More on Poverty
Matthew Yglesias has a post on poverty which is, shall we say, very different from my post on severe poverty below. In particular he wrote
We then had a giant reduction in poverty among this group [female-headed households without husbands] in the 1990s which was a combination of strong economic performance, “welfare reform,” and also the fact that the Clinton administration really wanted to make welfare reform work so threw lots of stuff—EITC expansion, SCHIP, etc.—at making it work. Then we saw a slow, steady erosion of that progress.
I totally absolutely utterly disagree as I explain after the jump.
I can’t say how strongly I disagree with you about welfare reform.
I note that welfare is still reformed. I think it is possible to distinguish the effects of welfare reform and the booming late 90s by looking at the 00s when we had the reformed welfare system (and SCHIP and expanded EITC). It seems to me that in 2000 one might wonder if the improvement were due to the tight labor market, to welfare reform or to a combination (as you very confidently assert). By 2007, it was obvious that the improvement was due to the tight labor market with (just eyeballing the graph) zero help from welfare reform. Also note the improvement in poverty under Clinton but before Welfare reform.
More importantly, the poverty rate is a very poor measure of total suffering due to poverty. to use the poverty rate as a welfare measure you must assum that someone just slightly below the poverty line suffers just as much as someone below half the poverty line. Obviously you don’t think anything that silly. Instead, you must be assuming that similar patterns are found in counts of sever poverty (below half the poverty line) near poverty (poverty line to 1.5 poverty line) etc. I think you are assuming this.
This assumption is totally utterly false. No one who wishes to consider poverty in the USA can stop after looking at the poverty rate and the poverty rate by demographic group as you did. The time series of the severe poverty rate is completely different from the time series of the poverty rate. It has increased enormously since 1975 (the trough of a recession). You can’t possible see the direct benefits of welfare looking the poverty rate as AFDC and TANF benefits were and are below the poverty line.
If you look at the poverty rate only, you would conclude that no harm was done if people on AFDC instead had zero income and starved after the reform (actually if they really starved the poverty rate would go down). Of course that didn’t happen, but the fraction of the population in severe poverty is now the highest in the Census time series (which only goes back to 75). Oh just go look at my post http://tinyurl.com/267hec4 .
An aside, you make a plainly false claim. You assert that the EITC expansion was part of the Clinton administration’s effort to make sure that welfare reform worked. This assertion is utter is nonsense. The EITC expansion was enacted into law in 1993 long before welfare reform.
You should have just mentioned SCHIP. Even in that case, you act as if Clinton was making policy which was actually made by the Republican controlled congress. Also, just to mind read, I would guess SCHIP was trying to win at least some health care reform and wasn’t even related to welfare reform in Clinton’s mind (not that that matters).
There is another feature of TANF that contributes to the increase over time in the proportion of population below poverty. That is the 5 year lifetime limit on program participation (with some states imposing shorter time limits). Many recipients attempt to forestall losing eligibility altogether by going on and off TANF in order to extend the period over which they are eligible. Now, more than 10 years out, many have exceeded the lifetime limit and have no recourse for cash assistance. There is also what has been called a “cliff effect” that perversely plunges individuals back into poverty as they exceed eligibility thresholds in their efforts to earn their way out of poverty. See here: http://www.wfco.org/web_wfco/images/userpages/file/COCliffEffect%20FINAL.pdf. It’s strange how a country that claims to value individual initiative and effort is so bad at rewarding either among those at the bottom of the economic pyramid.
Maxine’s got it. Matt’s idiocy is based in the idea that a revision that is most punitive more than five years out was A Good Idea based on contemporaneous data. It’s the optimist-who-fell-sixteen-stories joke done as a “Liberal Pundit.”
Yep, Ken and Maxine–The killer provision is the time limit on eligibility. One thing that happens to young families with kids is periodic, unforeseeable disasters such as illness, accidents, unemployment, and evictions, just to name a few. Throw in a common complication such as recreational drug use, you can get thrown out of subsidized housing and end up on the street. Poor people have no way to recover from such events under TANF because no temporary help is available.
So, as a result, “Payday lenders” are available for loans with obscene interest rates–hundreds of percent on a small loan of a few hundred dollars. Repeated emergencies lead to ever escalating, unpayable debt on which the borrowers pay only increasingly large amounts of interest, never reaching the underlying principal.
Debt is why people who earn for example $25K actually spend $28K in a year. Debt’ll do that and make any kind of financial stability impossible to achieve. Payday lending is legal in every state and in some states there is no limit on the possible rates of interest charged. It’s how poverty works and always has in this country. There is a lot of money in the poverty business. NancyOrtiz
I think Matt posts far too much to be as accurate as he should be. This causes a lot of the controversy around his opinions, but he does get the discussion started. This may be his ultimate goal.
Run755whatever….yes, I’m well aware of the alternative measures, I’m well aware of the relative poverty measures (which every other country uses) and I’m even on your side in agreeing that there’s too much poverty in the US.
However, the fact that $500 billion (yes, half a trillion) is spent on poverty reduction and yet poverty is measured, officially, without counting the effect of that half trillion of spending is simply absurd, insane.
But that is what is done.
