Not news - nor a surprise: The Government Lost the War on Poverty

Recently the Supreme Court put an end to Joe Biden’s efforts to gift erstwhile college students almost a trillion dollars in “debt relief”.  That’s a lot of money… but in reality that’s a tiny fraction of the money the government has wasted on redistribution, AKA social programs over the last six decades.

Next year the United States will commemorate the 60th anniversary of the War on Poverty, initiated by President Lyndon B. Johnson in 1964. The War’s programs initially started on a modest scale but have expanded almost parabolically since. At the 50^th anniversary of the launch the government had spent more than $22 trillion on various welfare and redistribution programs and today spends $1 trillion a year on said programs… not including various “targeted” expenditures under Social Security or Medicare, which make the true total simply unknowable.  To put that in perspective, $1 trillion is greater than the GDP of 194 of the world’s 213 countries. 

Is this massive expenditure justified by the results of the War on Poverty? Initially one might suggest the results say yes. As of 2021, poverty in the United States hovered at approximately 11.6%, down from the approximately 18% rate in 1964 when the War on Poverty began. That’s a reduction of 6.6%, or almost one third. 

A closer look however reveals that that 6.6% reduction after an expenditure of $30 trillion seems underwhelming to say the least.  To see the full picture of the failed War on Poverty one need only look at the poverty rate over the 15 years prior to its beginning.  In 1949 the poverty rate in the United States stood at 34%, fully one third of the nation’s population.  Over the next 15 years, without significant government redistribution programs, indeed, without the War on Poverty, the poverty rate fell almost by half, falling from 34% to 18%, a reduction of a full 16 percentage points.  So, without government spending significant money poverty fell 16% in a period of 15 years, or 1.08% per year.  But with government spending more than $30 trillion over the next 55 years it fell by a total of just 6.4%, or .12% per year! That essentially means that without government intervention the poverty rate was falling 10 times faster than it did once government programs kicked in.       

And that 11.6% itself deserves a closer look.  In 2014, when the War on Poverty turned 50, the American poverty rate was still at 15%. That means that after spending $20 trillion over the previous half century the government had successfully reduced poverty by a mere 3%. When Barack Obama he entered the White House in 2008 the poverty rate stood at 12.5%.  It jumped up to 15% for four years before dropping back to 12.5% by the end of his presidency and where it was when Donald Trump took the White House. A mere three years later Trump’s economic renaissance had reduced poverty by 2%, bringing it to its lowest level in history, 10.5%, before the Covid scam derailed the prosperity engine. To put that in perspective, Donald Trump’s economy brought poverty down by 2% in 3 years, fully half as much as government spending did in the 53 years between 1964 and 2016.   

And of course the income numbers only tell part of the story.  Sadly, there is much more to it. 

An unintended consequence of the War on Poverty appears to have been a skyrocketing of single-parent households, which is a significant driver of poverty.  In 1964, around 4% of American children were born to unwed mothers. By 2021, this percentage increased a full ten times to 40%. Under the heading of Unintended Consequences one could observe that the welfare programs intended to save children from poverty, have, by making it economically and socially viable for single-parent households to exist, in fact stranded many children in poverty and worse, inflicting on them the coincident pathologies of poor education and crime, not coincidentally, both also being consequences of government failure.

From another perspective, let’s draw a comparison between the effects of government spending and the impact of private-sector investments. Let’s take just three companies, Apple, Amazon, and UPS who together had about $1 trillion in revenue in 2022, approximately the same amount the government spent on welfare that same year. These companies – and many others like them – revolutionized industries, drove many trillions of dollars of business for customers and vendors and affiliates; directly and indirectly employ millions of Americans who are breadwinners for their families, and at the same time generated trillions of dollars of wealth for investors.    

