers of goods and services. That’s the very point being made.

  58. Tim Worstall
    March 16th, 2015 at 17:02 | #58

    Another measure of USA poverty is food stamps.

    Surely food stamps should just go to poor families and individuals.

    So, on this basis, US poverty is 20%”

    On that basis poverty before alleviation is 20%. Rather the point being made is that we might be interested in what is the poverty level after alleviation attempts?

    After all, the poverty rate in Sweden (and other places) would look pretty grim if we measured it before the influence of redistributive transfers, wouldn’t it?

  59. Ivor
    March 16th, 2015 at 17:29 | #59

    @Tim Worstall

    What do you mean I ignore inequality? I specifically mention it:

    Hardly, you specifically separate inequality from poverty at:

    It’s not really a measure of poverty that, it’s a measure of inequality. Useful and important no doubt, but they’re not quite the same thing.

    Poverty with the alleviation you cite, remains poverty.

    Placing a band-aid over an ulcer still leaves the ulcer.

  60. Apple
    March 16th, 2015 at 18:00 | #60

    We should not forget that the US “hides” some of its poverty by putting poor people in a situation where they have very few options, so consequently some of them resort to crime (including drug related crime) to make ends meet. Then they end up in prison.

    The last time I checked the figures, almost 1% of the US population was in prison. What an odd country.

  61. Apple
    March 16th, 2015 at 18:04 | #61

    According to the USDA:

    14.3 percent (17.5 million) of U.S. households were food insecure at some time during 2013.

    Again, what an odd country.

  62. J-D
    March 16th, 2015 at 19:17 | #62

    @Tim Worstall

    That would be a plausible explanation of people (rich or poor) spending a lower proportion of their budgets on food than was formerly the case, but I don’t see how it affects the incidence of poverty one way or the other. If food has become cheaper relative to other things, then mathematically equally other things have become more expensive relative to food. You could say that people don’t need to spend as much on food and so are free to spend more on other things, but you could alternatively say that people are forced to spend more on other things and that what changes as a result is not the incidence of poverty but the quality of the experience: for example, perhaps, that the typical experience of poverty has changed from perhaps having adequate shelter but not having adequate food to perhaps having adequate food but not having adequate shelter.

    Expanding the point in the hope of heading off misunderstanding:

    starting with John Quiggin saying, in effect, that poverty has gone up;

    I see you saying that people are spending less money on food as if that means that poverty has not gone up;

    but I’m not seeing the connection because, as far as I can make out, people spending less money on food is consistent with any of the three possibilities: poverty up, poverty down, or poverty steady.

  63. Tim Worstall
    March 16th, 2015 at 19:34 | #63

    “I see you saying that people are spending less money on food as if that means that poverty has not gone up;”

    The relevance is simply in how the poverty line was originally defined. As being three times a basic but nutritious food budget at the time.

    This has since been upgraded for *general* inflation. But not for *food* inflation.

    If we did the same calculation today, three times a basic but nutritional food budget then the poverty line would be very much lower, perhaps 50% lower, than it is today.

    I am not, by the way, recommending that we do that. It is simply an interesting point to note. That if we started out again with the same definition we’d end up with a very different poverty line.

    “but I’m not seeing the connection because, as far as I can make out, people spending less money on food is consistent with any of the three possibilities: poverty up, poverty down, or poverty steady.”

    This all depends upon how you define poverty. If it’s in market incomes and using relative poverty (less than x% of median income) then it wouldn’t surprise me at all to find that poverty hasn’t changed an inch in the US. I don’t know the answer but that one wouldn’t surprise me.

    If we define poverty as being some absolute standard of living then obviously poverty has fallen over that time span. Simple economic growth (at just about any level of inequality) will do that.

    And my basic point here is not in fact about poverty. It’s about the effect of poverty alleviation efforts upon it. JQ stated that goods and services in kind do not change the picture. Yet goods and services in kind appear to halve, near enough, the reported poverty rate. I regard that as being something of a change in the basic story.

    That really is the point I’m trying to get across and only that point.

  64. Ivor
    March 16th, 2015 at 19:35 | #64

    Apple :
    We should not forget that the US “hides” some of its poverty by putting poor people in a situation where they have very few options, so consequently some of them resort to crime (including drug related crime) to make ends meet. Then they end up in prison.
    The last time I checked the figures, almost 1% of the US population was in prison. What an odd country.

    Good point – if you are in prison are you counted as being below the poverty line?

  65. Ivor
    March 16th, 2015 at 19:38 | #65

    @Tim Worstall

    Giving blind people guides dogs does not mean there are less people.

    Giving poverty-stricken families welfare does not mean there is less poverty.

  66. Ivor
    March 16th, 2015 at 19:39 | #66

    @Tim Worstall

    Giving blind people guides dogs does not mean there are less blind people.

    Giving poverty-stricken families welfare does not mean there is less poverty.

  67. Tim Worstall
    March 16th, 2015 at 19:41 | #67

    “Giving poverty-stricken families welfare does not mean there is less poverty.”

    What?

    Poverty is not having enough money to get stuff. Getting stuff, or money to get stuff with, therefore reduces poverty.

    If you really think that welfare doesn’t reduce poverty then there’s no point at all in having any welfare, is there? Sweden, Denmark, everyone, can just give up right now.

  68. Ivor
    March 16th, 2015 at 20:06 | #68

    @Tim Worstall

    Yes, if you really want to reduce poverty – you should not provide welfare. You must provide jobs for wages producing things that the community needs.

    welfare does not reduce poverty – it institutionalises it.

    You only provide welfare when you have failed to include these people in the economy.

    A classic problem of capitalism.

  69. Jim Rose
    March 17th, 2015 at 13:13 | #69

    @rog
    Good to see you could not rebut any of the numbers.

  70. David Irving (no relation)
    March 17th, 2015 at 13:36 | #70

    @Jim Rose
    Why would he bother? It’s the Heritage Foundation.

    Do you have any credible sources?

  71. rog
    March 17th, 2015 at 14:40 | #71

    @Jim Rose Nothing to rebut.

  72. Jim Rose
    March 18th, 2015 at 11:14 | #72

    @David Irving (no relation)
    Their data is from DOE Household energy consumption survey that has 40 years of data. Did they misquote it?

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