Rethinking Poverty in America

January 6, 2014

According to the official poverty measure, being poor means having very little cash income — for a parent with two children, less than $18,499, according to the latest Census Bureau thresholds.

For the Supplemental Poverty Measure, being poor means not having enough cash income and certain near-cash benefits like refundable tax credits and food stamps to pay for everyday basic needs, plus some other necessary expenses, e.g., medical out-of-pockets.

Those of a liberal persuasion, including yours truly, often cite analyses in the annual SPM reports as evidence that our anti-poverty programs work.

A recently-published study by some Columbia University professors was heralded because, by using a slightly modified SPM, they were able to show that major safety net programs reduced the poverty rate by 40% between 1967, shortly after the War on Poverty was launched, and 2012.

This isn’t going to make one whit of difference to the right-wingers who are fond of recycling former President Reagan’s (in)famous “We fought a war on poverty, and poverty won.”

On the other hand, we do have 16% of the population — 49.7 million people — in poverty, according to the SPM. And this isn’t because we gave up on the anti-poverty enterprise, though surely “welfare reform,” harsh anti-drug laws and diverse other policies help explain it.

Professor Mark Rank at Washington University in St. Louis argues that economist John Galbraith put his finger on the problem 30 years ago, when he said we were attacking poverty from the wrong end.

Instead of beginning with root causes, he says, we begin with preferred remedies and tailor our view of the causes to fit.

More generally, we begin with a fondness for our free enterprise system and the American Dream, which promises a reasonably comfortable lifestyle to anyone who works hard and plays by the rules.

Working backwards, we locate both the causes and solutions to poverty in the individual. For conservatives, this means finding character flaws, e.g., a propensity to laziness, imprudent choices like having children out of wedlock, indulging in alcohol and/or drugs.

So safety net programs are badly structured because … well, because they provide a safety net. So there are no bad consequences for bad behaviors. Indeed, some have long argued that the programs reward bad behaviors.

Liberals focus more on inadequacies that disadvantage individuals in the labor market — lack of education, training and thus of in-demand skills. So we have a variety of programs to level the playing field — for those who’ll exercise personal responsibility.

In either case, Rank says, “the poor are by and large at fault for their poverty,” though we make an exception for those unable to work for reasons that have nothing to do with their behavior.

And we as a society feel limited responsibilities for poor people because it’s up to them to take advantage of such opportunities as we offer. We tinker with the incentives and disincentives. We don’t doubt what Rank, like a true academic, calls the “paradigm” that underpins the remedies.

He calls for a new paradigm, based on “realities,” rather than “the myths of America.” It’s got five components — none of which, he acknowledges, is altogether new.

The first seems to me in some ways the most important because it speaks directly to the role of public policies. We need to recognize, Rank says, that poverty in America is largely the result of “structural failings.”

The most obvious of these is that there simply aren’t enough decent-paying jobs for the number of workers who need them. Indeed, there aren’t enough jobs, period. And there haven’t been even when the economy was booming along, according to research Rank cites.

At the same time, our social safety net is “extremely weak.” By way of contrast, we’re asked to consider the range and reach of income supports and publicly-funded insurance programs that are common in Europe, e.g., child or family allowances, expansive child care, universal health coverage.

Put the two together and you’ve got widespread deprivation — Rank’s preferred concept of poverty (and mine).

He asks us to think of a game of musical chairs. As you know, there are always fewer chairs than players. Those most likely not to get a seat have some disadvantage. In the game itself, that tends to be pushiness, as I unhappily recall.

In the economy, it’s lack of education and/or marketable skills. We focus on these, Rank says, when we should ask “why the game produces losers to begin with.” In other words, why aren’t there enough “viable economic opportunities and social supports” for everyone?

Rank is hardly the only one to call for a refocused approach to poverty in this country. Many progressives have, in various ways, urged us fellow travelers to shift our attention to structural economic reforms.

They’re pushing back against what Rortybomb blogger Mike Konczal refers to as “pity-charity liberal capitalism” — a doubling-down on “welfare” at the expense of policies that would empower workers, both in the workplace and the in political sphere.

At the same time, we do need those safety net and social insurance programs. They’re under such heavy attacks from the right these days that we’re forced into a defensive posture.

