Politics Poverty and Dependence

“They say the world has become too complex for simple answers. They are wrong. There are no easy answers, but there are simple answers.” Ronald Reagan

Jesus said the poor will always be with you (Mark 14:7). This was nothing new; Moses said as much when he instructed the nation of Israel.  He said, “there will always be poor people in the land. Therefore, I command you to be openhanded toward your brothers”. (1)

Defining Poverty

Poverty needs perspective.  What is poverty and how do we define it? (2) In our world, we see extreme poverty and relative poverty.  Extreme poverty is defined by the world bank as living on less than $1.90 per day. In 1990, there were 1.8 billion people in Asia, Sub-Saharan Africa, and the middle east living in extreme poverty. Today’s poverty numbers are about 600 million, most of whom live in Sub-Saharan Africa and the middle east. I have made 3 trips to Nepal, one of the poorest regions of the world where 15% of the population lives in extreme poverty. Many of those are in NW Nepal where we have an ongoing ministry to help the poorest of the poor.  Families live in mud and rock huts the size of most of our living rooms. No running water, no electricity, no washer and dryer, no air conditioning, no sanitation systems. People live from hand to mouth, grow their rice and corn, raise goats and till their fields with cape buffalo and a wooden plow. The men plow and the women harvest by hand. There are no hospitals for many miles. Many have no transportation except by foot or public bus. The premise of an American “food desert” is laughable in Nepal. That is extreme poverty. Because of their poverty, Nepal is the 8^th most polluted country in the world. The US has the ninth cleanest air in the world.  

Only 1.2% of people in the United States live in extreme poverty. The relative poverty line in the US is $12,760 per year for one person or 18 times extreme poverty of $693.50 per year. For a family of four, that number is $26,200. The percentage of Americans living in relative poverty at or below the poverty line in 2018 was 11.8% (about 38 million people). However, that number does not account for government benefits. Income at the poverty level excludes food stamps, women, infants, and children (WIC) food support, and Medicaid and low-income tax credits among other benefits. When government benefits are considered, according to an analysis by the Heritage Foundation, a single mother with 2 children working a minimum wage job with after-tax income of $13,853 would have the spending ability of a non-benefit single mother of 2 with after-tax income of $47,400 per year. Yet this family is still counted as a family in poverty.   When benefits are taken into consideration, the relative poverty rate in America falls to about 4%. 

According to the US department of energy, in contrast to rural Nepal, 99% of “poor” Americans have a refrigerator, 97% a television, 98% a stove, 78% have air conditioning, 62% a washer and dryer, 63% subscribe to cable or satellite television. They are likely to have phones, cars, and more. The comparison between the extreme poverty in countries such as Nepal or Bangladesh and relative poverty in the US is stark. 

This is not to say we should not have compassion and an openhanded spirit toward those in relative poverty who have needs, even if those needs pale in comparison to the needs of people in extreme poverty. However, we should also be willing to ask questions. Are poverty programs in the US creating intergenerational dependence or providing a path to financial independence? Are we making progress for the trillions of dollars being spent? 

What Causes Poverty?

Poverty is often due to no fault of the individual in poverty. The circumstances of geography, education, politics, family heritage, health, and more contribute. Some children are born with birth defects that impair their ability to provide for themselves. Birth defects will impact about 1 to 2% of children in the US that survive birth.  They have little control over their circumstances. Much of global poverty is due to geographic and political circumstances. Some people are simply born in countries torn by war and political chaos. Thomas Sowell points out that “geography is not egalitarian” (4). Waterways, lands, mountains, climate, and coastlines (or lack of) all contribute to the wealth and poverty of nations. Politics also plays a major role. The Brookings Institute estimates that by 2030, 9 of the top 10 poorest countries in the world will be African. Not surprisingly, of the estimated 10 poorest countries in 2030, seven of them are in the 4^th quartile of the Fraser institutes economic freedom index. Two are in the 2^nd quartile and one is in the 3^rd.  Socialist, natural resource-rich Venezuela is dead last. As Americans, we were truly fortunate to be born into the richest nation in the world. We are blessed by great geography from coast to coast. Most importantly, our country has benefited from a free market economy since our founding. We rank number 5 on the Fraser Institutes economic freedom index. We ranked number 2 in 1985, and in 2014 we ranked 12th.  Montana ranks 30^th in economic freedom of 50 states.

Given that we live in one of the freest countries in the world, what is causing relative poverty in the United States? I submit that much of our relative poverty in the US comes primarily from political mistakes and poor personal choices.

