10 Things You Might Not Know About Poverty
Fifty years ago, Lyndon Johnson announced the war on poverty as the central message of his first State of the Union, less than two months after John F. Kennedy's assassination. Conservatives, following Ronald Reagan's quip, like to joke that the War on Poverty is over and poverty won. But as usual, the facts disagree.
We haven't vanquished poverty, it's true. But it's not Johnson's anti-poverty policies that have failed us. They've performed much better over the past 50 years than America's capitalist economy has, which has actually made poverty worse over that same period of time. If we want to make real, dramatic progress toward realizing the American Dream for all Americans, we need to arm ourselves with an accurate understanding of what the War on Poverty has actually achieved, as well as how it has fallen short, in order to make better policy for the future. What follows is a list of some of the most important facts to help guide our way.
1) Johnson's programs were never intended to end poverty all by themselves. They were supposed to accelerate and reinvigorate a process of poverty reduction that was already under way in post-WWII America—as was clearly laid out in the 1964 Economic Report of the President, one of the two key documents defining the original scope of the War on Poverty, along with Johnson's 1964 State of the Union.
"In the United States today we can see on the horizon a society of abundance, free of much of the misery and degradation that have been the age old fate of man,” the report stated. “Steadily rising productivity, together with an improving network of private and social insurance and assistance, has been eroding mass poverty in America. But the process is far too slow. It is high time to redouble and to concentrate our efforts to eliminate poverty."
The report cited impressive statistics to support its assessment. Poverty had fallen rapidly from 32 percent of the population in 1947 to 23 percent in 1956, but had fallen only another 3 percent in the next five years, when "total growth was slower and unemployment substantially higher." Even the earlier faster rate would still leave 10 percent of the nation in poverty by 1980, while the more recent, slower rate would leave it at 13 percent. Hence, the report concluded, "We cannot leave the further wearing away of poverty solely to the general progress of the economy."
2) The US economy has failed to keep reducing poverty as it did before 1964. After a few good years, the economy weakened substantially after 1973, undercutting the progress LBJ and his advisers had counted on. GDP grew 4.0 percent per year from 1948 through 1973, but only grew 2.7 percent annually from 1973 through 2011. The average annual unemployment rate from 1948 to 1973 was 4.8 percent, but since then it's been 6.5 percent, roughly 40 percent higher. That labor market weakness, combined with all-out attacks on labor unions, and a declining minimum wage, has significantly undercut the ability of tens of millions of Americans to raise themselves out of poverty simply by working an 8-hour day.
We see this in the shifting fortunes of the 1 percent and the 99 percent. From 1948 to 1973, the average income of the bottom 99 percent rose 102 percent, compared to just 46 percent for the top 1 percent. But from 1973 through 2012, the bottom 99 percent saw no increase whatsoever, while the top 1 percent gained an average of 187 percent. With this vast wealth shift to the top, it's no wonder the economy as a whole produced a net increase in the rate of poverty over this time, using new measures of market poverty.
3) Safety net programs have cut poverty by 40 percent since the 1960s. Along with social insurance programs like Medicare, and Social Security expansions—also associated with the War on Poverty—means-tested programs targeting the poor have dramatically reduced the rate of poverty in America since LBJ's presidency. For decades, the official poverty measure (OPM), based on cash income, has provided a crude and in many ways misleading measure of poverty, one that is particularly ill-suited to measuring the effectiveness of anti-poverty programs.
In 2011, the Census adopted a “supplemental poverty measure”, more accurately attuned to the actual resources consumed by families and individuals. Researches soon began looking backwards, constructing poverty level data for past decades. In 2012, Bruce D. Meyer and James X. Sullivan (“Winning the War: Poverty from the Great Society to the Great Recession”) reported that “A consumption based poverty measure that adjusts for bias in price induces declines by 12.5 percentage points between 1972 and 2010.” In contrast, the OPM actually increased several points over this time. In early December 2013, a team of five researchers (“Trends in Poverty with an Anchored Supplemental Poverty Measure”) reported even more striking results:
“The OPM shows the overall poverty rates to be nearly the same in 1967 and 2011 – at 14% and 15% respectively. But our counter factual estimates using the anchored SPM show that without taxes and other government programs, poverty would have been roughly flat at 27-29%, while with government benefits poverty has fallen from 26% to 16% -- a 40% reduction. Government programs today are cutting poverty nearly in half (from 29% to 16%) while in 1967 they only cut poverty by about a one percentage point.” [Chart here.]
Thus, the economy actually added 2 percent to the 1967 poverty rate (a 7 percent increase), while government programs have grown vastly more effective in cutting poverty. This completely contradicts the conservative narrative casting the War on Poverty as a failure. The real failure has been the American economy, as corporate power and profits have skyrocketed, while wages have stagnated, or even fallen for millions of American workers.
