The Locker Room's Raising the Issue

September 2, 2004

Raising the Issue: How Should Politicians Address the Issue of Poverty? How 'Bout with Open Eyes and a Little Common Sense?

Posted by Rob Schofield at 2:00 PM

Hey John:

WeÕve certainly touched on this question before. Our discussion about the "two Americas" theme championed by Senator Edwards in our most recent installment of Raising the Issue is a good example. Obviously (well, itÕs obvious to me, anyway) we at the Justice Center think that candidates should be discussing the issue of poverty (and the closely related topic of the shrinking middle class) a lot. It is, indeed, one of the most distressing aspects of the 2004 political scene that in an era of profound economic distress that the presidential contest has spent the last 30 days mired in a "debate" about what happened in Vietnam 35 years ago.

Fortunately, there is a new and good excuse to talk about poverty and the listing economy. Last week, the U.S. Census Bureau released the latest detailed poverty data.They tell a sobering, if not at all surprising story.

(An interesting side note here, that has raised more than a few eyebrows, is that the release came at least a few weeks early this year. Some anti-poverty advocates have voiced the suspicion that this may have been done for purposes of political timing, i.e. to help assure that the numbers have as little of an impact as possible in November. Whatever the case, weÕll do our best to keep the issue alive.)

Anyway, laying conspiracy theories aside, here are some of the salient findings: Since 2000, the number of Americans living in poverty has increased by 4.3 million and the number without health insurance has increased by 5.2 million. Median income (adjusted for inflation) has fallen by $1,535. Most of the newly poor were children under 18.
Not surprisingly -- given the decline in textiles and other industries impacted by national trade policy -- the story is even worse in North Carolina. Only two other states saw a bigger jump in poverty. More than one in six Tar Heels now lacks health insurance. Each of these disturbing facts arrives at a time when American worker efficiency and productivity are all-time highs.

Now, I know that you and some of your Locke colleagues such as Raleigh News & Observer columnist Rick Martinez have argued repeatedly that these facts should have little to do with the election because poverty is ultimately, a matter of personal choice. This argument, however, seems to me to amount to an effort to play a "blame the victim" spin game with what really is a pretty simple and obvious set of facts that goes like this:

1) The American economy has been down for almost four years and has shed lots of good jobs -- many of them to low wage employers overseas.
2) The cost of health care, housing and transportation are dramatically up.
3) Programs and initiatives designed to ease the effects of a roller coaster economy on average folks (unemployment insurance, public health insurance, childcare assistance, affordable housing investments and lower-income tax breaks) have all been slashed or neglected at the expense of large new tax cuts for the top 1% and an expensive war overseas.
4) The bottom-line result is a shrinking middle class and a general expansion of poverty and economic uncertainty.

With two months to go until election-day, one of the best gauges for North Carolinians attempting to measure the seriousness and integrity of any candidate is whether or not the candidate is willing to address (and propose aggressive solutions to) the fundamental inequities that plague our economy. If there is any justice in the world, such voter measurements will play the decisive role in the selection of our next crop of political leaders.

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Raising the Issue: What Poverty Is and How to Reduce It

Posted by John Hood at 2:06 PM

Towards the end of August, the U.S. Census Bureau released new data on poverty and other economic indicators for the 2001-03 period. While I have serious concerns about how some of these statistics are generated, there could be at least one salutary effect of the Census release: it may serve to direct the attention of North Carolina candidates, policymakers, journalists, and voters to what should be a major agenda item for the coming years.

The issue is poverty Š or, perhaps more broadly, the need to expand economic opportunities for all citizens.

There are two propositions to which IÕll stipulate up front. First, there are North Carolinians whose circumstances are dire. They suffer basic deprivations, they struggle just to get by, and they face an uncertain future. Second, policymakers can and should make it a goal to promote economic opportunity so that fewer North Carolinians live in poverty.

Unfortunately, this may exhaust the areas of agreement between Rob and me. Other propositions I will advance include: 1) the extent of poverty is exaggerated by the Census Bureau and other agencies and institutions, 2) its causes lie primarily in personal choices rather than economic recession or exploitation, and 3) the appropriate role for government in combating poverty does not include ongoing efforts to redistribute income from those who earn it to those who donÕt (which IÕll bring up later in the debate).

