Wednesday, February 13, 2013

Defining Poverty: A Conservative Perspective

Deciding who does and who does not live in poverty is an important and complicated question. The answer to that question has both a moral and a political dimension. Modern societies have generally decided that people so poor that they cannot provide food, clothing, and shelter for themselves will not be allowed to die in the streets. In other words, to die in the streets qualifies one as having lived in poverty. That is the easy part. The political issue derives from the need to ascertain who is sufficiently impoverished to be in need of public assistance and how best to provide that assistance.

Neil Gilbert makes an attempt to address the political dimension of poverty in an article in The American Interest: Retroview: What Poverty Means. He will provide a view that has become popular with political conservatives.

From a broad historical perspective, the issue of poverty was raised to the national political level by the Great Depression and resulted in the social welfare legislation of the New Deal. The war years and the postwar prosperity precluded significant public activity on the issue. Poverty was revived as a national concern by the publication of Michael Harrington’s The Other America in 1962.

"Harrington’s "other America" was a bleak place where at least half of the elderly could not afford decent housing, proper nutrition and medical care, and where low-income farm families suffered from "hunger in the midst of abundance." According to his calculations, about 25 percent of the American people were poor. So powerful was Harrington’s impact that in his wake a host of publications sought to raise national awareness about poverty in the United States."

The impact of this book produced legislative initiatives under President Lyndon Johnson that might be categorized as a "war on poverty." The result, driven by the progressive left, was a major increase in social welfare spending, including direct cash transfers.

Gilbert points out that there was even a study that recommended a guaranteed minimum income.

"....the blue-ribbon National Commission on Technology, Automation, and Economic Progress reported in favor of a guaranteed national income in 1966...."

This is an idea that some countries seem to have made work; one that deserves more consideration than it has received.

Gilbert identifies Hayek as the source of the corresponding view of the problem from the conservative pole. Hayek was of the opinion that a growing economy with opportunity for all to participate would best address the problem.

Given that we all now know that a rising tide does not lift all the boats, Gilbert feels a need to resort to a misuse of the liberal icon John Kenneth Galbraith for assistance in justifying a conservative opinion. In so doing, he presumably believes he is successfully mocking progressives. He quotes Galbraith from his book The Affluent Society written in 1958 prior to the publication of Harrington’s book.

"Harvard Professor John Kenneth Galbraith argued that in a society where the median family income was $3,960, poverty "can no longer be presented as a universal or massive affliction. It is more nearly an afterthought." Galbraith described what remained of American poverty as falling into two broad categories: insular poverty, which stemmed from living in economically depressed regions like Appalachia, and case poverty, rooted in personal handicaps such as ‘mental deficiency, bad health, inability to adapt to the discipline of modern economic life, excessive procreation, alcohol, and insufficient education.’ But in neither instance, he argued, could poverty be remedied by government transfers of income to lighten the hardships and increase the consumption of the poor."

Gilbert admits that Galbraith had changed his mind about how to address poverty by the time a new edition of his book was issued in 1998, and suggested an even greater effort was needed. This is a "curious shift" as described by Gilbert, who wishes to couple Hayek with the original Galbraith to arrive at the desired conclusion.

"At least as far as the "working poor" are concerned, therefore, it seems that some combination of Hayek’s view about "lifting all boats" and Galbraith’s social spending is responsible for the vast reduction of poverty between the late 1950s and the dawn of the twenty-first century. Between increasing affluence and the growth of Federal spending, both direct and indirect, on welfare since around 1964, the tangible signs of material deprivation faded."

The case Gilbert wishes to make is that the problem has essentially been solved. The few remaining truly deprived are generally incapable of participating in the economy and should be addressed as such. The current statistics on poverty include people who are at such a high state of material well-being that they no longer deserve our concern. Gilbert provides some interesting numbers to support his contention.

Poverty in this country is defined as having an individual or family income below a given level. Poverty by that definition is a relative phenomenon and, by Depression-era standards, those in poverty today are rather well-off.

Gilbert begins by reminding us that the poverty level incomes do not include the transfer of funds from various support programs.

"First, there is a huge gap in the data between what the poor earn and what they spend. The excess of spending over reported income has grown dramatically since the early 1970s, from 139 percent of income to about 212 percent today. Actual consumption of goods and services may be even higher than out-of-pocket spending suggests, since these figures exclude public benefits to low-income households available through eighty income-tested programs such as school breakfast and lunch programs, nutrition programs for the elderly, housing vouchers, legal services, home energy assistance and day care."

