How to End Poverty

President Johnson declared a “war on poverty” back in 1964 when the poverty rate was 19 percent. In the 48 years since, we’ve spent over 12 trillion tax dollars fighting poverty. The rate dipped below 11 percent in 1973, but is now back up over 15 percent. Forty-six million Americans are in poverty today. A new report from the Cato Institute, The American Welfare State, concluded that “clearly we have been doing something wrong.”

This year Cato finds that the federal gov­ernment will spend more than $668 billion on at least 126 different programs to fight poverty. State and local governments will spend an additional $284 billion. So, we’re spending nearly $1 trillion every year to fight poverty. That amounts to $20,610 for every poor person in America, or $82,440 for a family of four.

Yet, the government considers a family of four to be poor if its cash income falls below $23,050, which is less than one-third the amount taxpayers are spending to help them. Where does all that money go?

The solution seems simple. Instead of spending a trillion dollars every year fighting poverty, why not just cut checks to the poor and be done with it? We could raise every poor person out of poverty and still return hundreds of billions of dollars back to the taxpayers. And if we hurry, it could all be done by Thanksgiving.

Steve Buckstein is founder and Senior Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization.

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Posted by at 11:00 | Posted in Economy | Tagged , , , | 48 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Rupert in Springfield

    A few weeks back some senators took the entire amount we spend on welfare prgroams, sans Medicare and SS. They divided it by the number of families below the poverty line. It came to around $60k per family, right in line with your figure.

    This is insanity. Our longest and most expensive war to date has been the war on poverty. It is time to declare victory and go home.

    So why don’t we? Why don’t we simply end this massive drain on our country and declare victory?

    Well, people will starve, they will die if we just stop fighting the war on poverty.

    This is nonsense, and on a par with arguing we should never pull out of any war because the situation will immediately return to what we had to begin with.

    On the subject of leaving Iraq – what would have been the response if someone suggested if we hadn’t gone in, or if we now did leave, then they would develop WMD’s?

    That’s the same argument being presented to us with the war on poverty. It’s the same old perpetual war argument that was made on Orwells 1984.

    Indeed, when we have cut back on the war on poverty, as with welfare reform in the Clinton year, it was largely successful.

    It is time to apply the lefts logic to itself. End the longest war in our history. End the costliest war in our history. It has been an abject failure. It’s time to move on.

    • Steve Buckstein

      Good points, Rupert. It bears emphasis that Medicare and Social Security and Not considered anti-poverty programs for purposes of my calculations.

  • That would help my son… he only needs $10,000 to finish helicopter training (instrument rating) and he can get a job. He is a commercial rated pilot, but without the instrument rating, it is very hard to find employment. Student loans aren’t available either. In 18 months a person could go from zero to hero, gainfully employed and repaying the loan. But in this mixed up world, the government would rather spend the money on food stamps and 5 years of college where a person comes out with tons of debt and a tight job market. (we already put out over $70,000 for his helicopter training)….. but that’s ok, we will just find the money somewhere else…. we really don’t want another gov. handout….

  • DavidAppell

    Bad math.

    Consider the largest expenditure in CATO’s report: Medicaid, at $228 B/yr. CATO says it serves 48.9 M, but this report says it served 62.5 M in 2009, a third larger than the number officially in poverty given above:

    The NY Times says 56 M:

    This undercounting inflates per capita costs (and serves CATO’s needs). But why so many? Because of the unraveling system of health care we have, employer-based, that is leaving more and more without care, and increasing the cost of care that is provided.

    Many of the programs CATO lists (Appendix A) are at cross purposes to pure poverty reduction, such as Pell Grants, Children’s Health Insurance, etc. So again, their cost number is a significant overestimate.

    I noticed they didn’t list the home mortgage interest deduction. It cost $131 B in 2012, and 75% of that goes to those making more than $108,000/yr. 50% goes to those making $151,000/yr and above, and 31% to those making $260,000/yr and above. I guess aid is only controversial when it goes to poor people.

    • Steve Buckstein

      Not so much “bad math” David, as perhaps emphasizing the TOTAL number of people enrolled in Medicaid for at least one month in 2009 to the AVERAGE number on it that same year. The federal government’s 2010 ACTUARIAL REPORT ON THE FINANCIAL OUTLOOK FOR MEDICAID says on page iii:

      “Medicaid provided health care assistance for 50.1 million people on average in 2009. A total of 62.9 million people were enrolled in Medicaid for at least one month in 2009, or about one of every five persons in the U.S.”

      And, no David, aid isn’t only controversial when it goes to poor people, but the Cato report did deal with just such aid. As to the home mortgage interest deduction, here’s a simple way to eliminate it for all those rich people (and everyone else); eliminate the personal income tax itself. Interested?

      • Steve Buckstein
      • DavidAppell

        In 2009, Medicaid’s average payment per recipient was $5,136.

        So assuming that covers only the 46 M “in poverty” overstates “poverty” payments by $84 B. I suspect there is a lot of similar overstating in the CATO report, and hence in your result.

        By the way, there is another $81 B that goes primarily to the affluent: deduction of residential property taxes ($31 B/yr), and exclusion of housing capital gains ($50 B/yr).