First, "poverty" should not be a relative concept. It should refer to a state in which households are subject to real or threatened deprivations. In the interest of not ruining our language further, poverty should not refer to the lack of luxuries Š nor should it, I admit, simply refer to the ability to acquire only the bare necessities of food, clothing, and shelter. Most dictionaries suggest that we use the term "destitution" to describe a state of starvation or homelessness, "poverty" to denote a lack of resources for reasonably comfortable living, and "indigent" or "low-income" to describe someone who may not be poor but who cannot, for example, afford lots of entertainment, recreation, or long-term investments such as stock portfolios or college educations.

I donÕt say all this to play word games. I do so because the concept of poverty has been so warped over the years that many people who own their own homes and cars, who have cable television and Internet connections, and who eat out or attend concerts regularly are called "poor." This adulterates the term and clouds the debate over real poverty.

I have already written a fair amount lately about why the Census BureauÕs estimates of poverty are so misleadingly high. In sum, the bureau wrongly uses income reported to the government rather than reported spending as the basis for determining poverty. This results in an overcount because many low-income households earn off-the-books income, because government benefits other than cash Š such as free health care, free child care, and subsidized housing Š do not show up in reported income, because retirees can have lower incomes and higher standards of living due to accumulated assets, because many young people (think college students) are supported by their parents but treated as separate households, and because some households endure brief spells of unemployment by tapping savings or accumulating debt and thus donÕt truly live in poverty during such periods.

IÕll be happy to discuss the technical problems with the poverty rate later, but suffice to say that since poor families on average spend something like 40 percent more than their apparent incomes, this one factor, if accounted for in poverty measures, would cut the rate significantly.

On the cause of poverty, there is no apparent relationship between government policies such as minimum-wage hikes and reductions in poverty. Strong economic growth and job creation do, indeed, often correlate with declines in poverty, but Rob and I would likely disagree about how to accomplish those things. But even more clear is the existence of strong linkages between poverty and the decisions people make Š such as dropping out of school, failing to build job skills and experience, and having children out of wedlock. Looking at a recent Census survey, I concluded that while 14 percent of all families were considered poor in 2002, the rate dropped to 11.5 percent for single parents working full-time, 11 percent for high-school graduates, 4 percent for married families with children in which one parent worked full-time, 3 percent for married families with one full-time and one part-time worker, and an even lower rate if those married parents are high-school graduates.

Let me hasten to say that IÕm not saying this to "blame the victim." Many such decisions are made when people are quite young, when their time horizons are short and their ability to think carefully about what they are doing is not yet developed. Moreover, the children whose parents make these unfortunate decisions deserve our concern, not our blame. But unless we talk frankly about the sources of poverty, we cannot hope to fashion effective responses that help poor families build a brighter future and the next generation not to make the same painful mistakes.

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Raising the Issue: Poverty as "Relative"; Poverty as a "Choice"

Posted by Rob Schofield at 3:00 PM

You and I have agreed that our "blogs" tend to go on a little too long, so IÕll try and keep this relatively brief.

Your first main point seems to be that because poverty is a relative term, it has lost its meaning and usefulness. I read you to say two main things here: 1) ItÕs inaccurate and unhelpful to describe someone as living "in poverty" unless they are essentially hungry and homeless or close to it; and 2) The definition of poverty has become dramatically inflated so that tons of people leading comfortable middle class lives are being classified as poor.

To this, I would offer two responses: 1) Definitions of poverty must, of course, evolve over time. Seventy years ago, a huge percentage of North Carolinians used outdoor privies and never saw a doctor. Nonetheless, in their time they were quite likely of middle or average income. I canÕt believe that you would consider such a state of affairs to amount to anything but poverty today. 2) Having said this, it is also inaccurate to imply Š as you have Š that vast numbers of poor North Carolinians are out there living "la vita loca." Any honest look at the actual income levels weÕre talking about here ($10,000, $12,000, $15,000 per year) make clear that folks in poverty are not buying homes and cars.

