“The War Over Poverty”: The Problem Of Poverty Is Part Of The Broader Problem Of Rising Income Inequality
Fifty years have passed since Lyndon Johnson declared war on poverty. And a funny thing happened on the way to this anniversary. Suddenly, or so it seems, progressives have stopped apologizing for their efforts on behalf of the poor, and have started trumpeting them instead. And conservatives find themselves on the defensive.
It wasn’t supposed to be this way. For a long time, everyone knew — or, more accurately, “knew” — that the war on poverty had been an abject failure. And they knew why: It was the fault of the poor themselves. But what everyone knew wasn’t true, and the public seems to have caught on.
The narrative went like this: Antipoverty programs hadn’t actually reduced poverty, because poverty in America was basically a social problem — a problem of broken families, crime and a culture of dependence that was only reinforced by government aid. And because this narrative was so widely accepted, bashing the poor was good politics, enthusiastically embraced by Republicans and some Democrats, too.
Yet this view of poverty, which may have had some truth to it in the 1970s, bears no resemblance to anything that has happened since.
For one thing, the war on poverty has, in fact, achieved quite a lot. It’s true that the standard measure of poverty hasn’t fallen much. But this measure doesn’t include the value of crucial public programs like food stamps and the earned-income tax credit. Once these programs are taken into account, the data show a significant decline in poverty, and a much larger decline in extreme poverty. Other evidence also points to a big improvement in the lives of America’s poor: lower-income Americans are much healthier and better-nourished than they were in the 1960s.
Furthermore, there is strong evidence that antipoverty programs have long-term benefits, both to their recipients and to the nation as a whole. For example, children who had access to food stamps were healthier and had higher incomes in later life than people who didn’t.
And if progress against poverty has nonetheless been disappointingly slow — which it has — blame rests not with the poor but with a changing labor market, one that no longer offers good wages to ordinary workers. Wages used to rise along with worker productivity, but that linkage ended around 1980. The bottom third of the American work force has seen little or no rise in inflation-adjusted wages since the early 1970s; the bottom third of male workers has experienced a sharp wage decline. This wage stagnation, not social decay, is the reason poverty has proved so hard to eradicate.
Or to put it a different way, the problem of poverty has become part of the broader problem of rising income inequality, of an economy in which all the fruits of growth seem to go to a small elite, leaving everyone else behind.
So how should we respond to this reality?
The conservative position, essentially, is that we shouldn’t respond. Conservatives are committed to the view that government is always the problem, never the solution; they treat every beneficiary of a safety-net program as if he or she were “a Cadillac-driving welfare queen.” And why not? After all, for decades their position was a political winner, because middle-class Americans saw “welfare” as something that Those People got but they didn’t.
But that was then. At this point, the rise of the 1 percent at the expense of everyone else is so obvious that it’s no longer possible to shut down any discussion of rising inequality with cries of “class warfare.” Meanwhile, hard times have forced many more Americans to turn to safety-net programs. And as conservatives have responded by defining an ever-growing fraction of the population as morally unworthy “takers” — a quarter, a third, 47 percent, whatever — they have made themselves look callous and meanspirited.
You can see the new political dynamics at work in the fight over aid to the unemployed. Republicans are still opposed to extended benefits, despite high long-term unemployment. But they have, revealingly, changed their arguments. Suddenly, it’s not about forcing those lazy bums to find jobs; it’s about fiscal responsibility. And nobody believes a word of it.
Meanwhile, progressives are on offense. They have decided that inequality is a winning political issue. They see war-on-poverty programs like food stamps, Medicaid, and the earned-income tax credit as success stories, initiatives that have helped Americans in need — especially during the slump since 2007 — and should be expanded. And if these programs enroll a growing number of Americans, rather than being narrowly targeted on the poor, so what?
So guess what: On its 50th birthday, the war on poverty no longer looks like a failure. It looks, instead, like a template for a rising, increasingly confident progressive movement.
