More on Poverty

Robert Waldmann

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).

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