Mike Kueber's Blog

October 30, 2013

The GOP war on the poor

Filed under: Issues,Politics — Mike Kueber @ 4:38 am
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The NY Times, like most in the mainstream media, likes to seed discord amongst the ranks of the Republican Party.  Consistent with this predilection, the Times recently published an article titled, Ohio Governor Defies G.O.P. with Defense of Social Safety Net.”  The article leads with the following quote from Ohio Governor John Kasich:

  • I’m concerned about the fact there seems to be a war on the poor.  That if you’re poor, somehow you’re shiftless and lazy.

I’m a longtime fan of Kasich, ever since he was chairman of the House Budget Committee that balanced the federal budget in the late 90s.  He’s always been a free-thinking maverick/iconoclast, so this recent policy position is not surprising.  But as a conservative who is not trying to win an election, I wonder about the soundness of the position.

My most recent entry in my blog concerned the movie titled, “Waiting Room,” and it portrayed the experience of those waiting to be seen by a doctor in a county hospital.  Those people were poor and could be generally described as “shiftless and lazy” – i.e., no ambition and no energy.

A social safety net is described by Wikipedia as programs designed to prevent “the poor or those vulnerable to shocks and poverty from falling below a certain poverty level.”  The challenge to America’s safety net is to distinguish between those who need help because of a shock or an incapacity to participate in our modern economy.

Kasich will, of course, say things for popular consumption, but he needs to recognize that one size does not fit all.  Some people will respond to opportunity; others are basket cases.

March 28, 2013

Who is poor?

Filed under: Issues,Politics — Mike Kueber @ 11:59 am
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While visiting with a friend in Austin last week, he suggested to me that the definition of poor in America should be revised to include the welfare benefits that poor people receive from the government.  I told him that, coincidentally, I had seen a NY Times article on the subject just the day before, but hadn’t had time to read it.  When I finally had a chance to read the article, I learned that it was directly responsive to my friend’s suggestion.    

According to the article, there are three ways of defining poverty in America:

  1. The current (official) calculation.  The official Census Bureau method, which uses a set of income thresholds that vary by family size and composition;
  2. My friend’s proposal.  An experimental income-based method called the Supplemental Poverty Measure that factors in government programs designed to help people with low incomes; and
  3. Another idea.  A consumption-based method that measures what households actually spend.

The NY Times article contains some interesting elaboration of each of these methods:

  • The official definition was established in 1963 by the Kennedy Administration and uses as a point of reference the average dollar value of all the food needed for a week, times three. Income is calculated on a pre-tax basis including earnings, unemployment benefits, Social Security, disability, welfare, pensions, alimony and child support. The poverty threshold is set at the point at which a family would have to spend more than a third of its income on food.
  • The second income-based method of calculating poverty, the Supplemental Poverty Measure, is also published by the Census. It was first released in 2011. The S.P.M. adds together cash income, tax credits (in particular, the Earned Income Tax Credit, the benefit most important to the working poor), plus the value of in-kind benefits used to pay for food  (food stamps), clothing, shelter and utilities, and then subtracts taxes paid, work expenses (including child care), out-of-pocket medical costs and child support paid to another household.

Depending on which method you use, you will come up with dramatically different conclusions about poverty in America.  For example, “according to the two income-based methods of calculation, poverty is increasing; according to the consumption-based method, it is decreasing, especially for the elderly.  The poverty rate for poor children, under the official measure, is 22.3 percent; under the S.P.M. it is only 18.1 percent. The rate of poverty for those 65 and older is 8.7 percent under the official measure, but it nearly doubles to 15.1 percent under the S.P.M.  If the S.P.M. were adopted as the official measure used by government agencies to define poverty, millions of poor children would either lose, or face reductions in, benefits from means-tested programs, while millions of those over the age of 65 would qualify for government assistance.”

As America attempts to resolve its deficit problem, means-testing will play an increasing role.  That makes selecting a definition for “poor” an important decision.  The current, official definition is outdated, and both of the alternatives (supplemental and consumption) have solid arguments in their favor.  My preference would be to keep both methods available and then to make a reasoned choice, depending on the situation in which it is applied.

October 11, 2012

Dealing with poverty in America

Filed under: Economics,Issues,Law/justice,Politics — Mike Kueber @ 7:40 pm
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The presidential campaign is forcing Americans to think about how America deals with poverty.  Does America have a self-serving interest to create opportunity so that the poor can escape poverty?  Or are private and religious entities primarily responsible for charity? 