One can only wonder what might have happened if the more than $30 trillion the government wasted on its failed War on Poverty had instead been invested in startups similar to Apple and Amazon.  Not that we want the government taking our money and investing it – WE DON’T – but imagine the impact that money might have had had it somehow been targeted towards entrepreneurship and economic development. The 2% reduction in poverty during Trump’s first three years demonstrated with crystal clarity that market driven prosperity is a far more efficient vehicle for reducing poverty than government spending of any form. At a minimum, a market driven solution would likely have fostered a far more empowered, economically vibrant and dramatically more prosperous population than the generational dependency created by the government with its alphabet of aid programs. 

Benjamin Franklin understood this more clearly than virtually any politician in America today, having commented: “I am for doing good to the poor, but I differ in opinion of the means. I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it. In my youth I travelled much, and I observed in different countries, that the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer.”

Whether it’s student debt or the federal and state welfare perpetuation machines, America would be better off looking to the Founding Fathers for guidance than the grifters at either end of Pennsylvania Avenue…

Can A Nation Built By Giants Survive Nanny State Paternalism? The Numbers Don't Look Good...

While US Constitution and free market capitalism set the the foundations for American prosperity, it took a rugged, passionate, free people to build it. From George Washington to George Washington Carver to millions of other Americans, the United States was carved out a continent of forests that seemed to go on forever, fertile plains, vast mountain ranges and scorching hot deserts.  Over time American frontiersmen and settlers forged a country that seemed to have all of God’s blessings in abundance.

Conditions were rarely easy for most Americans throughout most of our history. Coal miners spent 12 – 16 hour shifts in dangerous coal mines in which they sometimes couldn’t even stand. Frontiersmen built a homestead and a farm out of a thick Appalachian forest while fighting brutal winters and a tenacious Indian population. Slaves toiled for years at backbreaking work during freezing winters and boiling summers. At the end of the 19th century over 50% of Americans still lived and worked as farmers, a far more dangerous job than most people understand. The industrial revolution brought sweatshops and drove a thirst for steel, trains and petroleum.

One sometimes has to marvel that America survived long enough to challenge the British for independence and then go on to grow and prosper (mostly) for over 200 years as it changed the world. Were the Americans who carved a nation out of a continent somehow so different than Americans today? Were the Americans who crisscrossed a continent with railroads, telephone lines and highways so different than Americans today? Were the Americans who won two world wars and sent a man to the moon so different than Americans today? Were the Americans who invented the mechanical reaper, air conditioning, vulcanized rubber and the microchip any different than Americans today? Not based on DNA they weren’t. But that doesn’t mean they were the same. While the DNA of the American people today is no different than that of the people who invented the elevator or the light bulb, the American people writ large certainly appear to be.

Go back a little more than one generation ago and it seems like Americans were something of another species. They appear to be relative supermen. In 1970 there were 78 million people working in the United States. At the same time there were 1.5 million people on Disability Insurance. That means that one person out of every 53 workers was on Disability. Fast forward 4 decades and it seems as if the world has turned on its side. By 2012 the number of Americans working had risen by 82% to 143 million people. During that same period however, workers receiving disability insurance skyrocketed up 491% to 8.8 million. Today, instead of one out of every 53 workers being on disability, it’s one in sixteen! That number is particularly interesting because the United States of 1970 was a far grittier place than the United States of 2013.

First off, the United States in 2012 is a much different workplace than the one that existed in 1970. In 1970 fully 25% of the American workforce worked in manufacturing while only 30% of employees worked in the service industry. Today, less than 10% of the American workforce works in manufacturing while over 50% of workers work in the service industry. Given that designing a website, taking an order at Red Lobster or greeting a guest at the front desk of a Marriott is generally less dangerous than welding together various pieces of a Lincoln Town Car or operating a blast furnace at a USX steel plant, America should be a safer place to work. And indeed it is. The death rate for American workers in 1970 was 18 per every 100,000 workers. By 2010 that rate had dropped to 3.6 deaths per every 100,000 workers, a decline of 80%.