By: Paul Krugman, Op-Ed Columnist, The New York Times, January 9, 2014
“The Vicious Circle Of Income Inequality”: New Forces Are Causing Inequality To Feed On Itself
Almost every culture has some variation on the saying, “rags to rags in three generations.” Whether it’s “clogs to clogs” or “rice paddy to rice paddy,” the message is essentially the same: Starting with nothing, the first generation builds a successful enterprise, which its profligate offspring then manage poorly, so that by the time the grandchildren take over, little value remains.
Much of society’s wealth is created by new enterprises, so the apparent implication of this folk wisdom is that economic inequality should be self-limiting. And for most of the early history of industrial society, it was.
But no longer. Inequality in the United States has been increasing sharply for more than four decades and shows no signs of retreat. In varying degrees, it’s been the same pattern in other countries.
The economy has been changing, and new forces are causing inequality to feed on itself.
One is that the higher incomes of top earners have been shifting consumer demand in favor of goods whose value stems from the talents of other top earners. Because the wealthy have just about every possession anyone might need, they tend to spend their extra income in pursuit of something special. And, often, what makes goods special today is that they’re produced by people or organizations whose talents can’t be duplicated easily.
Wealthy people don’t choose just any architects, artists, lawyers, plastic surgeons, heart specialists or cosmetic dentists. They seek out the best, and the most expensive, practitioners in each category. The information revolution has greatly increased their ability to find those practitioners and transact with them. So as the rich get richer, the talented people they patronize get richer, too. Their spending, in turn, increases the incomes of other elite practitioners, and so on.
More recently, rising inequality has had much impact on the political process. Greater income and wealth in the hands of top earners gives them greater access to legislators. And it confers more ability to influence public opinion through contributions to research organizations and political action committees. The results have included long-term reductions in income and estate taxes, as well as relaxed business regulation. Those changes, in turn, have caused further concentrations of income and wealth at the top, creating even more political influence.
By enabling the best performers in almost every arena to extend their reach, technology has also been a major driver of income inequality. The best athletes and musicians once entertained hundreds, sometimes thousands of people at one time, but they can now serve audiences of hundreds of millions. In other fields, it was once enough to be the best producer in a relatively small region. But because of falling transportation costs and trade barriers in the information economy, many fields are now dominated by only a handful of the best suppliers worldwide.
Income concentration has changed spending patterns in other ways that widen the income gap. The wealthy have been spending more on gifts, clothing, housing, celebrations and other things simply because they have more money. Their extra spending has shifted the frames of reference that shape demand by others just below them, so these less wealthy people have been spending more, and so on, all the way down the income ladder. But because incomes below the top have been stagnant, the resulting expenditure cascades have made it harder for middle- and low-income families to make ends meet. Despite taking on huge amounts of debt, they’ve been unable to keep pace with community standards. Interest payments impoverish them while enriching their wealthy creditors.
But perhaps the most important new feedback loop shows up in higher education. Tighter budgets in middle-class families make it harder for them to afford the special tutors and other environmental advantages that help more affluent students win admission to elite universities. Financial aid helps alleviate these problems, but the children of affluent families graduate debt-free and move quickly into top-paying jobs, while the children of other families face lesser job prospects and heavy loads of student debt. All too often, the less affluent experience the miracle of compound interest in reverse.
More than anything else, what’s transformed the “rags to rags in three generations” story is the reduced importance of inherited wealth relative to other forms of inherited advantage. Monetary bequests are far more easily squandered than early childhood advantage and elite educational credentials. As Americans, we once pointed with pride to our country’s high level of economic and social mobility, but we’ve now become one of the world’s most rigidly stratified industrial democracies.
Given the grave threats to the social order that extreme inequality has posed in other countries, it’s easy to see why the growing income gap is poised to become the signature political issue of 2014. Low- and middle-income Americans don’t appear to be on the threshold of revolt. But the middle-class squeeze continues to tighten, and it would be imprudent to consider ourselves immune. So if growing inequality has become a self-reinforcing process, we’ll want to think more creatively about public policies that might contain it.
In the meantime, the proportion of our citizens who never make it out of rags will continue to grow.
