February 22 2014

Policy Focus: Are We Winning or Losing the War on Poverty?

Rachel DiCarlo Currie

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Fifty years after the start of Lyndon Johnson’s war on Poverty, there are many ways to highlight America’s progress. Oddly, citing the official U.S. poverty rate is not one of them.

While the official data suggest that poverty is worse today than in the late 1960s, they measure only pre-tax money income, and thus fail to consider non-cash government benefits and refundable tax credits. When researcher Arloc Sherman of the Center on Budget and Policy Priorities adjusted the figures to include food stamps, rent subsidies, the Earned Income Tax Credit, and the refundable portion of the Child Tax Credit, he estimated that the poverty rate had dropped from 18.9 percent in 1964 to 10.9 percent in 2011. Moreover, economists Bruce Meyer of the University of Chicago and James Sullivan of Notre Dame have shown that consumption is a more reliable barometer than income for measuring material deprivation, and they reckon that America’s consumption poverty rate declined from nearly 31 percent in the early 1960s to just 4.5 percent in 2010.

Unfortunately, this does not mean the War on Poverty—properly understood—has been a success. While means-tested welfare programs have contributed to higher living standards among the poor, they have also exacerbated family breakdown, skewed economic incentives, and discouraged work, thereby fueling a vicious cycle of fatherlessness, failing schools, and high crime rates.

Moving forward, the key policy question for U.S. lawmakers is this: How can we make our government anti-poverty system more effective at boosting upward mobility and promoting the cultural values that underpin prosperity?

 

Click here to read the complete 6-page policy focus in PDF.

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