But of course work is not the only place where one gets hurt. Today, virtually everywhere Americans go everything seems safer. Cars have seatbelts, antilock breaking systems and a plethora of airbag options. Houses have GFCI circuit breakers in bathrooms and kitchens and smoke detectors in almost every room. Lawn darts are but a distant memory and towns across the country require helmets for bicycle riding and virtually every appliance and medicine comes plastered with book length warning label. At the end of the day, America has become a far safer place to live and work than it has been at any time in its history.

Somehow, however, despite that much safer America, the number and percentage of people listed as disabled and receiving disability payments has skyrocketed.

“ Since the economy began its slow, slow recovery in late 2009, we’ve been averaging about 150,000 jobs created per month… In that same period every month, almost 250,000 people have been applying for disability.” So the world has changed so much that Americans are now seeking disability benefits at a 60% faster rate than they are getting new jobs! That is a staggering statistic.

How is that even possible? Have Americans become weaklings, unable to stay healthy. Has some unknown affliction made us incapable of working? No. There is an affliction, but it’s not biological. It’s called the nanny state. From judges who rubberstamp virtually every claim they ever see to 34% of applicants who have musculoskeletal injuries, which conveniently enough cannot be detected by doctors, to outright fraud (more)(more)(more) and states seeking to shift costs to the federal government, the program is a symbol of much of what is wrong in America in 2013. Indeed, in some places 1 out of 4 workers (or former as the case might be) is on disability.  The worst thing about this dysfunctional program is that the fraud keeps people who are in real need of help waiting in line, sometimes to die.

When government decides to play the role of caretaker and redistribute wealth from workers to everyone else, it should come as no surprise that many people will choose to jump from the working pool to the everyone else pool. For more proof just look at the food stamp program over the same 40 year period. While the population increased by about 30%, workers by 82% and disability by 491%, food stamp recipients grew by 1,000%!

The economics of the welfare state, including the “disability industrial complex” cannot be sustained. If the record of the last 40 years were to be repeated over the next 40, in 2050 the country would have 260 million workers supporting 43 million people on disability and 450 million people on food stamps. Those numbers are simply not sustainable, but you wouldn’t know it by the administration’s push to get more people to apply for benefits.

American workers and entrepreneurs have together created the greatest wealth and prosperity the world has ever seen. At some point the spirit that helped forge a nation out of a continent and dot it with jewels like the Empire State Building, the Hoover Dam and the Golden Gate Bridge will reemerge and shout “I’ve had it and I’m not going to take it anymore!” American shoulders may indeed be broad, but the head which sits above them is not suicidal. At some point Atlas will shrug, the question is will it be in time to save the country…

Barack Obama finally embraces Supply Side Economics - but adds just a wee hint of redistribution

Last week the Bureau of Labor Statistics released a report that said that the labor force participation rate (LFPR) dropped to 63.6%, the lowest rate since Jimmy Carter was in office. Essentially that means that of the population of 16 year and older, 37.4% of them decided not to work or not to seek work. That’s 88.8 million people! To put that in perspective, when George Bush took office the LFPR was 67.2% and eight years later it was 1.5% lower at 65.7%. It has dropped 2.1% in Barack Obama’s first four years, the most precipitous drop in workforce participation since they started keeping records in 1948. But percentages only tell you so much. Each of those percentage points represents approximately 2.5 million people. Since Barack Obama became president over 5 million people have simply stopped trying to find a job. If just half of those 5 million people were still looking for jobs, the unemployment rate would actually be 9.4% rather than the official 7.8%. Now some of those are students who chose to go to college because they couldn’t find a job and others are senior citizens who’ve retired from the workforce, but the overwhelming majority of those 5 million are people who have simply given up hope.

And that’s the point, and the problem… Not since the 1970’s have the American people felt so discouraged about the prospects for the nation in general and their individual economic circumstances in particular. For most of American history the notion of having a job, doing something productive for your family and your community was the norm. Barack Obama is seeking to rapidly change that, and he got a good head start during his first term. The President has doubled the number of people on food stamps and he gutted Bill Clinton’s (grudging) welfare reform. That’s his version of Supply Side Economics, he supplies the benefits and people will be happy to give him four more years. Add to this the regulatory nightmare he has unleashed on businesses and four years of demagoguing those who drive American productivity and you have an ever increasing number of Americans who believe they either can’t or don’t have to find jobs.

