“We have spent $15 trillion from the federal government fighting poverty, and look at where we are, the highest poverty rates in a generation, 15 percent of Americans in poverty.”
— Rep. Paul Ryan (R-Wis.), chairman of the House Budget Committee, interview on Fox News’ “On the Record,” July 31, 2013
We were intrigued by Rep. Ryan’s statement, which was similar to a point he made at a committee hearing Wednesday on the “war on poverty.”
There are two numbers here — $15 trillion and 15 percent — designed to show that the United States is losing the war on poverty. But do these figures hold up to scrutiny?
The poverty rate is determined by the U.S. Census, and generally such government figures are fairly authoritative. The poverty rate is now about 15 percent, and the last time it was this high was in 1993. Ryan spokesman Conor Sweeney said that was the year that Ryan was referencing when he said “in a generation.” (Okay, a generation is generally defined as 30 years, but 20 may be fine for government work.)
If you look at the table on page 13 of the Census report, the poverty rate generally jumps up during or right after a recession, which is why the rate hit 15 percent in the early 1980s, 1993 and now.
While Ryan points to the 15-percent rate as evidence of failure, increasingly scholars believe the official figure is not especially informative.
For instance, transfer payments such as the Earned Income Tax Credit or food stamps, are not recorded as income, meaning that the impact of programs for the poor is not reflected in the official estimate. The Census Bureau has tried to mitigate these concerns with a new Supplemental Poverty Measure, but that has come under attack as well.
At the hearing that Ryan chaired, American Enterprise Institute scholar Douglas J. Besharov said there are a variety of systemic problems with the official measure and that the poverty rate is really 7.2 percent.
“In the past five decades, we have made much more progress against poverty than is suggested by the official poverty measure or the administration’s new Supplemental Poverty Measure,” Bersharov said. “In fact, both measures substantially understate our progress — thus distorting academic as well as political debates.”
Bruce D. Meyer and James X. Sullivan, in a paper for the National Bureau of Economic Research, also forcefully argue that the rate was both higher when the “war” was launched and is significantly lower than the official rate now, largely because of changes in tax policies. (See the charts starting on page 51.)
Still, Ryan is using an official number when he refers to a 15-percent poverty rate, so that’s defensible. But where does the $15 trillion comes from?
This figure appears in a 2012 report by Michael Tanner of the Cato Institute, who argued that the results of the war on poverty have been meager for the amount of money that has been spent. About $12 trillion of the spending was federal monies, which he calculated by adding up spending on means-tested anti-poverty programs since 1964, and then adjusting to current dollars. The other $3 trillion was spending by state and local governments, which he said was a rougher estimate.
But, as Tanner acknowledged in an interview, adding up any spending over a 50-year period is going to end up with a rather large number.
To provide some context, we added up all federal spending over the last 50 years and adjusted it to current dollars, using the White House’s historical budget tables. That adds up to $103 trillion, which means anti-poverty spending (as Tanner defined it) was a little under 12 percent of all federal spending in this period.
Then, there are definitional issues. Tanner’s list of $668 billion spent in 2012 includes more than $87 billion for education programs, with about half devoted to Pell Grants for college. While aimed at the poor, is that an anti-poverty program in the traditional sense (cash grants) or is it designed to help people climb out of poverty? We don’t take a position, but simply note that some might not include such programs under the rubric of “war on poverty.”
Moreover, as we have noted before, some means-tested spending goes to people with incomes above official poverty levels, making it difficult to say all such monies should be counted as part of the “war on poverty.”
Indeed, the biggest item on Tanner’s list is Medicaid. Tanner said he was careful to only count the truly poor in the program, leaving out spending on nursing homes and the disabled that makes up about two-thirds of Medicaid costs. But, even so, the growth in the Medicaid spending budget is reflective of increases in health-care costs in general.
The Congressional Research Service, in a 2012 report, says that between 1962 and 2011, “federal outlays for low-income health programs have increased, in inflation-adjusted terms, at a rate of 13.3 percent per year versus 6.5 percent for other spending.”
In fact, federal outlays for low-income assistance are predicted to reach 4.2 percent of the gross domestic product by 2022, with all of the increase due to health-care inflation. By 2022, CRS says, health care increasingly will dominate low-income aid, accounting for almost seven out of 10 dollars spent on “poverty” programs; meanwhile, non-health care programs “would see their aggregate spending decline.”
Sweeney said that Ryan’s larger argument is that “Washington’s myopic focus on inputs is misplaced. Instead of measuring compassion for the poor by how much government spends, let’s examine the results.” He noted that in 1964, President Johnson declared, “I believe that thirty years from now Americans will look back upon these 1960s as the time of the great American Breakthrough . . . the victory of prosperity over poverty.”
He said by Johnson’s standard, the war on poverty is not being won. “All we’re asking is why,” Sweeney said. “It seems government’s approach to poverty — including how it measures poverty — is in need of serious rethinking.”
The Pinocchio Test
We certainly applaud any effort to examine the effectiveness of government programs. But although there may be a nice ring in using two factoids with the number “15,” Ryan’s observation is a bit facile.
Lay aside possible limitations in citing the official poverty rate as a metric for progress. As we have shown, the $15-trillion estimate for 50 years of spending on poverty programs has its own set of limitations. The number lacks too much context to be of much value for this important debate, especially when juxtaposed with the current poverty rate.
Check out our candidate Pinocchio Tracker