By: Robert H. Frank, Economics Professor, The Johnson Graduate School of Management at Cornell University; The New York Times, January 11, 2014
“Not A Creator Or Manufacturer In The Lot”: America’s Would-Be Aristocrats Forget The Most Important Thing About Business
To paraphrase Tolstoy, every successful small business shares the same traits. And they all begin with high-quality employees. I’m thinking of three local establishments where I’ve traded for years: an auto repair garage, a dentist’s office, and a one-size-fits-all country store where I buy cattle- and horse-feed.
Along with just about everything else the aptly-named “Toad Suck One-Stop” might conceivably carry: from crickets and minnows to motor oil, pain remedies, kitty litter and homemade sandwiches. If you get up early enough, they’ll even fix you breakfast while somebody else loads feed sacks into your truck. (Toad Suck is a place name designating a long-ago ferryboat stop on the Arkansas River.)
It’s much the same at George Jett’s auto garage down in Little Rock; also at my dentist (his name is Lamar Lane). The first thing you notice is familiar faces. People who work at these places stay for years. And they do so because they’re well-paid, earn decent benefits, and are treated respectfully. So they like their jobs, take pride in their work, and are glad to see familiar customers.
Now I’m not going to lie that I love going to the dentist. But I do like feeling among friends, even if it means hearing Dr. Lane carry on about his LSU Tigers. (Because my wife was born in Baton Rouge, where her daddy played ball, I get a double dose.)
Something else: how a business treats employees also tends to be a reliable predictor of how they treat customers. Dr. Lane does high-quality work and stands by it. If a crown breaks, he replaces it free without asking if you were shelling pecans with your teeth.
My man George Jett hires good mechanics, values their skills, and guarantees their work. If the rattle’s still there, he’ll drive the vehicle around the block and then put it back on the lift to figure out why—also at no additional charge.
Jason down at the One-Stop isn’t exactly a philanthropist — at least not where Bermuda grass hay and Canadian night-crawlers are concerned. Keeping a business with so many moving parts running requires constant attention to detail. New hires that stand out back smoking when shelves need restocking tend not to last. Loyal longtime employees won’t cut them much slack.
Gas is cheaper at the Walmart across the river in Faulkner County, but the One-Stop’s pumps stay busy. It’s the community’s unofficial town hall. If you want to know who’s looking for a lost blue heeler or how Holly’s orphaned baby raccoons are doing, it’s got to be the One-Stop.
Ordinarily, such commonplaces would hardly be worth recording. So there are friendly folks at the country store.
Who’d have thunk it?
Unless, that is, you live in the United States of America, a large proportion of whose tycoon class appears determined to drag us back to the Gilded Age.
If they gave a Scrooge McDuck Award for the nation’s greediest knucklehead, the 2013 winner would be Home Depot’s billionaire founder Kenneth Langone, a Catholic who voiced public alarm at Pope Francis’s seeming enthusiasm for the gospel of Matthew 19. That’s where Jesus observes that “it is easier for a camel to go through the eye of a needle than for someone who is rich to enter the kingdom of God.”
The Pope didn’t cite that verse, nor discuss politics as such. However, his encyclical Evangelii Gaudium did warn against “crude and naive trust in the… sacralized workings of the prevailing economic system.”
What, not worship money? Never mind that this is elementary Christian doctrine. Langone warned that American plutocrats don’t want to hear about it, even in church.
You may not be surprised this same worthy also regards President Obama as “petulant” and “unpresidential.” His hawklike visage appeared prominently in a Forbes photo lineup of “Anti-Obama Billionaires.”
Scrutinizing the list, I noticed that almost everybody on it made his pile either by manipulating money or squeezing minimum-wage workers dry: casino operators, real estate speculators, corporate buyout scammers, hedge fund geniuses, fast-food franchisers, big-box retailers, and Donald Trump.
Not a creator or manufacturer in the lot. This is our would-be new American aristocracy, largely bereft of — indeed actively hostile toward — the retail virtues I’ve celebrated. (None of whose practitioners necessarily share my partisan views; I’m talking morals here, not politics.)
But the good news is that according to Adam Davidson in the New York Times, old-fashioned business ethics may be making a comeback through the unlikely agency of a Turk. According to Davidson, the going thing in corporate circles is The Good Jobs Strategy, a book by Zeynep Ton, an M.I.T. business professor.