Maybe it’s time we started measuring poverty by sampling soup kitchen and food bank requests for assistance. Counting people under overpasses and on street dividers at intersections might make sense too.
Brilliant Ken. I wish I’d written that.
is that your madness?
are you saying that people living on food stamps is the answer to poverty?
are you saying that a barely adequate diet and slum housing is the answer to poverty, even if the government has to pay for it?
or is it just that you don’t want to have to think about what poverty really is, and are afraid someone will raise your taxes to fix it, because you can’t think of anything other than to hand out welfare checks and you are mad about that?
Well there are efforts to count the homeless. Here the effect of welfare reform can be, in part, detected, because of the F which, in context, means families with children. Since welfare reform there has been a large increase in homeless families with children compared to homeless single adults. I don’t think there are many people who have any contact with the homeless who doesn’t hate welfare reform with a passion.
I also don’t think there are many journalists who write about welfare reform who have noticed this repeatedly published fact.
Amateur–This year’s census results should shed some light on this issue. The Census Bureau apparently aimed to do what you suggest. We’ll see what comes out of their effort.NancyO.
500 billion… hmm… nother big number.
Like the ~$2 trillion in tax breaks going to the upper 2.5% of the taxpayers who hardly need it and for sure didn’t spend it. 3 million taxpayers get ~$2 trillion in tax breaks and what 30 million of the population get 500 billion. Which group would you prefer to be a part of?
No discussion about what is causing poverty in the U.S.?
one of the little discussed facts here is how much less extreme poverty there is in the US in comparison to the much vaunted european social democracies.
as a % of population, germany has 2X the US rate. france 4X. canada 5X. holland 8X. sweden 15X.
their bottom quintile of earners are no richer than ours (at PPP)
all they manage to do is keep their rich from getting rich.
it amazes me that people see these as systems to emulate.
How about a labor-toothless labor market that allows the median wage to grow from $12.50/hr to only $15/hr while average income doubled from 1968 — instead of $25/hr?
How about a labor-toothless political era in which the minimum wage was allowed to drop almost in half by early 2007 while average income doubled — now fully $2.75/hr below LBJ’s minimum (adjusted) after the “big” 2007 raise.
A lot of what is wrong with Kansas is they understand tht the supposedly liberal Democrats don’t give one single damn about their pocketbooks (only about upsetting their social fabric — and, again, I am not talking about gay marriage).
I lived in New York’s East Village from 1966-68 in a building with gas jets for light still in the walls (inoperative), very lively rat families (plural) and a landlord who would deliberately turn off the heat (my brother’s mechanical monster friend showed us how to turn it back on). From our 4th story window I could see for blocks — always saw every free police car in the precinct line up for every response as a show of force before leaving the assignment car behind.
Remove your plates and the neighborhood kids would burn your car to the ground within the hour for you (for insurance) — poor kids have to make their own fun. One 16 year old told my 17 year old brother that he couldn’t wait until he was 17 so he could go to Vietnam!
Today the same neighborhood would be contested by street gangs plural — economics (that should be understood here): drug sales only way to make a living — got to come up with drugs with broad appeal to the general public, too; not just to a few desperate heroin addicts if your going to support a large community.
Back then the minimum wage was 80% of — for its time — a very healthy median wage and Medicaid actually covered the poor (instead of paying 10% of what Medicare pays) and full dental too!
It’s the labor market, geniuses!
Not as lunatic as defining poverty as income below the cost of three times the price of an emergency diet (dried beans only please, no canned). You have to compute the two lunacies together.
My computtions based on basic, eighth-grade math figures (see accompanying essay) yield an astounding 30% of Americans living in poverty if you don’t count food stamps, etc. Well, you would expect that wouldn’t you if the 12.5% without gov helps is based on three times… ?
At 30% — or 90 million — of Americans in poverty WITHOUT helps… $500 billion in gov helps doesn’t sound quite so mad does it? 🙂
No, it actually gets worse than this. AFDC *is* counted….it’s a direct cash transfer.
So, over the past few decades (since 1975 and the EITC) there’s been a deliberate and bipartisan effort to move poverty alleviation from direct cash transfers and into the EITC and benefits in kind. And the amount spent on poverty alleviation has been rising (yes, faster than inflation) over this time as well.
Yet, when we look at the poverty statistics we see that poverty has essentially (trend, not bounces around from recessions) flatlined.
Why? Because we’re not counting a huge chunk of the money that is being spent upon poverty alleviation. When the Census actually did the sums counting all that money (they did it as a one off back in 2004 I think it was) the poverty rate dropped from 12% as recorded to 8%. And the child poverty rate dropped to almost nothing, a couple of percent or so.
This is an important question I think: what we want to know is not how much poverty there would be if help wasn’t offered: but how much poverty is there left after the help that is given….and so, how much more do we have to do to alleviate poverty?
if you take the step of reading the actual study, you will see that the data is well substantiated and, ironically, conflicts with the conculsions of the authors.
they are just measuring gini coeficcient, not absolute poverty. being relatively poor in the US would still make you rich in most of the world, including europe.
read the cox and alms book. our poor are as well off as the swedish middle class.
the OECD chart pretty much says it all: our poor are no poorer, but everyone else is better off.