It’s commonly believed the War on Poverty failed. The government spends, including Medicaid, nearly $1 trillion a year on alleviating poverty — yet there seem to be just as many poor people around as there were before we started spending all that loot. Amazingly, we spend money on stopping poverty and we don’t stop poverty.
People from the Right say this and insist all that money’s just been wasted. People from the Left say this and insist we’ve got to spend much more to make a difference. Both are wrong.
The money has made a difference alleviating poverty. The Left’s argument is worse, for they’re arguing that we must spend more on what appears not to work.
The system, for whatever silly reason, doesn’t include the effects of what we spend on alleviating poverty. We measure the official poverty rate before including the benefits of Medicaid, food stamps, the earned income tax credit, Section 8 housing vouchers, and all the rest of that nearly $1 trillion a year.
What we should be doing is measuring the effect of all that spending on poverty. The best way to do this is to look at the only poverty, or even inequality, that actually matters. Wealth inequality isn’t important, nor really is income.
The thing we even might be concerned about is poverty or inequality of consumption — not how many pieces of paper do people have, but what is it they can actually do, eat, enjoy, use?
When we do this, properly, we find that the War on Poverty really has worked. The poverty rate is actually about 3 percent — pretty good for government work in any field, if we’re honest about it. Sadly, such a measurement isn’t done officially, but Bruce Meyer and James Sullivan at the American Enterprise Institute have just released a darn good attempt at getting the figures right in a new study. That gets us to a poverty rate of about 2.8 percent, not the more official 13 percent or so.
The trick here is to take all of the poverty numbers seriously and to count them all. The poverty line is a reasonable standard of living (defined as three times a decent-enough household food budget at the time) for 1963, upgraded for inflation over the decades. Since then, we’ve been doing an awful lot to increase the standard of living of those below that line. We’ve also not, as above, been counting the effects of most of what we’ve been spending. The advantage of this concentration upon consumption, not the varied possible different measures of income, is that we do end up measuring the effect of our spending on that only thing that matters, the actual living standard of those poor.
Once we do this, we find that the real, accurate poverty rate is 2.8 percent this year. Again, that’s pretty good for government work. It also shows that both critiques of welfare are incorrect. Welfare spending does reduce poverty, but conservatives are all correct that there were better ways of doing it. We could have alleviated more poverty for less tax. But it did actually work because poverty was alleviated and is still being alleviated. It also shows that the Left is wrong — there is no great mountain of poverty in the U.S. that needs alleviation. We’ve done the work, built the system. It isn’t true that there’s some vast necessary task yet undone.
The real lesson of this is not that we can declare victory and go home. Rather, it’s amazing how many political and economic problems go away if we just do the counting properly, isn’t it?
Tim Worstall (@worstall) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a senior fellow at the Adam Smith Institute. You can read all his pieces at The Continental Telegraph.