For much of the 20th century the United States was looked at as the place to come to seek your fortune, to make or do something with your life, basically where anything was possible. Although Hollywood and Coke and Levis brought the American Dream to the rest of the world, far more importantly, most Americans were pursuing it here at home, if not living it. Today something all together different is occurring. As the Gallop poll demonstrated, much diminished is that "Can do" feeling that most Americans had for most of our history, the feeling that prosperity and success were just around the corner and anyone could achieve it if they worked hard enough.  America has become a state of dependence, where half the population pays no income taxes and where 40% of the population suckles at the public tit, either in the form of government handouts or as employees of a bloated bureaucracy.

How long can a population survive when fewer and fewer people are supporting an ever increasing population of non producers? Not long. Frances Fox Piven and Richard Cloward posited in 1966 that you could overload the welfare system in an effort to bring about a redistribution of wealth. If you read their manifesto, you can’t help but recognize their methods in Barack Obama’s policies.

While it’s impossible to know what the future holds, it’s not difficult to wonder what the situation of the country might be in 4 years if the same policies that brought us to where we are today were implemented during the president’s second term.

If Food Stamp growth were to decline to 25% (vs. 50% over the President's first term) there will be 60 million Americans on the program. If Social Security Disability (which is at its highest level on record) increases by another 25% as it did in the last four years, a total of 13 million Americans will be on disability. (What’s most heart breaking about this programs is that the rampant fraud and bureaucratic incompetence are keeping benefits out of the hands of the truly needy.) Those measures alone would bring the total of people receiving government checks (i.e. money taken from taxpayers or borrowed that will have to be paid back by taxpayers) from 18% of our population today to almost 23%. Add in the 8 million or so people receiving unemployment benefits and the 4.4 million on welfare and you have over a quarter of the population on the receiving end of some wealth redistribution program. On the workforce side, if the LFPR declines another two percent it will sit at 61.6%, a level not seen since 1977. With a LFPR of 61.6% and an unemployment rate that stayed at today’s 7.9%, we would have only 141 million workers supporting a population of 323 million people verses today’s 144 million supporting a population of 313… That’s 3 million fewer workers supporting a population that would have grown by 10 million! Inverted pyramids like that don’t last for long.

At the end of the day, one has to wonder what exactly were those 65 million voters hoping for when they voted for Barack Obama? If it was more of the same they just might be in luck… at least in the short run. It appears that the President plans on doubling down on his policies. He appears to be executing the socialist Cloward Piven Strategy perfectly. While his devotees may be happy with his rhetoric today, they will likely not be happy when his grand strategy succeeds tomorrow. The problem with socialism in America is that it assumes a static nature of the citizenry, i.e. that government can impose whatever requirements on workers and producers and they will have no choice but to comply. Nothing could be farther from the truth. With countries from Australia to Canada to Singapore to Estonia to Denmark offering greater levels of economic freedom, those who fund what the government redistributes have many options available to them. Money, like water, flows to the areas of least resistance and the resistance is increasing in the United States. Eduardo Saverin, Tina Turner and a record number of other American citizens are making it clear that do indeed have options. Lots of companies do too. When all of the producers have finally left the country, all that will be left of Barack Obama’s redistributive state will be those who no longer know how to fend for themselves. Somehow I can’t imagine that being the Nirvana that Obama voters were thinking of.

Government programs have accomplished what slavery and Jim Crow could not... they've destroyed the black family.

For those of you who have never looked at my picture, I’m a white guy. Given the subject of today's piece I might as well get it out of the way. In addition, other than participating in ROTC at Florida A&M University (an historically black institution), spending a semester in Florida State’s Degraff Hall dormitory (at that time the dorm established primarily for “African American students”) and minoring in Black Studies while at FSU, I don’t have any particular experience in what one might call black culture. (I use the word culture in the general sense, recognizing that not every member of a particular group shares all aspects of that culture.)

