Rethinking the “War on Poverty”

michael tanner

michael tanner

In January 1964, President Lyndon Johnson delivered his first State of the Union address, and he declared an “unconditional war on poverty in America.” Almost 50 years later, on Jan. 21, Center of the American Experiment, a nonpartisan think tank that brings conservative and free market ideas to bear on the hardest problems facing Minnesota and the nation, held an event at the Radisson Blu in downtown Minneapolis entitled, War on Poverty or “War on Work?”. The purpose of the event was to understand what impact government efforts have had on poverty in America and to investigate other possible strategies to increase jobs and reduce poverty.

The keynote speaker was Michael Tanner, a renowned researcher in a variety of domestic policies with a particular emphasis on health care reform, social welfare policy, and Social Security. Tanner’s writings have appeared in nearly every major American newspaper, including the New York Times, Washington Post, Los Angeles Times, Wall Street Journal, and USA Today.

Tanner believes that government has failed to make any impact on reducing poverty in America. In 2012, the federal government spent $668 billion to fund 126 separate anti-poverty programs. State and local governments kicked in another $284 million, bringing total anti-poverty spending to nearly $1 trillion in that year alone. The poverty level varies from state to state, but the average is an annual income of $12,000 for one person. If you would take that $1 trillion and disperse it evenly to every poor person in America, you could write a check amounting to $20,610, or $61,830 per poor family of three. In fact, in most states the combined value of the most common welfare programs exceeds the earning potential of an entry-level job, discouraging welfare recipients from seeking those jobs and taking their first step up the economic ladder.

President Obama’s former Treasury secretary, Larry Summers, estimated “the existence of unemployment insurance almost doubles the number of unemployment spells lasting more than three months.” A person with a basic understanding of human nature should not be surprised by this fact. Workers are less likely to look for work or accept less-than-ideal jobs as long as they are shielded from the full consequences of being unemployed. That does not mean anyone is becoming rich off unemployment or that unemployed people are lazy. It means there is a problem with the way the government tries to help people out of poverty.

Leftist politicians want to extend these unemployment benefits, without realizing that the people most likely to suffer from extending them are the long-term unemployed. The longer workers stays unemployed, the more their skills deteriorate. By extending the time spent without a job, extending benefits makes it less likely that an unemployed worker will eventually find a job and could even reduce the workers’ wages when they do find work. Low-income workers with limited skills and frequent spells of unemployment may find this a particular problem.
Over the last 50 years, the government has spent more than $16 trillion to fight poverty. Yet today, 15 percent of Americans still live in poverty. That’s scarcely better than the 19 percent living in poverty at the time of Johnson’s speech. Clearly, it is time to rethink the way we approach poverty.

Tanner believes there are three keys to staying out of poverty, the first of which is to graduate high school. For people not graduating from high school, the chances of living in poverty increases substantially. Tanner believes that improving education needs to be an important topic within the conversation of decreasing poverty.
Tanner’s second key to avoiding poverty is to forego having children until marriage. “This is not a matter of morality for me,” Tanner said. “It’s common sense. Two incomes are better than one.” Being a single parent is extremely hard. A study done in 2003 showed that of families with children, 32 percent are poor if the family is headed by a single parent, but only seven percent are poor if two married parents head the family. Factoring in all the costs of a child, it makes sense to wait.
Tanner’s third key to stay out of poverty is to save income. This seems like common sense for many people, but the U.S. Bureau of Economic Analysis lists the national personal saving as a percentage of disposable personal income at a little over four percent. This is largely due to the fact that many people are counting on Social Security to provide for them when they retire; this is a huge mistake. In fact, Tanner points out, “Social Security is unfair to the poor, minorities, and women. The poor depend on it more than wealthier Americans yet tend to die sooner and hence receive less in benefits. Having lower life expectancies than whites, blacks are likewise disadvantaged, paying taxes all their adult lives but often getting little or no retirement benefits. Social Security gives women either 50 percent of their husbands’ benefits or benefits based on their own employment, whichever is larger. The former usually is larger, meaning that many women get no return at all for the taxes they paid.”

Privatizing Social Security would solve many of these problems and give a much better rate of return. It would also give every American–including poor Americans–an opportunity to participate in the economy by owning part of it. In effect, a privatized pension system would act as a nationwide employee stock-option plan, which would allow even the poorest workers to become capitalists. Through Social Security privatization, workers would become stockholders. The division between labor and capital would be broken.

Graduate high school, don’t get pregnant, and save: These are the keys to avoiding poverty, according to Michael Tanner. Simple compassion is not enough to defeat poverty. We should use a mindset of objectivity and accountability. We should constantly ask, “What is working, and what is not working?” Programs that fail should be ended—no matter how well intended. Fifty years of failure is a long enough.