Economics, Pethokoukis, U.S. Economy

Here’s why we might actually be winning the war on poverty

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I am skeptical of all economic statistics showing Americans no better off than they were 30 or 40 years ago. This new study makes me even more confident in that stance. Winning the War: Poverty from the Great Society to the Great Recession by Bruce D. Meyer and James X. Sullivan:

Citing official poverty statistics many have concluded that the U.S. has made little progress in reducing poverty. Furthermore, trends in official poverty have led some to argue that we have lost the war on poverty—that the panoply of income support programs, from food stamps to unemployment insurance, have been ineffective anti-poverty tools.

While the deficiencies in the official poverty measure have been the subject of much previous research, most poverty scholars still rely on the official measure as the definitive measure of trends in poverty and draw important conclusions based upon it.

The results in this paper contradict the notions that poverty has shown little improvement over time and that anti-poverty efforts have been ineffective. We show that moving from traditional income-based measures of poverty to a consumption-based measure (which is arguably superior on both theoretical and practical grounds) and, crucially, accounting for bias in the cost of living adjustment leads to the conclusion that the poverty rate declined by more than 25 percentage points between 1960 and 2010, with 8.5 percentage points of that decline occurring since 1980.

There are several explanations for these improvements.

– Poverty has been sharply reduced through tax rate cuts and tax credits.

– Increases in social security have played a large role in reducing poverty, but other transfers have played only a small role.

– Some of the decline can also be accounted for by rising educational attainment.

Since 1980, our consumption based poverty results suggest much greater improvement than those for income poverty for single parent families and the aged. However, relying on consumption we find little additional improvement in poverty for married parent families, suggesting that additional anti-poverty efforts for these households with children merit further investigation.

Despite repeated claims of a failed war on poverty, our results show that the combination of targeted economic policies and policies that support growth has had a significant impact on poverty. Better standard headcount measures of poverty show a sharp improvement in recent decades. Going beyond traditional headcount poverty measures, deep poverty and poverty gaps show even greater improvement, implying that considerable progress has been made at reducing severe deprivation. There have been noticeable improvements in the last decade, though they are not as big as the improvements in some prior decades, (but comparable or better than the progress in the 1980s). We may not have won the war on poverty, but we are certainly winning.

Meyer and Sullivan has also done some great working looking at median incomes and consumption.

One thought on “Here’s why we might actually be winning the war on poverty

  1. The real question should be what did the “war on poverty” set out to do and how well did it do it–if at all?

    The war on poverty wasn’t just meant to make people better off or raise their incomes; it was meant to end mass dependency on government programs, to turn “tax eaters” into “taxpayers.”

    When you look at the war on poverty in this lens, it is clear that it was not a success at all–and it’s also not clear by any means whether or not we are “certainly winning” as you say.

    It seems as if there are more “tax eaters” today than ever before–certainly more than when the war on poverty was first announced.

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