Why We Lost the War on Poverty

Take a look at the graph below. From the end of World War II until 1964 the poverty rate in this country was cut in half. Further, 94% of the change in the poverty rate over this period can be explained by changes in per capita income alone. Economic growth is clearly the most effective antipoverty weapon ever devised by men.

The dotted line shows what would have happened had this trend continued. Economic growth would have reduced the poverty rate to a mere 1.4% of the population today ― a number so low that private charity could probably have taken care of any unmet needs.

But we didn’t continue the trend. In 1965 we launched a War on Poverty. And as the graph shows, in the years that followed the portion of Americans living in poverty barely budged. In 1965, 18% of the population lived in poverty. Today we are at 15%, or 50 million Americans. That’s after spending $15 trillion on antipoverty programs and continuing to spend $1 trillion a year.

Poverty in the United States

Now here is something you may not know. Early on ― in the first decade of our 50-year experiment with an expanded welfare state ― carefully controlled experiments funded by the federal government established without question that welfare changes behavior. It leads to the very behavioral changes that keep people in a state of poverty and dependency. Think about that. Any serious social science debate about the effects of welfare on the behavior of the recipients was resolved four decades ago!

We now know a lot about how behavior affects poverty. In fact, if you do these four things, it’s almost impossible to remain poor:

  1. Finish high school,
  2. Get a job,
  3. Get married, and
  4. Don’t have children until you get married.

So how does welfare affect behavior? In the late 1960s the federal government sought to find that out in what Charles Murray calls “the most ambitious social science experiment in history.”

The experiments were all conducted by social scientists that believed in the welfare state and had no doubt about its capacity to be successful. In other words, they were confident of the answers before the experiments ever began. Their goal was to prove that popular wisdom was all wrong ― that welfare would not cause people to reduce their work effort, to get married less often, divorce more quickly or engage in other dysfunctional behavior.

The experiments were all controlled. Randomly selected people were assigned to a “control group” and an “experimental group.” The latter received a guaranteed income, and the program even used Milton Friedman’s term for it: a negative income tax. The largest, longest and best-evaluated of these experiments was SIME/DIME (Seattle Income Maintenance Experiment/Denver Income Maintenance Experiment) in Seattle and Denver. And the results were not pretty. To the dismay of the researchers, they largely confirmed what conventional wisdom had thought all along. As I reported in “Privatizing the Welfare State“:

  • The number of hours worked dropped 9% for husbands and 20% for wives, relative to the control group. For young male adults it dropped 43% more.
  • The length of unemployment increased 27% among husbands and 42% for wives, relative to the control group. For single female heads of households it increased 60% more.
  • Divorce increased 36% more among whites and 42% more among blacks. (In a New Jersey experiment, the divorce rate was 84% higher among Hispanics.)

BTW, these results have been studied and studied over and over again and there is a large literature on them ― almost all of it written by researchers who detested the outcomes. Good summaries are provided by Charles Murray and Martin Anderson.

Both authors point out that the results are even worse than they appear at first. For one thing, the “control group” had access to conventional welfare available in the 60s and 70s. So this was by no means a pure (welfare free) control group. Also, the enrollees were given different instructions about how long they could expect their guaranteed income to last. It turns out that the longer the guarantee, the worse the negative effects.

So far as I can tell there was no marriage penalty in these experiments ― certainly nothing like we have today ― and little or no penalty for earning a higher income. With the passage of time all these incentives have become increasingly more perverse. For example, over the past 50 years we have added one marriage penalty after another to welfare benefits. There is a very strong marriage penalty in ObamaCare, for example. And even Paul Krugman concedes that the marginal tax rate faced by low-income families is in excess of 80% today. (It actually goes above 100% in many cases.) And ObamaCare will make the penalty for working and earning even higher.

So here is the important public policy question: If it is well established that self-sufficiency is closely related to working and being married, why are we “fighting poverty” by doing things that social scientists have known for decades lead to less work and fewer marriages?

And here is a public discourse question: Why are New York Times columnists Paul Krugman and Nicholas Kristof declaring the War on Poverty a success when it is so obviously a failure? Both columnists claim that if we count goods-in-kind (food stamps, housing, Medicaid, etc.), the actual poverty rate would be lower by one-third. Of course, if we give people enough stuff and count it as income, we could declare victory and claim that there is no more poverty.

