May 10, 2014


The Great Society at Fifty : What LBJ wrought (NICHOLAS EBERSTADT, May 22, 2014, Weekly Standard)

[T]he proposition that a higher fraction of Americans are stuck in absolute poverty today than nearly half a century ago cannot be taken seriously. It is preposterous on its very face. 

Consider that the health of Americans of all ages is markedly better now than then: life expectancy at birth rose by more than eight years between 1966 and 2010 alone and is higher at every age these days​--​even for centenarians. Americans are not only healthier, but also much more educated​--​in 1966, nearly a third of adults 25 or older had a grade school education or less, compared to just 5 percent in 2013. And Americans are more likely now to be working in paid jobs: Despite the terrible 2008 economic crash, the percentage of employed adults 20 and older was still higher in 2013 than in 1966 (61 percent versus 57 percent). 

The idea that such a population would at the same time suffer a higher incidence of absolute poverty does not even pass the laugh test. This picture is an illusion, a distorted reflection from the statistical variant of a funhouse mirror, and the funhouse mirror in question is the poverty rate itself. The poverty rate is a highly misleading measure of living standards and material deprivation​--​incorrigibly misleading, in fact. 

The central and irresolvable trouble with the official poverty rate is that it presumes an immediate and exact equivalence between income levels and consumption levels​--​so that any home in any year with a reported income level below the poverty line must perforce also be constrained to sub-poverty-line spending power. In real-world America, by contrast, income is a poor predictor of spending power for lower-income groups at any given point in time​--​and that predictive power has dramatically worsened over the course of our postwar era. 

In 1960-61, according to the BLS Consumer Expenditure Survey, the bottom one-fourth of American homes spent about 12 percent more than their pretax reported incomes each year. By 2011, according to that same survey, those in the lowest quintile were spending nearly 125 percent more than their reported pretax incomes and nearly 120 percent more than their reported posttax, posttransfer incomes. 

This growing discrepancy between income and expenditures on the part of the poorer strata in recent decades is by no means impossible to explain. Not least important, households are subject to greater year-to-year earnings swings than in the past and have greater wherewithal (through borrowing, asset drawdowns, and other means) to buffer their consumption when they hit a bad year, or even a couple of bad years. But this phenomenon also means that people reporting ostensibly poverty-level incomes are less and less likely to be consigned to poverty-level living standards, as that standard was originally conceived in the early 1960s. Increasing noncash transfers of means-tested public benefits (including, especially, health care) only further widen the gap between reported income and actual consumption for America's "poverty population."

Thus, the actual living conditions of people counted as living "in poverty" in America today bear very little resemblance to those of Americans enumerated as poor in the first official government count attempted in 1965. By 2011, for example, average per capita housing space for people in poverty was higher than the U.S. average for 1980, and crowding (more than one person per room) was less common for the 2011 poor than for the nonpoor in 1970. More than three-quarters of the 2011 poor had access to one or more motor vehicles, whereas nearly three-fifths were without an auto in 1972-73. Refrigerators, dishwashers, washers and dryers, and many other appliances were more common in officially impoverished homes in 2011 than in the typical American home of 1980 or earlier. Microwaves were virtually universal in poor homes in 2011, and DVD players, personal computers, and home Internet access are now typical in them​--​amenities not even the richest U.S. households could avail themselves of at the start of the War on Poverty.  Further, Americans counted as poor today are manifestly healthier, better nourished (or overnourished), and more schooled than their predecessors half a century ago. 

To be clear: The poor in America are not well-to-do. They are poorer than the rest of America. This has not changed. What has changed is their standard of living​--​which has risen markedly since the beginning of the War on Poverty, as have living standards for all the rest of us. Work by economists like Daniel Slesnick at the University of Texas, Bruce Meyer at the University of Chicago, and James X. Sullivan at the University of Notre Dame demonstrates that an ever-smaller share of our country subsists on consumption levels demarcated by our old, official, 1960s-era poverty line. 

Consumption-focused assessments of the poverty problem are stunningly different from our official numbers. In a recent research paper, for example, Meyer and Sullivan indicate that such "consumption poverty" afflicted less than 4 percent of the population in 2008. In the wake of the 2008 crash, "consumption poverty" rose​--​but as of 2010, when postcrash conditions were possibly most dire, just 3.7-4.5 percent of America was subject to it, according to their calculations. 

This research underscores a significant point, all too often misunderstood in both policy and intellectual circles today. Poverty in America​--​the sort of material deprivation people knew back in the 1960s​--​has been all but eliminated. 

The current wave of Third Way welfare reforms throughout the Anglosphere--privatized social security and unemployment accounts, mandated HSAs, educational accounts, housing vouchers, etc.--represents a progression from mere consumption to actual capital accumulation.  

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Posted by at May 10, 2014 8:12 AM

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