We should acknowledge, however, that the challenge ahead is not only to preserve what works, but  change what doesn’t — or does, but not as well as it should, including our economy.

I expect we’ll be hearing a lot about this in the days to come because we’re about to celebrate the 50th anniversary of the War on Poverty.


The Poor Is Us

November 18, 2013

Professor Mark Rank seeks to disabuse us of a number of “myths and stereotypes about poverty” in America. He hopes, as he earlier explained, to build broader support for “programs that lift people in need,” largely by showing us how we could be among them.

Poverty is not something that affects relatively few people, he says, citing his own research. Nearly 40% of Americans between the ages of 25 and 60 will live for at least a year below the official poverty line — and 54% either in poverty, so defined, or near poverty, i.e., below 150% of the line.

If we add “related conditions” like receipt of safety net benefits and unemployment, the number grows to four in five, Rank says. So for most of us, “the question is not whether we will experience poverty, but when.”

As I earlier remarked, I don’t view unemployment per se as a poverty-related condition. The CEO of BlackBerry just became jobless, but he’s hardly going to qualify for food stamps.

Rank’s basic point still stands: “Poverty is a mainstream event.”

Yet high as the official poverty count is — 46.5 million people — it’s nowhere near a majority of the population. That’s because the average time people spend in poverty is relatively short, Rank says — a year or two, though perhaps followed by another spate sometime later.

Jordan Weissmann at The Atlantic gives us a preview of additional supporting figures in a forthcoming book Rank has co-authored.

Within the 25-60 age range, 11.6% of Americans will have spent at least 5 years in poverty, assuming figures from 1968-2009 are predictive. But the poverty years are consecutive for only 6.1%. The “chronic poverty” rate drops to 1.7% for 10 or more years in a row.

The gap between the overall rate and the chronic rates indicates the tenuous financial circumstances of a great many people — by one measure, about 44% of all U.S. households. This is virtually the same as the percent that Rank and co-authors found had benefited from a means-tested safety net program by age 60.

As Rank says, figures like these undermine the “standard image of the poor … [as] an entrenched underclass,” plus some other misconceptions, e.g., that most poor people live in impoverished inner-city neighborhoods, that they’re mostly non-white.

Once we accept the facts, it becomes more difficult to sustain the view that people are poor because they lack motivation, don’t work hard enough and/or make bad decisions — or at least, it should.

Research, Rank says, “has consistently found that the behaviors and attitudes of those in poverty mirror those of mainstream America” — presumably because poverty itself is a mainstream experience.

He’s surely right that what he calls “solutions to poverty” won’t become realities until we understand that the poor aren’t “other,” but rather collateral damage of “failings at economic and political levels.”

The solutions he names are basic enough — jobs that pay a decent wage, access to a good education, support for high-quality health care and child care.

They won’t, I think, solve poverty, if that’s an appropriate term for what’s ultimately the function of numerous policy choices.

We do, after all, have people with the advantages Rank names who nevertheless live close enough to the edge to fall into poverty — perhaps even stay there if, for example, they become too disabled to work. And some disadvantages call for other remedies.

But if we truly viewed poverty as “an issue of us,” we’d surely, at the very least, provide a strong safety net and programs that would keep so many people from needing it.

And we surely wouldn’t tolerate rigid time limits, unreasonable work requirements and demeaning entry-level procedures like drug tests, fingerprinting and the like — things that, as Barbara Ehrenreich says, have the psychological impact of “turning poverty itself into a crime.”

All this, however, assumes that we, the majority, perceive a common interest in minimizing poverty and ending the related hardships — and that we have the clout to make these happen. Rank’s interest is obviously to help create the common interest, in faith that we’ll then collectively have the clout.

One might even say he’s aiming to persuade us that anti-poverty policies are in our personal self-interest because, like as not, we or someone close to us will be poor (or nearly so) some day.

My own experience suggests that support for anti-poverty policies doesn’t hinge on self-interest, so narrowly defined. And people who feel economically insecure may react by defining themselves against a more vulnerable “other.”

I don’t want to detract from what Rank has done, however. As Weissman says, his “numbers undercut … the idea that most of the poor, as a broad group, are different from you and me (aside from the bit about having less money).”

