How America Spends Nearly $1 Trillion a Year Fighting Poverty -- and Fails

April 16, 2012

Forty-eight years after President Johnson declared war on poverty, the number of poor people in the United States remains stubbornly high.  Various administrations have increased the number of programs helping those with incomes below the poverty line, but no such institution has had much success, says Michael Tanner, a senior fellow with the Cato Institute.

This trend is particularly surprising because of the rapid increase in spending and the number of programs that has occurred over the time period in question.  Since Johnson's time, dollars allocated to fighting poverty at both the federal and state level have increased rapidly, but to no avail.

  • Total welfare spending in constant 2011 dollars (including state and local funds) has risen from $256 billion in 1965 to $908 billion today.
  • Measured as a percentage of gross domestic product (GDP), total welfare spending nearly tripled from 2.19 percent of GDP to 6 percent.
  • In 2011, there were 126 antipoverty programs administered by seven different cabinet agencies and six independent agencies.

Measured in per capita terms, the dollar figures make it clear that in terms of fighting poverty, the government is clearly doing something wrong.

  • Combined with state and local spending, government spends $20,610 for every poor person in America, or $61,830 per poor family of three.
  • Given that the poverty line for that family is just $18,530, poverty should theoretically have been wiped out many times over.
  • According to Obama administration projections, over the next 10 years, federal and state governments will spend $250,000 for every American currently living in poverty.

The answer to this gross inefficiency is that programs should not focus on making poverty more comfortable.  Instead, they should focus on helping the poor to climb their way out of poverty.  To this end, they should emphasize:

  • Education -- high school dropouts make significantly less money and are much more likely to live in poverty.
  • Not having children out of wedlock -- roughly 63 percent of all poor children reside in single-parent families.
  • Sticking to a job -- only 2.6 percent of full-time workers and 15 percent of part-time workers are poor.

Source: Michael Tanner, "The American Welfare State: How We Spend Nearly $1 Trillion a Year Fighting Poverty -- and Fail," Cato Institute, April 11, 2012.

For text:

http://www.cato.org/pubs/pas/PA694.pdf

 

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