Wednesday, January 8, 2014

The War on Poverty at 50: Guess Who's Winning? (Hint: It's Not the Government)

It can be quite fastidious when the government "declares war" on something. After 9/11, the government declared a War on Terror, and yet terror still exists. The government goes on the rampage with the War on Drugs, and drugs are still a major problem, courtesy of the underground market the government created. When the government declares war on something as relatively abstract as poverty, like Lyndon B. Johnson did fifty years ago today, it makes me wonder what chance the government has to give poverty a good licking.

Proponents would like to look at the declining poverty rate as a form of success. Taking a look at Census data on poverty (Table 2), the poverty rate was already declining prior to the beginning of the War on Poverty. Plus, it takes some time for the government programs to fully take into effect, not to mention that they have grown over the course of time. Keep in mind that none of this considers that using consumption as a basis to measure poverty is superior to solely measuring income, much like the Census Bureau does. Not only would I apply "correlation doesn't equal causation" here, but to point out that these supposedly wonderful government programs have not reversed the increase of poverty since the Great Recession.

We have spent about $16T (yes, trillion with a "t") on the War on Poverty, which is more than the War on Terror. What have we gotten as a result? At the very least, a poverty rate that has fluctuated between eleven and fifteen percent. This country has also dealt with an expansion of the government, including the creation of Head Start, Medicare and Medicaid, as well as expansions of such programs as unemployment insurance, Social Security and food stamps.

Due to the largesse of the government, Americans have become more dependent on government. Dependence on government is not just some "right-winged talking point"; it actually exists. And I cannot emphasize this point enough. The National Park Services does not want us feeding animals because such behavior would make them more dependent, which a fortiori applies to humans. Such dependence has adverse effects on behavior.

1964 was solidified as the moment in which "government is the solution" became increasingly prevalent. Truth be told, the War on Poverty has not addressed structural issues. It was as if the government ignored the Chinese proverb of 授人以鱼不如授人以鱼 ("Give a man a fish, feed him for a day; teach a man to fish, feed him for life"). Programs like TANF notwithstanding [that actually address root problems and make the safety net a temporary one], the government only perpetuates poverty with its "anti-poverty" programs.

"The road to hell is paved with good intentions," which is why I find that the War on Poverty goes well beyond bureaucratic ineptitude. The entire approach of using wealth transfers as a way to pull people out of poverty is flawed. For a majority of those receiving wealth transfers, the government is providing enough to make people comfortable, but it does nothing to help people escape poverty. Throwing money at the problem isn't going to solve it.

If you want people to escape from poverty, you have to go well beyond handing out money, goods, or services. You have to provide poor people with the tools and the incentive to escape poverty. Rather than throwing more money at schools, which doesn't work, students need to learn skills that will make them marketable for a future employer. Unemployment insurance is another example: it only exacerbates unemployment. As the American Enterprise Institute (AEI) illustrates, there are alternative policies (e.g., lowering minimum wage) that do not impede economic growth, entrepreneurship or job creation. After all, having a job [in addition to having an education] is one's best bet for escaping poverty (Tanner and Hughes, 2013). Family arrangements also make a difference. Removing the government regulations and taxation that throw up additional obstacles need to be removed, but even more importantly, we need to have a paradigm shift about poverty reduction if we don't want to create a permanent class of poor people sucking the teat of Big Government while losing their ability to stand on their own feet.

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