Dylan Matthews makes much the same point that Krugman and Kristof make. After citing a Columbia University study on the different ways of measuring poverty, he zeroes in on the key point (how much difference does government make?) and says this:

…[T]he most noticeable trend here is that the gap between before-government and after-government poverty just keeps growing. In fact, without government programs, poverty would have actually increased over the period in question. Government action is literally the only reason we have less poverty in 2012 than we did in 1967.

Reviewing some of the early literature, I find it very difficult to determine what Lyndon Johnson would have called “success” in the War on Poverty. But there is no doubt in my mind what the average citizen thinks success is. The goal is to have people earning enough and saving enough to support themselves above a poverty level income without any help from government.

So by that measure, there has been no progress at all ― despite spending $1 trillion a year on the effort.

Comments (27)

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  1. Bubba says:

    Why We Lost the War on Poverty

    Yeah, I’m one of the refugees from that war. As is usually the case in a war, there are plenty of victims who are either collateral damage, displaced and must be relocated or lose their livelihood in the melee of combatants.

    If we just let people poor, there would be more jobs in the productive sectors; and more incentive to move to where those jobs are.

    • Dennis Arashiro says:

      Move where the jobs are? China?

      • DFS says:

        How about Texas, North Dakota, Louisiana to start with. All places where the states encourage actual energy development (not so much the fraudulent and corrupt, criminal activities like government subsidized ethanol, wind turbines, solar energy, etc.)

        As John Fund says “More guns…less crime”, It could be said less government…more jobs. More jobs…less poverty.

        Taking money from working people to give to non-working people is evil. It does not reduce poverty…it is merely institutionalized theft. Government is not, and can not be “charitable”. Only people can perform acts of charity. Charity can only occur as a conscious and deliberate act.

        The “government” is only performing the will of those in power…and that will is to create a dependent underclass that will be their permanent power base that will vote them into power…term after term.

        Only a fool or a liar would claim that the federal government has any right to take a single dollar from any working person to give to another non-working person to provide for food, clothing, education, housing, childcare, or any such purpose. It is all a pack of lies. It is not meant to “help” anyone. Even it were meant to “help”, but was just “misguided”, it would not matter. The federal government has absolutely ZERO right or authority to hand out money to “poor people”. It is a corrupt and evil sham that only stupid or evil people could support on any level.

  2. David Lenihan says:

    Is it just a coincidence that our total national debt…now about $17 Trillion…is roughly equivalent to the amount spent (or misspent) on welfare programs?

    • James M. says:

      Very interesting point. The money spent for the war on poverty has put the country in massive debt…

      • Bill B. says:

        “So by that measure, there has been no progress at all ― despite spending $1 trillion a year on the effort.”

        $1 trillion a year for a stagnant effort. That is about par for the course for government programs.

  3. Devon Herrick says:

    Stored away in my collection of old, university books, I have a book on poverty. It’s mostly a bunch of essays written by well-known academics — one of which was Robert Reich. I don’t recall the author, but one story was about a young man in Appalachia who didn’t know how to read and hardly had two nickels to rub together. His education had only extended as far as his early primary school years. The story discussed how social workers helped this man learn to read and acquire other life skills. The social workers helped him get some decent clothing suitable for work. As I recall they helped him get transportation sufficient to get a job. They then set out to help him get a job. That was their ultimate goal — teach a man to fish (as the old saying goes). They quickly found he didn’t want a job. He wasn’t lazy. But neither did he subscribe to the notion that everyone should get up at 6:00am, get dressed and go work in the formal economy until 5:00pm and start all over the next day. He wanted to hunt and fish for his sustenance. He wanted to earn just enough money from small jobs to acquire the few supplies he needed. His goal wasn’t to get out of poverty in the way his social workers assumed people should.

    I’ve heard similar stories from other people. I know a retired engineer who told me about volunteering for an agency that helped illiterate people learn how to read. He talked about one young man who spent six months learning to read at the 4th or 5th grade level. One day the man came in and thanked him and explained that would be the last time he would come to the tutoring sessions. This young many had what we had come for: he could read well enough to fill out an employment application. He could read well enough to do menial jobs. He could read the TV guide and scan the paper. He had achieved a reading level far greater than other members of his family. He was happy with the results. He didn’t feel the need to go any further.

    That’s one problem with the war on poverty. We project our own goal into the lives of others and assume we have to make them like us.

    • Thomas says:

      “That’s one problem with the war on poverty. We project our own goal into the lives of others and assume we have to make them like us.”

      This is one of the most true and profound statements regarding the war on poverty and the nature of humans. People will always have some sort of self interest, especially when it comes to the aid of others.