In his state of the union speech on January 8^th, 1964, Lyndon Johnson declared “war on poverty”. He said, “our aim is not only to relieve the symptoms of poverty, but to cure it, and above all, to prevent it” (5). When President Johnson made this speech, the US relative poverty rate was about 19%. By 1972, according to the United States Census Bureau, the poverty rate was 11.1%. From the 1970s through 2018, the rate moved between 11% and 15%, climbing during recession and dropping during periods of economic growth. In 2018, it stood at 11.8% (about 4% when benefits are considered). This is not significant progress. Are people really being lifted out of relative poverty, or are we just subsidizing their plight without truly curing poverty as was the goal of Johnson’s war on poverty? I believe it is the former. We subsidize families in poverty, but we don’t do a good job of helping them out of poverty. In America, we have created intergenerational dependents of the state, a generation of children without home-based fathers and with single mothers struggling to raise children on their own. The fact is that America has a low level of poverty when benefits are considered but a high level of dependence.  

In 2018, according to federalsafetynet.com, the US government spent approximately $2.5 trillion on all social and welfare programs combined. This is 55% of federal spending (Montana spends 43% of all funds on health and human services). Depending on who’s counting, the US has spent over $22 trillion on poverty and income security programs since Johnson initiated the great society campaign. Does this measure up to what was promised by President Johnson? You can read his state of the union address here. In initiating the war on poverty, Johnson stated his aim was to not only cure poverty but above all, to prevent it. He claimed this could be done while enacting “the most far-reaching tax cut of our time” and “without any increase in spending” but with an “actual reduction in federal spending.” His proposals were wide-ranging, calling for a broader food stamp program, modernizing unemployment insurance, and adding more federal school aid. His goal was to build more hospitals, libraries, and nursing homes in addition to mass transit and a decent home for every American. His greatest legacy was his goal that “we must provide hospital insurance for our older citizens, financed by every worker and his employer.” This reference was to Medicare and Medicaid, which were signed into law in July of 1965.  

As with all entitlement programs since the founding era, these programs have been expanded far beyond their original design (6). For example, Medicaid was originally designed to provide healthcare only to people receiving cash assistance below 100% of the poverty line. It was then expanded to pregnant women and low-income families, then to those with disabilities, and then to those needing long term care. These were traditionally our vulnerable populations. Just recently, Medicaid was expanded to able-bodied individuals and families regardless of health or willingness to work under 138% of the poverty level. Medicaid has expanded from covering 4 million people in 1966 to 74 million today, nearly 22% of the US population. Once started, politicians perpetually expand entitlement programs regardless of party. Because the limits to programs are always arbitrary, they will always expand. There is no just reason to cut off benefits at 138% of poverty and not 150% of poverty. Our question is, did these expansions eliminate poverty or simply subsidize poverty? 

Looking back, we can see how hollow and deceptive Johnson’s war on poverty speech was. At best, it was naive. You can have everything with a tax cut and no increase in federal spending. After enacted into law, Medicaid spending went from $900 million to over $13 billion in 10 years. Medicaid now costs over $630 billion per year. Unfortunately, nothing has changed. Entitlement programs that families once qualified for at 100% of the poverty level now can be received at up to 400% of poverty. For example, tax credits for health insurance subsidies now go up to 400% of poverty or $104,800 for a family of 4. In Montana, we spent $2.1 billion on Medicaid and other assistance programs in 2018, subsidizing 250,000 people (nearly 25% of the population). This is an increase from 202,000 people in 2012 (7). Why was this needed in a growing economy with falling unemployment?  Due to failed government policies, families in poverty, and now even the upper-middle class are becoming increasingly dependent on the state versus becoming independent self-sustaining citizens. (8)   

As personal responsibilities to provide for our own families have been undermined and subverted by the state, we have become an entitlement culture, demanding our right to government healthcare, food, housing, and protection from any possible natural or economic disaster. This trend has so established itself that John Cogan laments that in the next 15 years, “entitlement expenditures plus interest on the national debt will consume all government tax revenues, leaving no tax revenues to finance all of the federal government’s other national security and domestic activities” (9). 

There is enough blame to go around for dependence in the United States. Certainly, the government is not the only problem and personal responsibility and work ethic is also part of the equation. Conservative commentators and political scientists suggest the personal success sequence keeps most out of relative poverty and dependence on the state. That is, get an education, get a job, get married, and have children. This seems intuitive; however, progressive arguments suggest that this is “more a sideshow than the main event” (10). Progressives argue that the success sequence is a byproduct of affluent parents or white privilege. They would argue that there is no simplistic 4 step process to success. I agree to both.  The idea that you will avoid poverty if you have an education, a job, a spouse, and then children is, well, obvious. However, complexities arise, and plans go awry. Children born and raised in a family dependent on government subsidy learn to depend on government subsidy. If mom is single, uneducated, and lives in dependency, it’s natural to follow that example and be a single mom and dependent. If your dad deserts you, it follows that you may desert your child.  It is hard to escape a dependent lifestyle when a parent is dependent, the education system is bad, and crime infects your neighborhood. 