I do have eyes however, and much of what I see of black America is not good. I say that not as an indictment of black people. On the contrary. I don’t think blacks are any better or worse than anyone else on the planet or in the country.

That being said, I put pen to paper on this topic because of a series of disturbing headlines I’ve seen over the last month combined with something Walter Williams recently said on John Stossel’s show. Over the Memorial Day weekend Drudge ran a series of headlines about chaos breaking out across the country: Chicago, Charlotte, Boston, Miami, Nashville… The common factor across each of these melees was that the problems involved large groups of black teens and young adults. These stories dovetailed with numerous recent accounts of “Flash Mobs” across the country (Washington, Las Vegas, St. Paul) where similar groups of black youths descended on a store of one sort or another and brazenly walked off with hundreds or thousands of dollars of merchandise.

Something struck me about the people whom I was reading about or watching on video… they seemed to have no appreciation for personal property. It seemed to me that the violence and mayhem being displayed was the result of people who had an entitlement mentality where they felt they could do whatever they wanted, could take whatever they wanted, regardless of the consequences on anyone else, simply because they could. One asks how do people end up with this type of mentality. The answer was obvious: the government’s nanny state.

Then Walter Williams crystallized my thinking when he made the observation that government programs had accomplished what slavery could not do and what Jim Crow laws could not do… they destroyed the black family. The numbers are stark. Williams points out that up until the 1940’s between 75 & 90 percent of all black children were being raised in two parent homes while today the number is less than 1/3. He continued, pointing out that the illegitimacy rate amongst blacks was 18% in 1940 but ballooned to 72.5% in 2008. In a 1985 documentary he suggested that government programs, with their “good intentions” had led America’s black families into Hell.

The recent news stories about riots and gangs and flash mobs are simply the symptom of the Hell Williams discussed. There are now millions of government supported and government non-educated black youth (and in many cases their parents before them) who simply have no understanding of the concept of individual responsibility, private property or work. The result is exactly as one would expect. As Williams points out, “If you subsidize something you get more of it” i.e. dependency, illegitimacy, poverty… and most brutally, if you tax (or regulate) something you’ll get less of it… i.e. jobs.

Culture of course is different than people and there are many black people and families who do not fit into this culture. Regardless of whether or not one agrees with the notion of a black culture in the first place, one must agree that the state of black America is difficult. Bill Jones, the Chairman of the Black Studies program at FSU back in the 1980’s once said that he could make a very strong argument that blacks in America were better off before the civil rights movement. His primary argument was built on the loss of role models in the black neighborhoods as most of the successful people moved out to the suburbs as soon as they could. Without those positive role models to show them how to act, who could the young people in those neighborhoods look to for guidance?

While that was not his position, he suggested a good argument could be made for it. He makes a valid point. Role models are always important for young people, but particularly for those growing up in difficult circumstances. Despite what Hollywood might want to suggest, data clearly demonstrate that growing up in a two parent home is one of the most powerful indicators of a child’s success in life. By ameliorating the financial burden of having children, by removing any correlation between individual responsibility and income, and most devastatingly of all, by making fathers superfluous, the liberal policies of the last five decades have destroyed the lives of millions of black Americans who make up what one may or may not want to characterize as black culture.

America is too great of a nation and the challenges of the 21st century are too many to leave any group behind. If America is going to survive and thrive well into the 21st century, it will require the entrepreneurial, creative and productive efforts of everyone, including her 40 million black citizens. Let's face it, we're in this together. Five decades of government policies have handicapped millions of black families and we’re seeing the consequences of those policies in headlines across the country. Perhaps the recent demonstration of that destruction playing itself out in front of news cameras and security cameras will be a catalyst to make black Americans reconsider their fealty to the Democratic Party and the big government programs that have wrought so much damage to their communities… One can only hope.