The 50-year war on poverty

We fought the war on poverty, and poverty won  — Peter Ferrara

It’s now 50 years since President Lyndon Johnson proposed his war on poverty. To date, the nation has spent $20 trillion to solve the problem, twice the amount spent on all military conflicts since the American Revolution. During this past half century, federal spending in constant dollars on major means-tested programs exploded from $516 per-person, per-year to more than $13,000 per-person. Currently, the U.S. government spends more annually on anti-poverty programs than it spends on national defense, Social Security, or Medicare.

So how effective has the war on poverty been? When President Johnson launched his campaign, the U.S. poverty rate stood at 15 percent. In 2012, the last year for which we have figures, the rate was about the same. No wonder Peter Ferrara, senior fellow at the Heartland Institute, says we’ve lost the war on poverty.

But does anyone ask why?

Two things are clear. First, people who live at poverty levels don’t work. In 1960, nearly two-thirds of households in the bottom quintile were headed by people who worked. Three decades later, the number working had dropped to one-third and only 11 percent worked full-time, year-round. If we contrast the top 20 percent of earners with the bottom 20 percent, the Census Bureau says there are six times as many people working full time in the top quintile. If those in the lowest quintile worked full time, 75 percent of the poor children would no longer be classified as living in poverty.

Conclusion: Today’s welfare system pays people not to work. Statistics from the seven-year Seattle/Denver Income Maintenance Experiment confirms that generous welfare benefits reduce labor earnings by 80 cents on the dollar. On top of that, anyone desiring to forgo government largesse loses 50 cents worth of subsidies for every dollar earned. Add Social Security tax, a modest 10 percent federal income tax, and another 5 percent state income tax, and voila, the effective marginal tax rate is more than 70 percent. Now there’s an incentive to get off welfare.

Second, out-of-wedlock births to single mothers promote poverty. The poverty rate for households headed by females with children is 44.5 percent compared to 7.8 percent for married couples with children. The poverty rate for black American families who are married is 11.4 percent; the rate for households headed by black females is 53.9 percent.

If poor women who give birth outside of marriage married the fathers of their children, two-thirds of the families would be lifted out of poverty. The numbers are even more dramatic for those trapped in long-term poverty: 80 percent of all long-term poverty occurs in single-parent homes. Today, most welfare benefits are restricted to families with children, thus encouraging single women to pursue generous government benefits. Or put another way, our government policy pays women to have children out of marriage and discourages family unity.

We did address the problem back in the 1990s, when Washington reformed the New–Deal, Aid-to-Dependent-Families-with-Children program and renamed it Temporary Assistance to Needy Families (TANF). The key to reform was eliminating the matching program of grants and replacing them with finite grants to the state. Each state redesigned the program, requiring able-bodied recipients to work. The success of TANF was both quick and dramatic. Low-income families formerly on welfare increased their income by 25 percent. The percentage of families living at just half the poverty level plummeted 35 percent. Poverty among female-headed households declined by one-third. Not only did poverty decline, but the taxpayers also saved 50 percent of the program cost. That’s how you define success.

But TANF was just one program. Today, Uncle Sam sponsors nearly 200 means-tested welfare programs projected to cost more than $10 trillion in the decade that began in 2009. America is smart enough to redesign our current welfare system to put people back to work and to encourage marriage. We really could win the war on poverty if we could overcome the ideology that the best way to create jobs is to redistribute workers’ money and if we promote marriage.

After spending 50 years and $20 trillion trying to eradicate poverty, it’s time America casts the politics of envy overboard and replaces it with the politics of plenty for all. The keys are work and family.

Norman Poltenson is a regional staff writer with The Business Journal News Network. Contact him at npoltenson@cnybj.com