Regardless, the success sequence works. It has worked for hundreds of years. In 1965, when the war on poverty began, unwed childbearing was about 7%. Since the great society has created a dependent culture, unwed childbirth has risen to 41%. It is not that single parents don’t want a spouse to support the raising of children and provide income; it is just that dependence creates an environment that makes good choices difficult. If we are to reduce dependence, we must change how we subsidize poverty.  

Solutions to Poverty

President Johnson was seeking the “cure” to “prevent” poverty and not just relive “the symptoms.” We are still seeking. As discussed above, politics, personal choices, and circumstances beyond one’s control are all causes of poverty. Sometimes one can’t change the circumstances of birth, disability, or poverty; family, friends, churches, non-profits, and the state all need to help. But the state must have the wisdom to know the difference between alleviating poverty or creating dependents. Above all, we must not create a policy that discourages good choices and then subsidize bad choices. In government, you get more of what you subsidize. 

First things first: personal choices. A recent study by Bradford Wilcox and Wendy Wang found there is a strong relationship between the success sequence and positive financial outcomes. Their study found that 97% of millennials who followed all four steps in the sequence are not in relative poverty by the time they reach their adult years of 28-34. Their success was found to be universal even after controlling for background factors such as childhood family income, race, sex, ethnicity, and scores on the Armed Forces Qualifying Test (AFQT) which measures intelligence. Although cultural circumstances may make good choices difficult, that does not rule out our individual responsibility to make good choices. Some have instruction in good choices inculcated by their parents; others are not so fortunate.  Regardless, good choices make for good outcomes. The role of politics can help or hinder those choices.

Politicians also have responsibility for their choices. Choosing to continue a system that has failed is not responsible. Continuing to spend trillions of dollars we don’t have, or to raise taxes to levels of legalized theft are not viable options. When we create policies that make it difficult to move out of dependence, liberty is lost, and dependence is the result. 

The political sphere must pursue policy to help as many as possible move from dependence to independence. This begins with education, and I believe school choice is a starting place to improve educational outcomes (11). Not all children are served best by the same educational system. Some learn better in homeschool settings, some in private religious schools, some public schools, and some in public or private charter schools. And schools that compete for students become better. Competition makes education better just as it makes software companies, car companies, and nearly any business enterprise better. Policymakers are wise to allow for choice and competition among educators. 

Advanced degrees are good, but not for everyone. Parents and educators should focus on helping teens wisely choose between university degrees, technical training, or apprenticeships. Only about 33% of adults receive a 4-year college degree. Yet many high schools and parents push high school students in this direction. Counselors, policymakers, and public-private partnerships should provide the opportunity for students to join programs that pay them to learn trades and skills that do not need 4-year degrees. These skills can provide lucrative career opportunities for life that can be the first building block in the success sequence. In addition, it puts young adults immediately on their way to financial success and avoids debt for a worthless or incomplete degree. This also saves taxpayers who subsidize college tuition. Currently, 52% of freshmen students at Montana State and 59% at the University of Montana do not finish their degree programs (12). According to the American Institute for Research, the average government subsidy for a college degree is $60,000. This must stop for those who never should have started 4-year degree programs. Consider the apprenticeship program my nephew is attending. Shipyards that build ships for the US Navy will start high school graduates at $20.00 per hour, pay for technical school, provide a 401k, and health insurance benefits. As the apprentice moves through the program with good grades and shows responsibility, they increase the pay and prepare for a lifetime career in shipbuilding.  

President Johnson said we must “cure” poverty. We cannot deny that single parenting is a symptom of poverty and the cure is two parents in the same household who care. When you split a household with earning power of 70,000 and then have two households earning $35,000 you have just created two households with half the income and nearly twice the expenses. This also creates emotional concerns. Children are less likely to thrive in school and stay emotionally healthy and are more likely to use drugs and commit crime. If policymakers would at least work to create policy that supports and encourages marriage, they would move a long way to “curing” relative poverty in America. 

Conclusion

In American’s long history, the government has always sought to help. From our earliest times, American government helped revolutionary war widows, wounded civil war veterans, and then children and widows unrelated to acts of war (13). But as it turns out, politicians used public assistance as the means to their election and inadvertently (to be kind) created the path to perpetual dependence for citizens. With over 50% of the US population receiving some social benefits, the trends now appear irreversible. How does the country withdraw from the opiate of public “assistance”? How do we help those in relative poverty to increase standards of living and recreate a culture of responsibility and self-reliance? Of one thing I am sure. This cannot be done by giving something for nothing. All human experience and our American experiment show that this path leads to a culture enslaved and in decline (14).  