As obvious as this seems, it doesn’t seem to be the view that’s driving the Republican agenda at the national level — or in red states like Kansas, where the governor has decided that poor people will get their act together if they’re hurting enough.


Poverty and Income Inequality Don’t Just Happen

November 12, 2013

Now, here’s an interesting fact to chew over. If the wealth in this country were evenly distributed among adults, each of us would have $301,000.

By this measure, we’re not the wealthiest country in the world. That distinction goes to tiny Switzerland, according to the latest Global Wealth report from Credit Suisse.

But we’ve got, by far and away, the highest percent of millionaires (42%) — and an even larger share (46.5%) of all the people with more than $50 million in the 19 countries the Credit Suisse analysts could compile data far.

At the same time, we’ve got 15% of the population — 46.5 million people — so poor as to fall below the Census Bureau’s very low poverty thresholds.

Blogger Matt Bruenig crunched some numbers and found that it would take $175.3 billion to lift every one of them out of poverty, as officially defined.

That may seem like a great deal of money. But it’s only a bit over 1% of the value of the goods and services our country produced last year — and according to my number-crunching, only about $3,770 per person.

Now, I don’t want to lend credibility to the troll who alleges that I’m a “commie terrorist,” but these numbers do get the mind churning.

On the one hand, the Credit Suisse figures underscore how unevenly wealth is distributed. On the other hand, Bruenig’s indicate how relatively little we’d have to redistribute to end poverty — well, not really, but at least according to the measure we use.

As Bruenig says, we have mechanisms to do this. We could, for example, expand the refundable Child Tax Credit and Earned Income Tax Credit. We could expand SNAP (the food stamp program), instead of arguing over how much to cut it.

We could, Bruenig adds, establish a “mild basic income and a negative income tax.” These aren’t radically leftist notions.

Economist Milton Friedman, whom no one would call a leftist, proposed a negative income tax back in 1962. As he described it, people would file tax returns and get a refund of sorts for some portion of however much their income fell below the threshold at which they would owe anything.

This ultimately became the basis for the EITC, but the tax credit helps only people who work and their dependents. And it does very little for parents who earn very little and for those who are childless, even if their earnings are fairly decent.

Though Friedman viewed the NIT as an alternative to existing welfare programs, it wouldn’t have to be. On the other hand, it could replace them if the refunds were big enough to pay for basic needs.

I know economists have concerns about disincentives to work — as, of course, do policymakers. Comfortable hammock and all that.

And perhaps there’s something to this, though I note that we don’t seem to have these concerns when the issue is what are effectively income supports for people who are already well-off, e.g., the various tax benefits to homeowners.

These alone would pay for more than half the cost of lifting everybody out of poverty, according to Joint Taxation Committee estimates that Bruenig cites.

The basic point here, which Bruenig makes well, is that poverty is a function of policies that distribute income unevenly, not a spontaneous phenomenon. Wealth likewise, I’d add.

Policies built into the federal tax code are an obvious example — not only so-called tax expenditures in the individual income tax system, but the tax treatment of assets that are passed on to heirs.

State and local tax policies also enter into the picture, since, on average, they collect the highest percent of income from residents in the bottom fifth of the income scale and the lowest percent of all for the top 1%.

Less obvious, but surely important are school financing policies, which tend to provide significantly more resources for the schools wealthy kids can attend and shortchange the schools for the poorest, who arguably need more.

Insofar as a good education increases future earnings, the uneven distribution of tax dollars contributes to uneven income distribution in successive generations.

Diverse labor policies also affect earnings, of course. These have generally tended to depress wage growth for the vast majority of workers.  And the savings they enable businesses to achieve go to owners, who may be shareholders — and in many large corporations, to CEOs.

Housing, transportation and urban development policies have also played a part by concentrating poor people in pockets of poverty, with limited access to jobs and, as aforementioned, good schools.

I’m sure some of you can think of others.

In short (after what perhaps should have been shorter), poverty and income inequality don’t just happen. We’ve created them — or at the very least, made decisions that foster them.

By the same token, we could make decisions to reduce them. We’ve got the wealth and a wealth of ideas. Not, however, the political will that can come only from a broad consensus that creating the conditions for shared prosperity is a must-do.


