No Progress Since the War on Poverty Began Half a Century Ago

Eleven days ago, President Obama took the opportunity at Georgetown University to defend the government’s 50-year experiment in anti-poverty welfare programs.  The president claimed:

It is a mistake for us to suggest that somehow every effort we make has failed and we are powerless to address poverty. That’s just not true. First of all, just in absolute terms, the poverty rate, when you take into account tax and transfer programs, has been reduced about 40 percent since 1967.

The president assumes that after spending $22 trillion (in inflation-adjusted dollars) on federal and state anti-poverty programs since the Great Society’s inception in 1964, a 40% reduction in the poverty rate would be some sort of victory.  But is this statistic even meaningful?  Has there really been a substantial reduction in the rate of American poverty since LBJ declared an “unconditional war” on poverty half century ago?  Has this incomprehensibly vast sum really gone to waste?

Yes, it has.  After you take into account the transfer payments themselves, such as means-tested tax credits, food stamps, welfare checks, and other handouts, not including Social Security or Medicare, and after adjusting for inflation, there has been no significant reduction in poverty itself.   

In 2014, the Census Bureau reported that the American poverty rate was 14.5%.  In 1965, the very first year the War on Poverty programs began, it was 17.3%.  In sum, $22 trillion purchased not even a 3% reduction in real poverty.  Even this “reduction” is illusory, because the poverty rate fluctuates year by year with the rate of the economy growing or slowing.

This, the greatest erasure of wealth in the history of humankind, was all the more tragic because when the programs began to be implemented in 1965, the U.S. poverty rate had already been cut in half.  In 1950, as Robert Rector of the Heritage Foundation recently pointed out, the poverty rate was 32.2%.  Basically, the gigantic War on Poverty stopped the decline of poverty and froze the rate in place.

The federal and state governments collectively spent almost one trillion dollars in 2013, averaging a tab of $9,000 per recipient on anti-poverty programs, not including Social Security and Medicare.  It is important to note, as Dr. Rector has, that when the Census Bureau defines the poverty rate, it does not include the government transfer payments.  This means that the “poor” are not nearly as poor as one might think, but it also means that without the transfer payments, the poor would still be with us in the same ratio as they were in the 1960s. 

In other words, what the War on Poverty accomplished was that it kept the underclass frozen in place, with no reduction in the ratio of people climbing out of poverty.  If the goal of welfare transfer payments was to give people a chance to climb out of their straightened circumstances, the War had no effect.  If the goal was to artificially inflate poor people’s income at the expense of taxpayers, then President Obama’s claim this month at Georgetown was correct – a 40% reduction was indeed accomplished, if you call that an accomplishment at the inconceivable expense of $22 trillion.

With the all the transfer payments, the poor today are much richer than the middle classes were in 1965.  As Dr. Rector pointed out:

  • Eighty percent of poor households have air conditioning. By contrast, at the beginning of the War on Poverty, only about 12 percent of the entire U.S. population enjoyed air conditioning.
  • Nearly three-quarters have a car or truck; 31 percent have two or more cars or trucks.
  • Nearly two-thirds have cable or satellite television.
  • Two-thirds have at least one DVD player, and a quarter have two or more.
  • Half have a personal computer; one in seven has two or more computers.
  • More than half of poor families with children have a video game system such as an Xbox or PlayStation.
  • Forty-three percent have Internet access.
  • Forty percent have a wide-screen plasma or LCD TV.
  • Ninety-two percent of poor households have a microwave.

The real question is not “can the living conditions of the poor be artificially improved through a trillion a year in federal and state poverty spending?”  Of course they can be improved.  The relevant question is rather: is it morally just to keep a permanent, 14.5% underclass in effect at the expense of the producing class of Americans? 

Christopher S. Carson, a lawyer, formerly worked at the American Enterprise Institute.