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Government Spends Four Times the Amount Necessary to End Poverty in America

Peter Ferrara of the Heartland Institute recently wrote that the US Census Bureau “estimates that our current welfare spending totals four times what would be necessary just to give all the poor the cash to bring them up to the poverty line, eliminating all poverty in America.” Yes—we spend four times the necessary amount to bring all of the poor in America up to the poverty line. Clearly we are doing something wrong. The war on poverty began back in 1965 under LBJ. Since then, our federal and state governments have spent more than twice the cost of all the American conflicts since the American Revolution. Peter Ferrara writes:

What have we gotten for all of that welfare spending? Poverty fell sharply after the Depression, before the War on Poverty. The poverty rate fell from 32% in 1950 to 22.4% in 1959 to 12.1% in 1969, soon after the War on Poverty programs became effective. Progress against poverty as measured by the poverty rate then abruptly stopped. By 2009, the U.S. poverty rate had risen back to 14.3%, and today it has further soared to 16.1%, substantially higher than when the War on Poverty began. In other words, we fought the War on Poverty, and poverty won.
Ferrera cites two main cultural problems that have brought about poverty, each negatively correlated to the increase in welfare spending: First, poor- to low-income earners have stopped working. And second, there’s been a dramatic increase in out-of-wedlock births. These rates have increased over the past 50 years, and I think there is a pretty good case that these two—an increase in welfare spending and these two cultural problems—are causally related. Consider, as Ferrara writes, that “the poverty rate for female headed households with children is 44.5%, compared to 7.8% for married couples with children.” As outlined in a recent Values & Capitalism monograph, if a person finishes high school, gets a job and gets married before having children, their chance of being in poverty is about 2%, according to researchers at the Brookings Institution. But what can we do about the spending fiasco by the government? When central planning fails as badly as it has, perhaps we should try and come up with a less wasteful solution, like Milton Friedman’s Negative Income Tax (NIT) idea or like Charles Murray’s plan outlined in “In Our Hands.” For those unfamiliar with these ideas, Friedman suggested simply writing a check to people who fall under the poverty line that would make up the difference between their earned income and the amount needed to hit the poverty line. And after writing “Losing Ground,” Charles Murray wrote “In Our Hands: A Plan to Replace the Welfare State,” suggesting that we eliminate all welfare transfer programs and instead give an annual $10,000 cash grant to every adult in America. Many of the critics of NIT, including some fiscal conservatives, worry that there would be a large disincentive to work. For the sake of the discussion, let’s grant that point: many people will not work. But could such a situation get any worse than our current situation? Probably not. If implemented, the federal and state governments would save, if the U.S. Census Bureau’s estimate is correct, 75% of their current spending. 75%! Perhaps it is time to reconsider simpler approaches to fighting poverty. Not only would taxpayers save more money, but perhaps the poor would be better served.