The independence declared by the United States in 1776 was not just political; it was also ideological. Separating itself from class societies the globe over, the new republic asserted “that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the pursuit of Happiness.” The American idea expressly minimizes the importance of birth conditions, while maximizing that of exertion, in the determination of an individual’s outcome. And our constitution expressly institutionalizes liberties—speech, religion, rights of assembly—which promote mobility, appeal to an innate sense of justice and mute popular disaffections that historically preluded upheaval and chaos.
For a long time, this system of institutionalized liberty and self-actualization was remarkably successful. Around the world, America became synonymous with “opportunity for all.” And as the standard bearer of capitalism, the United States refined and exported the most successful system of poverty reduction the world has ever known.
In 1964, Lyndon B. Johnson sought to eliminate the last vestige of class by declaring an “unconditional war on poverty” with the categorical objective of “total victory.” Today, the cost of this 50-year effort stands at $22 trillion, a sum the National Center for Policy Analysis estimates is greater than the cost of all wars the United States has ever fought. Have the means justified the end? The numbers seem to suggest, no. Research by Pew Charitable Trusts in 2012 shows that intergenerational mobility remains disconcertingly low: 43 percent of children whose parents were in the bottom income quintile remain in the lowest quintile as adults. In 1965, the poverty rate was 17.3 percent; in 2014, it was two and half percentage points lower at 14.8 percent.
Unsurprisingly, some economists dispute this ostensible failure. Notre Dame’s James Sullivan and University of Chicago’s Bruce Meyer argue that a truer measure of poverty would be based on the consumption of goods and services after receiving government benefits. Using this approach, the “real” poverty rate declined from 16.5 to 4.5 percent over the past 50 years. The implication is that, technically at least, our current programs help 10 percent of the population live above the poverty line.
Unfortunately, this measure reflects the principal fallacy that has characterized the War on Poverty since inception: confusing means for ends. Both empathy for the poor and the advancement of their cause has been measured by the amount of money spent on anti-poverty programs rather than the economic emancipation of the poor. The result is a welfare system that helps millions fend off abject deprivation but at enormous costs. Besides the $1 trillion federal and state governments spend annually on its programs, the welfare system generates enormous collateral damage in the form of a poverty trap. As Speaker Paul Ryan and Sen. Tim Scott noted in a recent Wall Street Journal editorial, the benefits received by a single mother earning the minimum-wage are administered in such a way that she would face a marginal tax rate of 90 percent were she to get a job with an hourly wage that was $3 greater. In such a system, millions of individuals have made the (perfectly rational and irreproachable) choice to stay unemployed or under-employed. The acknowledgment of this issue is not a denunciation of the poor as lazy. Rather, it is simple recognition of the most important lesson of economics: incentives matter.
Because our anti-poverty institutions prioritize alleviating the situation of the poor over helping them escape it, the quest to realize the American idea has instead trended inexorably towards its deepest anathema: a permanently segregated, class society. What can be done to reverse this trend?
The solution is not that of the New Poor Laws of 19th century Victorian England, cutting off all benefits for able-bodied workers. A society as wealthy as the United States should provide, as Friedrich Hayek advocated, some minimum level of food, shelter and clothing, sufficient to preserve health, as well as some form of social insurance against the “hazards of life.” Further, for many people in poverty who are mentally or physically handicapped, escape is not a possibility. Here, alleviation is simply the best we can do. But among the able poor—i.e., the vast majority of Americans stuck below the poverty line—innate talent, hope and ambition are being crushed.
The easiest step, perhaps, is the reallocation of funds to programs that ensure benefits are gained, rather than lost, through work. For example, the Earned Income Tax Credit (EITC) incentivizes work by supplementing the wages earned by low and moderate income individuals, effectively eliminating the high marginal tax trap mentioned earlier. It also rewards additional efforts, unlike arbitrarily raising the minimum wage (which invariably displaces as many or more workers than it helps).
Greater in both difficulty and importance, the reform of the American public school system is necessary in order for education to fulfill its role as the “great equalizer” of society. Schools working in low income neighborhoods have insufficient capital to deal with the complex problems their students face. Over the last 30 years, the performance of U.S. public schools has increasingly been measured by the test results of their students. An aspect of test-based accountability is the use of funds to reward schools that perform well on tests and to punish schools that don’t. The problem with this is that the schools that are likely to perform the worst on tests are those with the highest quantity of low-income students. This sometimes results in the schools that are most in need of funds getting the least. Indeed, a report by the Education Law Center found that 14 states have “regressive” school funding (schools with a higher quantity of low-income students get less funds than schools with a smaller quantity of low-income students). This being said, the marginal product of capital reallocated to public schools in low-income neighborhoods is unlikely to be very high unless other inefficiencies are eliminated. Amongst many others, the problem of teacher unions, which causes enormous harm to the instruction quality at these low-income schools, needs to be addressed.
America today has become wealthier and more powerful than any nation preceding it. An essential measure of our success remains equal opportunity at birth. To keep the American idea operant, much work remains. Rethinking our approach to poverty without prejudice would be a good place to start.
Julian Keeley is a Trinity junior. His column runs on alternate Tuesdays.
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