Ton argues that what some call the “Costco” strategy of hiring better-trained, better-paid employees “will often yield happier customers, more engaged workers and—surprisingly—larger corporate profits.”
By: Gene Lyons, The National Memo, January 8, 2014
“Meet The Poverty Liars”: GOP Peddles More Garbage In War On The Poor
As we observe the 50th anniversary of Lyndon Johnson declaring the “War on Poverty” this week, it’s worth remembering the way Ronald Reagan wrote its history, and its epitaph, with a soothing nine-word bromide: “We fought a war on poverty, and poverty won.”
It’s worth remembering, because as Republicans scramble to appear as though they care about the poor, circulating memos teaching how to seem “compassionate” and digging “anti-poverty plans” out of dusty file folders from the 1980s, all they’re doing is updating Reagan for the 21st century. And Reagan was dead wrong the first time around.
It’s almost impossible to exaggerate the effect of Reagan’s War on Poverty lies, especially as they’re warmed over by Sen. Marco Rubio and Rep. Paul Ryan as they dream about 2016. Even though Reagan began his Republican political career as a race-baiter and anti-welfare demagogue, by the 1980 campaign and his presidency, he’d softened some. He didn’t rail as much against “welfare queens” and “young bucks” buying T-bone steaks with food stamps. Now he projected concern for the poor: He wanted to help them, and poverty programs hurt them.
Of course, we can’t forget the racial component of Reagan’s anti-welfare animus. Racial division is what doomed Johnson’s War on Poverty, almost as soon as it began. I was riveted by Slate’s feature on the actual woman behind Reagan’s race-baiting “welfare queen” stereotype. Reagan didn’t invent her, as many people thought over the years; his anecdote was based on Linda Taylor, a Chicago woman who did in fact use multiple identities to commit welfare fraud.
But my takeaway from Josh Levin’s mind-blowing piece had nothing to do with government poverty programs: Linda Taylor was a scary sociopath, a serial identity-switcher credibly accused of multiple cases of kidnapping and murder. Yet politicians and the media focused on the welfare fraud charges. It was the Chicago Tribune, not Reagan, that dubbed her the “welfare queen.” The Chicago police officer responsible for investigating her actual crimes was aghast at the focus on her welfare-grifting rather than her more far serious crimes. She went down in history as a symbol of a “welfare cheat,” not the kind of shrewd but deadly con artist and criminal that comes in every color and gender. And she got away with everything except the welfare fraud.
There weren’t neighborhoods full of Linda Taylors; there was one. But she’s the person Reagan chose to represent the millions of mothers – the vast majority of them white, by the way — struggling to feed their children on welfare aid that in many states might not bring them over the poverty line. And too many Americans chose to believe him.
Later, they believed his lyrical lie about welfare. Reagan revolutionized the poverty game for Republicans: You didn’t have to be angry and Nixonian, or an Archie Bunker type, to be against welfare anymore; instead you could project compassion. White middle-class folks didn’t have to worry that they were indulging resentment, or God forbid racism, by opposing poverty programs. Those programs hurt the poor; Reagan said so.
And here we are again. On the one hand, it’s a slight relief to see some in the GOP abandoning their ugly narrative about “makers” and “takers,” their demonization of the “47 percent” who “just won’t take care and responsibility for their lives,” in Mitt Romney’s campaign-killing words. House Republican leaders are now coaching members to show “compassion” for the unemployed, making sure they reflect that it’s a “personal crisis” and that they will give “proper consideration” to an extension of benefits — as long as Democrats cut other programs, of course — instead of rejecting it out of hand as they did last month.
Meanwhile Sen. Marco Rubio made a whole video to channel Reagan’s ideas about poverty programs. (Is it just me, or is anyone else waiting for him to lurch for a nearby bottle of water and take a slug?) Sleepy-eyed and absolutely unconvincing, Rubio asks: “After 50 years, isn’t it time to declare big government’s war on poverty a failure?” Not surprisingly, his cheesy video offers absolutely no policy agenda to fight poverty.