Better Poverty Measure Shows Worse U.S. Poverty Rate

November 6, 2013

We should be used to this by now. The Census Bureau has just reported a higher national poverty rate than the rate it reported in September. According to its Supplemental Poverty Measure, the rate is 16%, instead of 15%, as the official measure indicated.*

This means that somewhat over 2.7 million more people — a total of 49.7 million — were living in poverty last year. On a somewhat brighter note, the percent of people living in severe poverty, i.e., below 50% of the applicable threshold, is again lower — by 1.5% — than the official measure shows.

We again see shifts up and down for state-level rates as well.

For example, the rate for the District of Columbia rises from 19.3% to 22.7%, according to the three-year averages the Census Bureau uses for the SPM. Rates based on the three-year averages dropped in 28 states and increased more than the District’s in five.

As in the past, we also see shifts in rates for different age and race/ethnicity groups. For example, the poverty rate for blacks dips from 27.3% to 25.8%, while the poverty rate for Asians rises from 11.8% to 16.7%.

The poverty rate for non-Hispanic whites is till the lowest, but it’s higher than the official rate — 10.7%, as compared to 9.8%.

The rate changes all reflect differences between the crude, official measure and the SPM, which goes at poverty measurement in a different — and more sensible — way.

I’ll forgo another summary of how the SPM works. I took a stab at one last year and the year before. And the Census Bureau has a more extensive (and wonkish) explanation in its report.

From a policy perspective, both the overall higher poverty rate and the rate shifts are especially important because they show both the impacts and the limits of major federal benefits programs.

So far as the rate shifts are concerned, the most striking are those for the young and the old.

  • The child poverty rate drops from 22.3% to 18%, reducing the number of children in poverty by about 3.2 million.
  • For children, the severe poverty rate is less than half what it is under the official measure — 4.7%, as compared to 10.3%.
  • The poverty rate for seniors rises from 9.1% to 14.8%, increasing the number of poor people 65 and older by nearly 2.5 million.
  • The severe poverty rate for seniors also rises, from 2.7% to 4.7%.

The higher rates for seniors reflect principally the amount they spend on medical out-of-pockets, e.g., deductibles, copays.

This seems to me pretty good evidence that the chained CPI, which could still become the new cost-of-living adjustment measure for Social Security benefits, would disadvantage the 36% of seniors who rely almost entirely on them, as well as younger people who receive them because they’re severely disabled.

At this point, however, Social Security remains by far and away the single most effective anti-poverty program we’ve got. The SPM report shows that, without it, 26.6 million more people of all ages would have been poor — and the poverty rate for seniors a whopping 54.7%.

The report speaks to another issue that Congress is debating — and one that it isn’t, but should deal with swiftly.

The hot issue is SNAP (the food stamp program) — not whether to cut it because Congress has already done that, but by how much more.

So it’s useful to know that pre-cut SNAP benefits lifted 4.9 million people, including 2.2 million children, out of poverty last year. They were the single most important factor in the marked drop in severe child poverty, the Center on Budget and Policy Priorities reports.

The back-burner issue is the soon-to-expire Emergency Unemployment Compensation program, i.e., cash benefits for workers who’ve been jobless longer than their regular state programs cover.

I may have more to say about this, but will note here that unemployment insurance benefits generally reduced the SPM poverty rate by somewhat less than 1% — about 2.54million people.

UI benefits have lifted fewer and fewer people out of poverty since 2009 — mainly because fewer jobless workers are receiving them, according to a recent CBPP analysis based on other Census figures.

Retrenchments Congress made in the EUC program in early 2012 are part of this story. I suppose more recent figures would show the impact of sequestration as well.

House and Senate negotiators apparently still hope to stop the across-the-board cuts — at least for while. But this is a far cry from an agenda that would bring the very high poverty rate back down to where it was when we rang in the 21st century.

* The SPM report cites 15.1% for the official measure, noting that this is not statistically significant from the previously reported figure. Several other official measure figures in the report also differ from those the Census Bureau earlier reported.

The differences, if I understand correctly, reflect the fact that the SPM universe includes children under 15 who are living in a household with adults to whom they’re not related. For comparability, I’m using the official measure figures in the SPM report here.


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