Over here in Europe, we have a long-running and well-known hobby: America bashing. Most of it is just the former global top dogs expressing their dismay at the new global hegemon. If it had been the Russians that won the Cold War, then the sneers would be about pelmeni instead of hamburgers. Some of it is even fair – seriously, whatever did Europe do to anyone that deserved having NSYNC inflicted upon us? Or "Sharknado"?
But the big thing people over here pride themselves upon is that at least poverty isn’t like it is in the U.S. We’ve now got this report from the U.N. Special Rapporteur into poverty in the U.S., and he’s made a total mess of it, an entire cock-up, failing to understand even the basics. The important thing to note here is that this gross foolishness isn’t going to stop people beating you all over the head about it. So, as a little inoculation, allow me to point out the error.
What is being measured in the report is not poverty in the U.S. It is the amount of poverty there would be if the government didn’t do things to reduce poverty. But they do, indeed, do things to reduce poverty – thus, the amount of poverty is not what the report claims.
That mistake is in paragraph 14 (in Section IV). They use the Official Poverty Measure and thus tell us that 40 million people were “living in poverty.”
But the OPM does not measure the number of people living in poverty. It includes only market income plus any poverty reduction through direct cash transfers. The U.S. made a deliberate decision many decades back (starting in the mid-1970s, well before Ronald Reagan was president) to not alleviate poverty by just giving people money. I happen to think that was a bad decision, but I’m not ruling the place either. Instead, poverty is alleviated by changes in the tax system (the Earned Income Tax Credit, child tax credits) and giving people goods and services (Medicaid, cell phones) or vouchers (food stamps, Section 8 housing, and so on).
The important point here is that the report doesn’t count any of those tax things, nor those goods and services, as alleviating poverty. Well, maybe we shouldn’t. But think of it this way. If we gave poor people the cash then the poverty rate would fall. We give them the things instead of cash, and the poverty rate technically doesn’t go down – in the way that we measure it that is. Obviously, people who have the EITC, Section 8 housing, food stamps, and Medicaid are less poor because of it.
Further, absolutely no one else uses this sort of definition of poverty nor its alleviation. Everyone else (and I do mean everyone) has a poverty number which is after the things done to reduce poverty. Only, really only, the U.S. has one marking who would be poor without the help already given.
Just to emphasize this when they talk about child poverty (para 25) we’re told that 18 percent of children live in poverty, 13.3 million. Then in paragraph 29, we’re told that food stamps (SNAP) lift 5 million out of poverty, the EITC another 5 million.
So, the number of children “living in poverty” is not 13.3 million, is it — it’s 3.3 million. That comes out to just 4.5 percent of children “living in poverty,” after the effects of just two of the things we do to reduce poverty.
In their own report, the U.N. is detailing how their claims of the number in poverty in the U.S. are entirely wrong – codswallop in fact.
Please do note something very important here. This is not to claim that America couldn’t be doing this better – I think it could be. It is also not a claim nor an insistence that more should not be spent, or differently, or even that less should be.
What I do insist is that the U.N. report simply has no clue of the numbers it is presenting. They are shouting “America has too much poverty” by looking at the numbers for before the government starts reducing poverty. Which is, when you think about it, a very stupid thing to be doing.
Here is something astonishing. We could put every person below the poverty line onto free medical care as good as members of Congress get. Increase the EITC so that everyone who gets it makes as much as a Wall Street banker. Put the food stamp allocation up to a lobster and filet steak for breakfast budget level, foie gras for lunch. Section 8 rents the 2,000 square foot penthouse for a single guy, families getting the extra space they need.
And you know what? The number of people listed officially, and by the U.N., as “living in poverty” would not have changed by one single person.
This U.N. report is bunkum because they’ve simply not understood the first thing about the numbers under discussion.
Which is one of the reasons why I think alleviating poverty by giving people things, not cash, is such a bad idea. We could spend exactly the same amount we do now, and people would end up with exactly what they get now, but if we shifted the resources by giving people cash then the U.S. child poverty rate would fall from 18 percent to 4.5 percent and lower.
Overnight we would achieve that change. And wouldn’t that change the amount people shout about poverty?
Tim Worstall (@worstall) is a contributor to the Washington Examiner's Beltway Confidential blog. He is a senior fellow at the Adam Smith Institute.
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