Rubio’s efforts are being met by well-deserved cynicism in the media and among Republicans. Not so for Paul Ryan’s claims that he’ll develop a bold new anti-poverty agenda. Yet so far, the notions Ryan has floated sound like warmed over Enterprise Zones, the failed 1980s GOP prescription for urban neighborhoods that cut taxes and created other incentives for employers to hire poor residents. Not to be outdone, Sen. Rand Paul is advocating “enterprise zones on steroids,” what he calls “economic freedom zones” in places like Detroit with high unemployment.
Of course, every reputable study of enterprise zones has found their impact on urban poverty “negligible” to nonexistent. “Enterprise zones are not especially effective at increasing overall economic activity or raising incomes for the poor,” Len Burman of the Urban/Brookings Tax Policy Center told Politico recently. “They just seem to move the locus of activity across the zone’s boundary — reducing activity outside the zone and increasing it inside.”
Criticizing GOP flim-flam on poverty shouldn’t obscure the fact that the War on Poverty didn’t do all that its sponsors hoped. That’s not because we did too much, but because we did too little. It’s true that in the immediate wake of the war’s launch, poverty fell from roughly 22 percent to 12 percent, before it began to climb again in the mid-1970s. Not surprisingly, given that establishing Medicare and expanding Social Security were its core components, Johnson’s anti-poverty push made the biggest strides in reducing poverty among the elderly.
For the rest of the poor, the program was never as ambitious – or successful. Johnson famously rejected a big public works jobs program as too expensive, especially as the Vietnam War escalated. He agreed to make “community action” a centerpiece of his anti-poverty work, but he had very different ideas about what that meant than some of the people who implemented the program. To kick it off, Johnson called Chicago Mayor Richard Daley and told him, “Get your planning and development people busy right now to see what you do for the crummiest place in town, the lowest, the bottom thing, and see what we can do about it. We’ll get our dough, and then you can have your plan ready, and we’ll move.”
But on the ground, community action organizers saw their role as organizing the poor to challenge mayors like Daley, which widened existing fissures around race and power in the Democratic Party. Federally funded anti-poverty warriors often took the side of urban insurgents – which was surely the correct side, in moral terms, but with hindsight, not the most effective way to mount a controversial and weakly bipartisan anti-poverty effort.
Finally, Democrats ran away from the War on Poverty, joining Reagan in declaring that government was too often a problem rather than a solution. Bill Clinton’s anti-poverty agenda was a stealthy one. With one hand, he ended welfare as we knew it with the 1996 reform act; with the other hand, he funneled billions to poor people by expanding the Earned Income Tax Credit – a Republican idea – as well as eligibility for food stamps and Medicaid. That lifted millions of Americans above the poverty line — but most Americans didn’t know he did it. Democrats from Jimmy Carter to Clinton to Barack Obama – at least until recently — have contributed to the belief that “we fought a war on poverty, and poverty won,” by refusing to either take credit for existing programs that fight poverty or advance a bold new agenda to update them.
That’s changing some. Obama is said to be readying a big income inequality push for his State of the Union, and he seems to have realized it must include taking aim at persistent poverty. With even Republicans conceding they can no longer demonize the poor, maybe Democrats can do something to actually help them.
By: Joan Walsh, Editor at Large, Salon, January 8, 2014
“The Silence Of The Austerians”: Here’s Why 2014 Could Be The Year America Finally Ditches Its Inane Deficit Obsession
The year 2013 will be seen as a year of crushing intellectual defeat for advocates of fiscal austerity. There were many smaller victories, but this big one came in April. Researchers at the University of Massachusetts examined the Austerian paper, “Growth in a Time of Debt,” by Carmen Reinhart and Ken Rogoff, which said that countries whose debt-to-GDP ratio reaches 90 percent experience dramatically slower growth. The UMass folks found not only dodgy statistics and backwards causation, but a goof in the paper’s Excel spreadsheet. The causation and statistics errors were more serious, but the fact that elites around the globe had gleefully embraced something with a flub any office temp could understand was horribly embarrassing.