    • Rick says:

      “That’s one problem with the war on poverty. We project our own goal into the lives of others and assume we have to make them like us”

      I wish I could “like” this statement a thousand times … so true and not necessarily just about poverty.

    • Barry Carol says:

      I grew up middle class in a wealthy town and felt psychologically poor. The fellow who learned to read better than anyone else in his family but still only at the 4th or 5th grade level felt psychologically rich or at least well off enough relative to his peers. Perspectives among people vary widely and need to be appreciated in context.

  4. Buddy says:

    Leave it to the government to declare a war on poverty and then proceed to stunt the decline of poverty while increasing government spending. If they had taken efforts to encourage economic growth, then the U.S may look like a very different place.

    • Jay says:

      Perhaps a much less impoverished place.

      • Bill B. says:

        “And even Paul Krugman concedes that the marginal tax rate faced by low-income families is in excess of 80% today.”

        You know when Krugman can concede a point about the failure on the war on poverty, it must have been quite ineffective.

  5. Walter Q. says:

    In a welfare state, people face very little incentives to get out of poverty and off welfare. If the basic needs are being met, what becomes the driving force out of poverty?

  6. Elizabeth A. Reid, MD says:

    I was in medical school on the south side of Chicago at the end of the falling curve (class of ’73). My exposure to life up until then had been apolitical and solidly middle class. I got to see, up close, the lives of those affected by welfare policies that were just gaining steam. Our delivery rooms were filled with 14 year olds having babies. In the waiting rooms, grandmothers to be were in their thirties, great grandmothers barely 50. And fathers? They were absent, or in other wings of the hospital recovering from gunshot wounds, heroin overdoses or endocarditis. I heard from the women that they got more money for more babies. And less if there were fathers around.
    My views of leftist philosophies began to take shape back then, based on the evidence that I could see with my own eyes. I find now that many of the leftists I know never got to live in the midst of the results of their thinking. Perhaps doctors, privileged as they are to be involved in the lives of others outside their own social groups and trained to evaluate evidence, have a perspective that should demand more attention from the ruling elite.

  7. Buster says:

    After World War II, the economies of Germany and Japan were in shambles. Millions of their men of working age were dead or wounded. All the domestic industries had been converted to War Production and then bombed out of existence. Much of the housing was destroyed. Yet, within a few years these economies were strong again — and the devastation that occurred during the war was repaired. How did that happen? How did the sudden condition of extreme poverty get replaced with prosperity?

    This is especially important given the state of the economies of southern Europe, who were not bombed out of existence. Germany has had to bail out Greece, Spain, Italy and other countries. Why had it gone from shambles to wealthy again?

    The answer is institutions. Germany and Japan were advanced economies when the war broke out. When they were bombed, the factories were destroyed, but the knowledge wasn’t lost. All that had to be replaced was the factories. The institutional knowledge was retained.

    The moral of this story is: we can buy houses and fund people who are in poverty. But that won’t necessarily end poverty. We have to change the mindset of people in poverty with a different mindset. That’s much harder. If we merely give people money, they will have kids with the same mindset. We have to instill the institutional knowledge that:

    1) Finish high school,
    2) Get a job, Get married, and
    3) Don’t have children until you get married.

  8. Perry says:

    I recently read a couple of historical novels about African Americans at the end of slavery and Reconstruction (they were based on true family histories, however). At that time, the dreams of these ex-slaves involved owning property, working for wages and getting married, and voting, none of which were allowed under slavery, and fought for during reconstruction and into the Jim Crow Era.
    Somehow, it seems our policies toward the poor and minorities are not much better than what the slaves endured if you look at the perverse incentives.

  9. Stephen says:

    I’m not necessarily disagreeing with the article, but I have a complementary take on the issue. A recent article said that in 1965 (the year we began losing the war on poverty), executive compensation averaged about 20-times the average line worker’s compensation. Today executive compensation is something like 270-times the average line worker’s (I apologize; I can’t recall the exact figure).

    It’s hard to reduce poverty when our country’s well-to-do have their hands on the income spigot, and simultaneously out-source so many of the traditionally good jobs to other countries.

    • Toady says:

      Wealth isn’t a zero sum game. The existence of rich people doesn’t create poor people. Is a single mother of three getting food stamps because Bill Gates and Oprah Winfrey are rich? Will more people fall into poverty if someone wins a $20 million lottery? I don’t think so. The situation is more complicated and is related to many factors. Both rich and poor can become richer. We need less poor people not less rich people.

