The 50th anniversary of President Lyndon B. Johnson’s War on Poverty focused some long-overdue attention on the plight of America’s poor. President Obama said that Johnson’s Great Society programs “lived up to our best hopes as a people” but that “our work is far from over.” Conservative critics like Rep. Paul Ryan (R-Wis.) argued that the government “needs to dump decades-old programs” and “remember that the best anti-poverty program is economic growth.”
It’s easy to be in favor of economic growth — Obama, too, called for broader access to “the opportunities a growing economy provides,” concluding that “we rise or fall together.” Unfortunately, while that’s a nice sentiment, one of the clearest lessons of the past 50 years is that, in the modern American economy, we do not “rise or fall together.”
The economy as a whole has grown substantially since Johnson was president; gross domestic product per household has increased by more than 75 percent since 1967, when the Census Bureau began tabulating household incomes. Average household income grew apace for much of that period. It has stagnated since 2000, but market income per household is still 45 percent higher than in 1967. The real problem is with the distribution of income. Virtually none of the gains of economic growth have gone to the bottom 40 percent of American households. Their real incomes, before taxes and transfers, are no higher than they were 40 years ago. Our “best anti-poverty program,” the free market, has done nothing at all to improve their lot.
In his 1964 State of the Union address, Johnson offered an ambitious anti-poverty agenda — expansions in food stamps and unemployment insurance, school aid, slum clearance, hospital insurance for the elderly and more. What is often forgotten is that he envisioned a multi-front war enlisting private enterprise along with federal, state and local governments. “Our chief weapons,” he said, “will be better schools, and better health, and better homes, and better training, and better job opportunities.” “Above all,” he counted on a major tax cut to inject billions of dollars “into the private spending stream to create new jobs and new markets in every area of this land.”
Conservatives sometimes claim, as Sen. Marco Rubio (R-Fla.) did recently, that the federal government is “incapable” of providing effective help to poor people, and that we should rely instead on “the single greatest engine of upward mobility in human history: the American free enterprise system.”
“Mobility” is often taken to mean that individuals can move up or down in the income distribution. Even in that sense, the United States lags behind other affluent democracies in economic mobility. But more importantly, no amount of churning will put a dent in poverty unless the incomes of the poor increase in absolute terms. That is where the American free enterprise system has failed abjectly over the past half-century.
According to Rubio, “our federal government is a major impediment to the enterprise and ingenuity of our people. An expensive tax code, burdensome regulations and an unsustainable national debt are suffocating our economy’s ability to create enough steady and good paying jobs. That is why poverty and inequality have only gotten worse under the current administration.” But then, when was it that “real American free enterprise” produced “a broad and growing economy that creates opportunities for everyone to get ahead”? Republicans held the White House for most of the past 50 years, and they presided over even slower growth for poor and middle-class families than Democrats have.
The first part of Rubio’s claim is wrong, too. Far from being “incapable” of alleviating poverty, federal programs are responsible for much or all of our progress on that score since the 1960s. The official poverty rate in 2012 was 15 percent, slightly higher than it was in 1967. But that official rate is quite misleading due to antiquated assumptions and methodological flaws. Most importantly, it fails to count many of the resources provided to poor people by government anti-poverty programs.
The Census Bureau has recently started providing a much better Supplemental Poverty Measure, and a team of scholars at Columbia University has produced a comparable measure from 1967 to the present. Their calculations show that poverty by this measure has declined by about one-third since Johnson’s War on Poverty began, from 25 percent in 1967 to 16 percent in 2012. That is a substantial, albeit partial, success. They also show that this substantial decline is entirely attributable to the expansion of Social Security, food stamps, the Earned Income Tax Credit and a wide variety of other government programs. Without this expanded safety net, the poverty rate today would be almost 29 percent, adding another 40 million people to the ranks of America’s poor.
The expanded safety net has contributed significantly to reducing poverty in America over the past half-century; but our market economy has not. On one front, as Zachary Goldfarb wrote recently, the War on Poverty has been “a resounding success”; on the other, “a failure.” It would be foolhardy to launch a new offensive without recognizing which is which.