It was an intellectual rout that badly wrong-footed the Austerians, who have since been notably half-hearted in the face of a resurgent left now campaigning on economic justice. This includes, for example, increasing Social Security benefits, which was unthinkable two years ago, when the fight to stop benefits from being cut was nearly lost.
The question for 2014, then, will be whether this triumph can be consolidated and expanded into the policy sphere. Because despite the intellectual collapse, Austerian assumptions and reasoning still dominate United States policy, which is undertaking fiscal consolidation at a pace not seen since the WWII demobilization. If the current Austerian death grip on the framework of policy negotiation can be broken, there might be a chance.
The answer to this question turns on how one views intellectual debate. Given the history of the last few years, one could be forgiven for thinking it’s pointless. As the Polish economist Michal Kalecki demonstrated brilliantly, there are powerful cultural and class-based reasons for both political and business elites to favor austerity now.
We see this today, as Steve Randy Waldman has demonstrated, in the blatant double standards applied to austerity as compared to inequality or raising the minimum wage. Consider a recent paper by the liberal economist Jared Bernstein, which, while outlining much excellent evidence about the economic harm of inequality, is stuffed with unnecessary hedging and hesitation. The Reinhart and Rogoff paper, by contrast, was weak even without knowing about the Excel and stats errors (as Paul Krugman, among others, observed at the time), but elites nearly tripped over their own feet seizing on it anyway. Their bogus “90 percent” conclusion was stated as economic fact by everyone from Paul Ryan to the Washington Post editorial board.
However, biased reasoning is different than no reasoning at all. Seizing on a fig leaf paper fulfills a deep psychological need. Current elites may be largely greedy, corrupt hypocrites, but the cultural credibility of science is such that what amounts to outright class warfare must have an “evidence-based” patina. It’s far too gauche to simply ram through one’s favored policies because you want all the money or to kick the poor.
Therefore, fiscal policy in 2014 and 2015 will hinge on whether the Austerian coalition can be split (assuming, as is probable, that progressive Democrats don’t sweep the 2014 midterms).
Roughly speaking, we’re talking about the center and the right, and there are good reasons to suppose that neither will be brought around. For the center, it takes an intellectual defeat roughly akin to the Battle of Trafalgar to get them to grudgingly abandon austerity. (And if some hack economist churns out another pro-austerity paper, they will probably grab it eagerly.) Meanwhile, “straight” reporters have been culturally conditioned to code deficit reduction as a non-ideological good thing, so even very recent straight reporting still contains buried Austerian assumptions.
And on the right, things look especially hopeless. Denial and motivated reasoning are so epidemic that even Mitt Romney believed the “unskewed” polls before the 2012 election. Ivory tower arguments alone are useless here.
However, all hope is not lost. The key is to change what is considered acceptable for budgetary negotiations. Right now, they all assume that any new spending must be “offset” by cuts elsewhere. That aversion to deficit spending is 100 percent Austerian.
So while Republicans are largely immune to evidence, it’s also true they don’t actually care about the deficit in and of itself. They favor reduced taxes on the rich and cutting social insurance. What’s more, conservative reformists at places like National Affairs have gotten louder and bolder in their advocacy of new thinking, even including infrastructure spending.
So if the center, especially including President Obama, can be persuaded to drop their deficit obsession (and again, it’s hardly possible to overstate how badly this debate has been lost), we could trade tax cuts for some austerity relief, like re-extending unemployment benefits and food stamps. And, it’s important to note, both spending increases and tax cuts count as austerity relief. Tax cuts, especially on the rich, aren’t very good stimulus, but they still put money into people’s pockets.
But the main point is to shift ground for negotiation. This strategy of “tax cuts for more spending” has been suggested many times in the past few years and gone nowhere. But before that, it had been the basis for many successful bipartisan deals, including expanding Medicaid in the 1980s and the CHIP program in the 1990s.
So while the deck is stacked against the anti-Austerians, continuing the intellectual battle is by no account useless. It’s highly possible to influence even a crooked debate.
By: Ryan Cooper, Web Editor of The Washington Monthly; Published in The New Republic, January 5, 2014
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