As to your second point about unfortunate personal choices being the big cause of poverty, here are two more thoughts: 1) As you admit, the issue of personal choice as the cause of poverty is of no relevance to the 13 million American children living in poverty. Whether itÕs their parentsÕ fault or the economyÕs makes no difference to a poor kid without access to basic health care or a safe and decent place to live. Also, as long as weÕre on the subject of choice, IÕd love to know your position on comprehensive sex education in the schools. 2) If choice is the big cause of poverty, is it your contention that recent growth in the numbers of poor people is a result of an increase in poor decision making by individuals? If this is so, how does this jive with shrinking teen pregnancy rates and improved education outputs? IsnÕt the declining economy a much more logical and obvious culprit? And if this is the case, isnÕt it also logical and obvious to use the most powerful tool at our common disposal, the government, to try and do something about the situation?

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Rob, you suggest that the incomes implicated in the poverty rate Š such as $10,000 to $15,000 Š are too low for the poor to be able to afford homes and cars. Friend, you are missing my point. First, households that report $15,000 in income are, on average, spending something like $21,000. Of course, this is on average. For some there isnÕt much of a discrepancy, but for others it is large Š particularly if they are getting free health care, free child care, free or nearly free housing, food stamps, etc. Perhaps that is why, contrary to your point, nearly half of all "poor" families own their own homes, nearly 75 percent of "poor" families own at least one automobile, and the average expenditures of the bottom quartile of the income distribution reflect a standard of living roughly comparable (adjusted for inflation) to that of the median U.S. household in the 1970s and to middle-income households in Europe today.

No, we are not talking about whether folks should have to go potty in outhouses. Poverty is a real problem, but its extent is massively overestimated due to poor data collection and reporting.

Your second point, regarding poor children, brings up tougher issues. I happen to believe that a limited, constitutional government still has a responsibility when it comes to the needs of minors. I also believe, as it happens, that elderly or disabled folks with no means of support from their families become, in effect, "wards of the state." In both cases, the argument is a practical one, related to the necessity of ensuring public order: without some kind of public-policy response, we would end up with bulging county lockups and abandoned or neglected children whose plight would impose real costs on everyone.

But in providing temporary relief for needy families (gosh, that term sounds familiar) or a true, minimum "safety net" for wards of the state, we should be careful not to create snares that trap generations of people in poverty. Such snares are woven, I contend, out of the strands of self-destructive behavior and unfortunate choices that people make Š again, dropping out of school, having children out of wedlock, and failing to build useful skills and work experience. We donÕt help children by putting their parents on a perpetual dole, thus keeping adults from facing the consequences of their actions and learning from them. And we donÕt build real skills and work experience by passing laws that arbitrarily raise the minimum wage. Laws donÕt make someoneÕs work effort worth more. Only skills, responsibility, education, experience, and innovation do that.

On sex ed, the clear message should be that having children out of wedlock is a serious handicap that should be avoided. Whether to send that message via abstinence-based education or birth-control tutorials is perhaps a debate for another day.

Lastly, you suggest a tension between my causal arguments about poverty and fluctuations related to the economic cycle. No, I didnÕt mean to suggest that general economic trends have no impact on poverty rates. They obviously do. But their influence is less than the influence of personal behavior. LetÕs flip things around: it would be wonderful for our economy, for producers and consumers as a whole, if fewer young people dropped out of school, had children out of wedlock, and participated only sporadically in the labor market.

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Raising the Issue: Homeownership, Sneaky Poor People and a Safety Net

Posted by Rob Schofield at 4:26 PM

John, John, John, John.

I think our discussions are always more interesting when we do our best to avoid statistical battles but when you throw out a whopper like you did in your last posting IÕve got to respond. To claim that nearly half of the poor own their own homes is absolute hogwash. I donÕt know where the Heritage Foundation gets their number (46%), but my source (those crazy left-wing ideologues at the U.S. Census Bureau) report that in North Carolina only 69.4% of all households own their on home. The number of households below the poverty level owning their home is 7.5%. In the Raleigh-Durham-Chapel Hill MSA the number is only 4.4%. IÕve got the paper in front of me and will post the link ASAP. Now remember this is the same group that you assail for saying that the number living in poverty is too high.