The greatest tool to lift people out of poverty is our free-market economy. Clearly, capital markets have lifted the United States to the highest standard of living in the world. In seeking to increase the wealth of all citizens, we need to stay free and avoid the temptation to give something for nothing to those in relative poverty or raise taxes to confiscatory levels. We also must avoid making it difficult for people to break out of relative poverty by cliffing out subsidies.  Programs should phase out, not cliff out. Continuation of benefits should not compete with marriage. Competitive education models should be pursued. Civics should teach that the role of government is to protect our constitutional rights, provide police protection, a sound and fair justice system, and national defense. It is not our monetary provider or sustainer. We must inculcate into all youth that the success sequence, well, leads to success! Sometimes the obvious is the most obscure. 

Finally, we must remove the temptation for politicians and the electorate to continue to expand entitlements to the point of federal bankruptcy. This will require constitutional amendments via an article 5 conventions of states . Federal term limits will eliminate the reelection motivation for both the politician and the electorate and a balanced budget amendment, with a 2/3 override in times of national emergency, will force spending to come in line with tax revenue. “There are no easy answers, but there are simple ones.” 

Tom McGillvray 

April 2020

1. Matthew 26:11 and Deuteronomy 15. The biblical instructions to be generous to the poor were always directed to the individual, not the government. 
2. Compassion International, one of the premier organizations addressing extreme poverty has a good definition of poverty here: https://www.compassion.com/poverty/what-is-poverty.htm. Poverty is not just related to economic concerns. Educational, spiritual, emotional, and other forms of poverty exist but are outside the scope of this article. 
3. Nepal economic freedom: https://www.heritage.org/index/country/nepal
4. Wealth, Poverty and Politics, Thomas Sowell page 17
5. President Johnson’s State of the Union speech on January 8^th, 1964. 
6. The High Cost of Good Intentions A history of Federal Entitlement Programs by John Cogan. This book details from the founding of the United States, the sobering history of federal entitlements and congresses inability, regardless of party, to stop the growing entitlement state. 
7. DPHHS Cost drivers page 7:  https://leg.mt.gov/content/Publications/fiscal/BA-2021/Section-B/2021-BA-B.pdf
8. Upper-middle-class Americans (see the link where # 8 footnote is) have household incomes starting at $62,500.  Montana Children Health Insurance benefits start at 250% or $65,000 per year for a family of 4. Medical insurance subsidies on the health insurance exchanges go up to 400% of poverty. A family that receives this subsidy is in the top 15% of incomes in America ($104,000 for a family of 4).
9. The High Cost of Good Intentions page 384. 
10. The success sequence: Normative or Descriptive? By Michael D. Tanner
11. I’m not saying that the lack of school choice causes poverty. I am saying that education is a means out of poverty and that school choices available for the needs of different learning styles enhance education which is a path out of poverty.
12. Forty nine percent of MSU students do not graduate after 8 years  
13. America still supports a civil war dependent. See the story here
14. Leviticus 19:9-10 illustrates the principle that individuals (not the government) should help the poor. In return, the poor must have a hand in and take responsibility in providing form themselves. In other words, something (effort) was expected for something (food) given. The original food stamp program was set up somewhat like this. People had to purchase food stamps. The original program provided a 50% match on each eligible food stamp purchase. So, a $4.00 purchase of food stamps netted $6.00 worth of stamps. The $2.00 gained had to be used to purchase food of nutritional value. When the law changed to no longer charge for food stamps, usage increased dramatically from an expected $540 million to $5.8 Billion. (Government always underestimates the cost of entitlements). Supporters of paying for food stamps believed that this encouraged personal responsibility and a willingness to participate in helping themselves. Detractors said this prevented the truly needed from access to the program. (The High Cost of Good Intentions page 283). 

More sites and references for further study and review on poverty and spending on entitlements:

Just facts site:  https://www.justfacts.com/socialspending
Federal Safety Net This site has numerous articles on poverty, quick facts and information: https://www.federalsafetynet.com/index.html

Success sequence:
https://www.mercurynews.com/2017/07/06/will-theres-a-success-formula-to-keep-millennials-out-of-poverty-will-they-follow-it/
https://www.cato-unbound.org/2018/05/11/isabel-v-sawhill/why-does-success-sequence-work
https://www.acf.hhs.gov/blog/2017/06/research-shows-importance-of-success-sequencehttps://www.frc.org/insight/why-marriage-should-be-privileged-in-public-policy
https://www.acf.hhs.gov/blog/2017/06/research-shows-importance-of-success-sequence