      • Stephen says:

        I beg to differ. You are speaking in the abstract. In any given year, a company has a certain amount of revenue available to disperse among its management, its shareholders or owners, and its employees. That’s a zero-sum situation. If management takes a bigger and bigger piece of the pie, someone loses – the employees.

        • ELina says:

          Rich people don’t stuff their wealth into the mattress. It gets invested in stocks for growing companies (which hire people) or goes into the bank where it gets loaned out to the rest of us. It goes back into the economy.

      • Laura Dee says:

        You hit the nail on the head! People didn’t get poorer because Bill Gates got richer. People around the world got richer (not as rich as him of course but much better off) because Microsoft employes thousands of people and provided the means for people to do their work in a more efficient way which leads to greater productivity and higher earnings.

  10. Bruce Landes, MD says:

    If you want less of something, tax it or regulate it.

    If you want more of something, subsidize it.

    So when you tax employment and subsidize poverty, you should not be surprised that you get less of the former and more of the latter.

  11. Wanda J. Jones says:

    John and Friends:

    This is an excellent case study for a thinking tool I have learned to value: it is called Cause/Solution Analysis. It states that solutions are found in understanding both direct and indirect causes. Here’s what this set of comments revealed: direct causes are too much government subsidy and rule-making.

    Indirect causes are the skewed visions of those sponsoring and executing legislation; no direct experience with the problem, an unexamined belief that their vision about bringing people out of poverty with government money could and should prevail, and an “academic tribal value system” that was widely shared within government so there were few or no counter-voices around when laws and regs were written.

    Solutions can also be direct and indirect. I’d best that enough publicity about these facts can help to reverse some of the indirect causes and allow there to be a climate for reversing direct causes.

    It’s interesting that you mention Krugman and Reich in the same breath; they really do think that giving people government goods is the same as lifting them out of poverty. A guess is that another indirect cause is that so few people/ voters know about the trends you report that they let these economic charlatans get by with these opinions. It seems that this same lesson needs to be learned every generation.

    Here’s a thought; why don’t we urge the parties to publicize the actual knowledge of candidates who should be asked to state what causes poverty, and what lifts people out of it, and similar questions in other fields. We think that if a candidates is actually voted in by enough people that means he or she knows enough to do the job. That’s what people thought when the country elected Obama and see where we are now. Even Democrats are beginning to be overtly embarrassed.

    It’s not cute anymore to just spout slogans and taunt people who don’t agree with you by calling them racists or critical of the poor. All of us should take to the streets and the airwaves about the horrible debt burden of this country. Remember Germany?

    I’m actually looking forward to having more mainland Chinese immigrants coming to this country and investing in new business; their value system is that it is a shame to take money from the government when you can take care of yourself.

    So–where do I get off being against government subsidies? My father, at 16, had to work in the oil fields in Oklahoma. At 17, he joined the army. After 24 years in, he went into the ministry, with tiny rural churches. He finished his BA the year I did, driving 70 miles each way to our college. When we moved up to the same town, he acquired a paper route to make enough gas money to drive in for classes. One year, he was a census taker. After WWII, he built a small chicken yard in the rear of our suburban house, and, at 8, I sold live chickens door to door, then strawberry plants in the summer. We never thought we were in poverty, but in today’s terms, we were. The Master’s degree I now have was the second in the family, after Dad’s. Education is the greatest asset I have.

    And, yes, I grew up during an era where it was expected that women would be supported by their husbands. Instead, I went into the Air Force myself. It’s both sad and exasperating that so many people have become the new slaves, not of local slave-owners, but of the government. They should remember the Bible’s statement: “The Lord giveith and the Lord taketh away.” It is a shame to this country that a man elected largely because he is “black,” so betrays the very group he counted on to elect him by making them members of his political plantation.

    Krugman and Reich–you ought to be ashamed, too.

    Wanda Jones
    San Francisco

  12. Toady says:

    “Finish high school, Get a job, Get married, and Don’t have children until you get married”

    I would also add:

    5. Avoid behavior that results in a criminal record
    6. Don’t get addicted to drugs or alcohol

  13. XLA says:

    The real reason that the war on poverty failed is because it was intended to fail. When “solutions” to any serious problem continue to fail year after year and, now, decade after decade and are still strongly supported, then the poor results must be by intent. Who could possibly ignore the preponderance of proof of the war on poverty’s failure. In other words, the left is ultimately about death. First, death for you and me, and then death for the lead leftists themselves by a slow, subconscious suicide.

  14. Stephen says:

    I suggest you go back and read my original comment, and then revise your reply accordingly.