Now as for the actual living conditions of the poor, your contention that the average poor North Carolinian lives like the average middle-income European is just not credible Š unless, I suppose, you mean to include a couple of hundred million Russians. If you really believe this, I suggest we take a joint two-part joint fact finding mission Š first to Hoke or Halifax County and then to suburban Copenhagen or Milan. (Come to think of it, why donÕt we divide that task up Š I volunteer for the second part). But if weÕre gonnaÕ do that, why not go ahead and compare ourselves to the rest of the world? Heck, at least Iraq is formulating a plan for universal health care.

Now, as for the tired old Cadillac welfare queen aspersion (that is, that all those sneaky poÕ folks are hiding vast amounts of underground income in order to get on the dole from Uncle Sam) you may want to recall the following:

„ The average Work First (i.e. TANF) benefit in North Carolina is less than $300 per month, per family. This is a benefit that lasts a maximum of two years and includes a very seriously enforced work requirement.

„ Huge numbers of hurting and needy people are not receiving "free health care, free childcare, and free housing." In North Carolina, 1 in 6 people lacks health insurance Š not because of choice, but because they simply canÕt afford it. The waiting list for childcare subsidies is over 25,000 long. Food stamps are badly underutilized because of burdensome and punitive rules. The waiting list for Section 8 housing is as long as your arm.

Finally, while I agree that our safety net should not be designed to snare people into poverty Š here I believe your colleague Mike Walden has discussed the intriguing idea of a "negative income tax" (something akin, I think, to NixonÕs guaranteed minimum income), you really can rest assured that North CarolinaÕs pitiful public assistance system is not luring vast throngs into a life of carefree sloth. Moreover, when we do assure all working people of a decent income, we do an incredible service to their children by helping to give them a decent diet, health care and living conditions Š three badly, under-identified, but necessary, precursors to a sound basic education.

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The source for the percentage of poor households owning a home is the federal government. The full cite, via Rector and Johnson, is "U.S. Department of Commerce and U.S. Department of Housing and Urban Development, American Housing Survey for the United States: 2001." I looked up what appears to be a relevant table, which appears to track fairly closely with the percentage (46 percent) that Rector and Johnson use. Just look down the left hand columns. Now, I will note that this is limited to households who dwell in a structure, so to the extent the truly homeless are classified as poor households, the percentage might change slightly, down a few points, let's say. But no way are we talking about a tiny fraction Š 7.5 percent or 4 percent Š according to the data from HUD. Perhaps what you are looking at involves a measure of households who no longer have a mortgage, not the same thing as homeownership obviously.

As far as comparisons to middle-income families go, I notice that you donÕt dispute my citation of evidence suggesting that poor families today have average expenditures comparable to the median U.S. household in the early 1970s. I view this statistic, again straight from federal reports, as devastating to the claim that the poor are getting poorer, that opportunity is shrinking, and that poverty as currently Š and expansively Š defined by the Census Bureau is a meaningful concept. You did choose to ridicule my comparison to European living standards. I should have been clearer, here: I was talking about assets owned and services available, not simply monetary income.

Next, you talk about the fact that many families with below-average incomes do not have access to free health care, free child care, public housing, and the like. Granted. We are talking about poor families, about families with apparent incomes below the poverty line. Actually, large percentages of these families are enrolled in such programs. Virtually all are eligible for Medicaid, so they are effectively insured whether they are enrolled and using medical services today or not. In most cases, you are referring to waiting lines or lack of eligibility for services that involve families with incomes above the poverty line. We can debate whether they should have access to such wealth transfers, but thatÕs not germane to my point about poverty. Unless you account for these substantial transfers Š worth many thousands of dollars Š you cannot yield a satisfactory measurement of real poverty.

Finally, I never suggested that low-income people are residing in "carefree sloth" just because they earn more than is reported and are more likely to own assets than is commonly believed. In fact, I never suggested that I considered these facts to mean that the folks in question were defrauding the taxpayers. Most of the households that I would consider as wrongly classified as poor still face significant economic challenges. We should seek to boost their prospects by stimulating job growth, improving education, reforming our post-secondary education and training policies, and transforming transfer programs such as Social Security and unemployment insurance into personal-account systems that let people build real assets and make decisions that best meet their individual needs.

As always, thanks for engaging in the debate. I am sure we both hope that our readers across North Carolina will find the differences of opinion illustrative, stimulating, respectful, and a useful starting point for their own thinking and conversation about the governmentÕs proper role in combating poverty.

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