        • DavidAppell

          To continue my earlier thought, the problem with just giving Medicaid (etc) money to recipients is that the private market still wouldn’t necessarily address their needs. Giving every Medicaid recipient $5,136 per year instead of health care wouldn’t get them private health insurance, since (1) a private policy costs more than that (for a single person; a family-of-four policy does cost about 4 times that amount, on average, at the moment), (2) many are not insurable due to pre-existing conditions (more likely to be true for those in poverty, I suspect). The program is just as important as the money, as far as delivering care goes.

          • Rupert in Springfield

            A private policy costs more than $428 a month?

            You really have no idea what you are talking about do you? I pay less than that and I’m 51.

            Please, next time you think about continuing your thoughts, get out a calculator before you do.

          • Rupert in Springfield

            Or just enroll at OHSU. A friend of mine, a big Obama supporter was all angry he was forced to buy insurance. OHSU’s price? $600 per term.

          • DavidAppell

            “…data from the 2009 KFF/HRET Employer Health Benefits Survey shows average premiums for employer-sponsored coverage of $4,824 for single coverage and $13,375 for family coverage.”

            – Kaiser Family Foundation

            That’s for 2009. For 2012 you can add probably 15% to that, at least.

          • Rupert in Springfield

            Looks like you have some homework to do my friend. You said you couldn’t get insurance for $428.

            Now you are trying to switch your losing point, that insurance was unavailable at that rate – to one you think you can win, what the average cost of insurance is.

            Well, the average cost of insurance was never in dispute. Your inane statement that you couldn’t get insurance for $428 was.

            The fact is you can. I do for far less and OHSU offers a plan for far less as well.

            Another Appell crash and burn.

          • DavidAppell

            If the average cost of a policy is $5,615/yr, and the average Medicaid recipient were to get $5,136/yr, then the average recipient could not buy the average policy. QED.

            Those with pre-existing conditions would have to pay more (if they could get it at all) and couldn’t afford it either. Maybe they *could* buy some high deductible, high copay policy, but they’d have to spend more than the Medicaid cost, and since their income is low by definition it’s unlikely they could afford that. And unless they were enrolled at OHSU — unlikely, for Medicaid recipients — they they could not get OHSU rates (which are so low partly probably because the pool is mostly young people). Again, QED.

            Medicaid gets the poor health care they could not afford in the private market if they were given vouchers.

          • DavidAppell

            “The average annual premiums in 2012 are $5,615 for single coverage and $15,745 for family coverage.”
            – Kaiser Family Foundation, Sept 2012

            $5615/yr =$468/month

            Plus, deductibles are rising:

        • Rupert in Springfield

          David – Would you get off the “I dont get this deduction so I think its unfair” idiocy. You bring this up every time there is a discussion of welfare benefits and continue to make the same mistake over and over.

          Someone getting a deduction gets no money from the government.

          Someone getting welfare benifits is getting money handed right to them or a provider.

          Big difference.

          It would be nice if you could finally learn this distinction so you could not continue to make this same logical mistake.

          Either that or get a job other than being a “science writer” that might enable you to buy a house and eliminate this envy you have.

          • DavidAppell

            Baloney. Homeowners who get a tax deduction for a home mortgage have their tax bill reduced — that’s a direct subsidy, and a cost to government, no less than if the government decided not to tax everyone with blue eyes. Other taxes elsewhere must be raised.

            These kinds of deductions only go to the well-off. That most of the home mortgage deduction goes to the very affluent is obscene. (It also raises home costs, which reduces the buying ability of those with lower incomes.)

          • Rupert in Springfield

            >Baloney. Homeowners who get a tax deduction for a home mortgage have their tax bill reduced — that’s a direct subsidy

            >no less than if the government decided not to tax everyone with blue eyes.

            Then therefore you are getting a direct subsidy because you are taxed at 20% rather than 90%?

            You are making a totally inane argument here. Someone you are envious of not getting taxed at the rate you would prefer is not the same as someone getting a check in the mail or service payment by the government.

          • DavidAppell

            Homeowner A takes the home mortgage interest deduction worth $M and then pays $X in taxes.

            Homeowner B makes the same income, gets no deduction, and pays $Y in taxes, but the government then sends him a check for $M, where Y-M=X.

            What’s the difference, to either the homeowners or the government?

      • DavidAppell

        Eliminating income taxes (etc) gets to the heart of what you’ve been asked before: are people who can’t afford the health care they need supposed to just go without, whatever the consequences, or is there to be a safety net? The assumption from CATO, and from you, it seems, is that this Medicaid money is somehow wasted. But it’s providing health care to people who need it and can’t afford it. I don’t see that as a waste at all, and because some people’s incomes put them below the poverty line does not mean this assistance isn’t useful.

  • Mike

    The best way to end poverty is to get a job.

  • valley person

    If we just send the poor more money, which would be more efficient, I somehow think conservatives would not be happy with that.

    • The standard of poorness is different in developed and developing countries. In developed countries poor is meaning ,jobless person but having basic facilities of life. While in developing countries jobless as well as do not have enough to eat and spend for his health and hair transplant

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