As American government and Americans become more secular, many believe that government, in addition to encouraging equal opportunity for the disadvantaged, will have an increased responsibility for providing a safety net that ensures that all citizens, except irresponsible bums, avoid poverty.

Is America wealthy enough to afford such a safety net?  A New York Times editorial, based on a Cato Institute analysis, responds with a resounding “yes.” 

LBJ started our war on poverty almost 50 year ago when almost 20% of Americans were living in poverty.  That rate dropped to as low as 10% before heading north again to its current rate of 15%.   The Cato Institute analysis describes the panoply of government programs costing almost $952 billion a year, of which $668 billion is by the feds and $284 by the states and locals.  These programs are intended to deal with poverty in America.  Although the article describes these overlapping programs as “The American Welfare State,” I think that term is misleading because of its close resemblance to the notorious European Welfare State. 

In the case of Europe, welfare state has come to mean any redistribution program, and would typically include Social Security, Medicare, and ObamaCare.  By contrast, the Cato study of American programs is limited to those that conform to the traditional definition of welfare – i.e., assistance for the poor.  Thus the $1 trillion of spending examined by Cato includes Medicaid, but not Medicare or Social Security.   

The New York Times editorial suggests that America spends so much money attempting to ameliorate poverty that the 46 million Americans currently in poverty could be immediately moved out of poverty if the money were issued as a direct payment to those in poverty.  Instead of considering that as a serious option, the editorial suggests that the lesson to be learned is that America’s anti-poverty spending is scandalously ineffective.  But the editorial is lacking in suggesting fixes.  Block grants, such as what Paul Ryan has proposed for Medicaid, is an option, along with a shift in mindset by measuring a program’s effectiveness by outcomes (number of self-sufficient individuals) instead of inputs (dollars thrown at a problem).

Getting back to the Cato study, the Top 13 are as follows:

  1. Medicaid; $228 billion in 2011; 48.9 million beneficiaries
  2. Food stamps (SNAP); $72 billion; 44.2 million beneficiaries
  3. Earned income tax credit; $55 billion; 27 million beneficiaries
  4. Child tax credit; 18.5 million beneficiaries
  5. Pell grants; $41 billion; 8.7 million beneficiaries
  6. Supplemental security income; $43.7 billion; 8.1 million beneficiaries
  7. State Children’s Health Insurance Program (SCHIP); $13.459 billion; 7.7 million beneficiaries
  8. Housing vouchers; $18.1 billion; 5.1 million beneficiaries
  9. Temporary Assistance to Needy Families (TANF); $21 billion; 4.5 million beneficiaries
  10. National School Lunch Program; $10.9 billion; 31 million beneficiaries
  11. Adjustable-rates mortgages; $10.6 billion; 43,687 units
  12. Special supplemental nutrition program (WIC); $7.17 billion; 9.18 million beneficiaries
  13. Head Start; $7.1 billion; 904,000 beneficiaries

The New York Times is correct in concluding that the problem is not that America doesn’t spend enough money to fight poverty.  The problem is that the spending is often ineffective.  The same can be said for education.  And a John Stossel is wont to say, the micro-management by government is more often the problem than the solution.

July 30, 2012

Eliminating poverty in America

Filed under: Issues,Politics — Mike Kueber @ 4:45 am
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The cover of  Time magazine this week was titled, “How Guns Won.”  Obviously Time was lamenting the fact that the gun-control fanatics did not win.

Similarly, an op-ed piece in the NY Times today lamented the fact that America seems unable to end poverty.  The Times piece began, “Ronald Reagan famously said, ‘We fought a war on poverty and poverty won.’ With 46 million Americans — 15 percent of the population — now counted as poor, it’s tempting to think he may have been right.” 

Implicit in the Time’s op-ed piece is that it is America’s obligation to end poverty.  I disagree.  America should endeavor to provide opportunity for every American to avoid poverty, but all Americans should have the right to live in poverty if they choose to ignore the opportunities that they have. 

The author of the op-ed piece, Peter Edelman, seems to think that poverty can be eliminated through the ballot – i.e., income redistribution.  That approach seems short-sighted because it might produce short-term numbers but long-term dependency on government.