He then points out that although the official poverty level is around 15% right now, that number will include many who are merely passing through while they endure a temporary decline in income before returning to a higher level of prosperity.

"....the official measure of poverty relates to a temporal dimension. Many households endure brief spells during which their incomes fall beneath the poverty line, just as many people experience periods of unemployment. Chronic poverty, though, is relatively rare. Thus, for example, between 1996 and 1999 the household income of 34 percent of the population dipped below the poverty threshold for two months or more, while only 2 percent of the population remained below the poverty line for the entire period. Similarly, from 2004 to 2007 the income of 31.6 percent of the population fell below the poverty line for two or more months, but just 2.2 percent of the population remained under the poverty threshold for the full four years. In 2009, 7.3 percent of the population was under the poverty line for the entire year, even as unemployment hovered around 9 percent."

And, as it turns out, the poor aren’t actually very poor at all.

"....the range of material possessions enjoyed by people living below the poverty line provides a final reason for questioning what the official measure claims to represent. As with the household expenditure data, these amenities reflect higher than expected levels of consumption. Thus, for example, at the height of the recession in 2009, 40 percent of the families officially designated as poor owned their own homes, which were mainly single-family units and had a median value of $100,000."

"Moreover, 92 percent of poor households had microwaves, 76 percent air conditioning, 50 percent computers, 64 percent a clothes washer, 99 percent a refrigerator (23 percent an additional freezer), 98 percent color televisions (70 percent more than one television) and 77 percent owned a car, truck or van (22 percent owned two or more vehicles). This describes a level of material well-being that corresponds with neither public perceptions of poverty nor Biblical dictates to aid the needy."

Gilbert’s conclusion is that there are not many people who are truly poor, and those that do live in continual poverty are mostly beyond redemption.

"Various estimates put the current rate of chronic poverty at 2–7 percent. At the middle range, if 5 percent of the population is chronically poor, we’re talking about roughly 15.5 million people. Just a fraction of the official poverty rate, this relatively small percent nevertheless signifies a huge number of people living in distress. As with the homeless, a large proportion of this group suffers from mental illness, addictions and other disabilities."

And finally, the people who are deemed to be living in poverty and are not incapable of working are doing just fine because they have clothes to wear, food to eat, and a shelter in which to live, and that is all anyone has a right to expect.

"When we look more closely, we see a genuine poverty problem restricted largely to people with physical and psychological conditions that make it difficult to be productive. From this perspective, not only does the size of the problem become more manageable, but the solutions take on a very different hue from those mainly seeking to provide additional cash for low-income people. A closer look also reveals that low-income people (as well as many above their level) who struggle daily to make ends meet are in truth engaged in a battle to match resources with modern appetites for material consumption. They are not in a battle to put a roof over their heads, clothes on their back and food on the table."

When conservatives argue that poverty is not such a great problem, the goal is usually to create the impression that the growing income inequality is not important—and therefore nothing need be done about it. Gilbert finally arrives at that conclusion.

"This focus on redistribution to achieve economic equality does little to alleviate the disabilities of the chronically poor. It does not develop opportunity, strengthen family life, educate children, or encourage the civic virtues that are independent of market capitalism. It does nothing to address the acute suffering of those afflicted by case poverty. Instead, it conveys an image of the good society as one dedicated to increasing private consumption."

Everyone would agree that using incomes as a fraction of the median to determine poverty is a crude approach. Countries use that methodology because it is easy to implement and because it is consistent with the belief that poverty is not an absolute state, but a relative state. Wealth provides economic and political power. Lack of wealth tends to deprive one of economic and political power. If one does not have the resources to compete for a good education and access to a well-paying job, then that person is living in poverty.

The resources needed to compete in society are not merely financial; social capital is just as important as economic capital. The social and cultural environment in which a child is raised has as much to do with his/her ability to compete as the wealth of the parents. In Poverty in the United States we indicated that areas of persistent high poverty are associated with specific socio-economic groups: southern whites and blacks, borderland Hispanics and whites, and urban blacks and Hispanics. Poverty has persisted in these regions because of a complex mix of economic, cultural and social factors.

The fact that these people might possess cars and TVs and dishwashers does not lift them out of poverty. And the fact that they are living in poverty does not mean that most are suffering from "mental illness, addictions and other disabilities."

There are better sources for learning about poverty. What is frightening is that there are so many people who believe what Gilbert has written.

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