4) The War on Poverty wasn't just means-tested programs for the poor. The most important single program it included was Medicare, a social insurance program covering almost all Americans. In addition to the legislative agenda Johnson laid out in his State of the Union speech, there were eleven goals contained in chapter 2 of the 1964 Economic Report of the President, titled “Strategy against Poverty." In their book Legacies of the War on Poverty, editors Martha Bailey and Sheldon Danziger wrote, “These goals include maintaining high employment, accelerating economic growth, fighting discrimination, improving regional economies, rehabilitating urban and rural communities, improving labor markets, expanding educational opportunities, enlarging opportunities for youth, improving the Nation’s health, promoting adult education and training, and assisting the aged and disabled.”
Thus, direct assistance for the poor was just one side of a multi-faceted approach. The part that failed—mostly after Johnson left office—was the side of the macro-economic goals of maintaining high growth and employment.
When I asked Bailey to group the programs into larger categories, she responded: “Here are four (not mutually exclusive) categories. Lots of programs cut across the categories:
- Macroeconomic and structural change: 1964 tax cut, minimum wage, worker training and development, Civil Rights Act, Voting Rights Act, Housing and Urban Development
- Human capital development: Elementary and Secondary Education Act, Higher Education Act, Head Start, Civil Rights Act
- Social insurance: Social Security, Medicare
- Safety net: food stamps, AFDC, Medicaid, Older Americans Act.”
Commenting on what Johnson himself said at the time, Bailey observed, “Johnson notes that he wants to eliminate the paradox of poverty in the midst of plenty. He wants to go beyond treating the symptoms of poverty and cure it. Safety net programs treat the symptoms of poverty. The initiatives in the other categories aimed to prevent it.” Thus, it's particularly ironic when the term “War on Poverty” is used to focus almost exclusively on the aspects that were secondary in Johnson's own thinking.
The real failures of the War on Poverty can be found in the first category. The 1964 tax cut—and subsequent tax cut policies that went much farther—clearly didn't restore the broad-based prosperity gains seen in the early post-WWII era. There was a short-term increase in the minimum wage, but it reached its inflation-adjusted peak in 1968, and has consistently lagged inflation ever since—let alone keeping pace with productivity gains.
On the other hand, the multifaceted nature of the War on Poverty profoundly contradicts the conservative narrative which casts it as solely a matter of means-tested programs for poor people, which it then proceeds to claim have failed and actually serve to perpetuate poverty. Rather, the War on Poverty was consciously designed to produce synergistic effects, improving the skills of poor people, improving their livelihoods, improving the regional economies in which they were concentrated, etc. The results varied, of course, but it was expected that programs would need to be altered and adjusted over time, and in some cases that's just what has happened.
5) Medicare has dramatically cut elder poverty, while providing broader family security. In the pre-Medicare era, 65+ poverty rates were 35 percent, today, they're less than 10. Both Medicare and Social Security expansion contributed a lot, although the poor weren't specifically targeted. As Bailey and Danziger explain:
The War on Poverty was more than a disparate set of programs. One of its unifying elements was prevention of economic hardship. An example is Medicare. Although Medicare is targeted to all of the elderly, not just the elderly poor,6 Johnson stressed its capacity to prevent poverty. His 1964 State of the Union noted the need to “provide hospital insurance for our older citizens... to protect him in his old age... against the devastating hardship of prolonged or repeated illness.” Johnson went on to say that “every American will benefit by the extension of social security to cover the hospital costs of their aged parents.” That is, Medicare not only prevented financial ruin among the elderly—it also protected their adult children from having to pay for the costs of their parents’ illness.”
The fact that grandparents' health was provided for freed-up resources to invest in grandchildren's education—a form of “intergeneraional transfer” going in the exact opposite direction of that highlighted by conservatives attacking Medicare and Social Security. While many aspects of the War on Poverty have been demonized as government at its worst, Medicare has become so revered that it's not even associated with government at all. Hence the recurrent cry—more popular than ever since the Tea Party emerged—to “keep the government's hands off my Medicare!”
6) Poor children have benefited from multiple programs, working together. From improved prenatal health onward, poor children benefit from the cumulative effects of multiple programs as they grow older. Bailey cited four major ways this occurs:
- Early childhood investments in preschool or education can have large returns—they complement other investments
- Large beneficiaries of safety net programs are children—these are another way of improving early childhood environments.
- Federal dollars for public schools increase educational opportunities for poor kids
- Tuition subsidies for college students increase labor market skills of the next generation
Although the federal government did provide education funding before the War on Poverty, there was virtually no relationship between poverty and the funding provided—a situation which changed dramatically in a few short years, and has remained in place ever since. Although state and local programs and practices can dilute these impacts, and we still have significant disparities between rich kids and poor, white kids and blacks, those disparities are much smaller than they were when Johnson took office. The programs as a whole are basically successful—it's a question of how to make them more successful.
7) The War on Poverty played a major role in desegregating America. Perhaps the most significant synergy involved with the War on Poverty is the role it played in desegregating America. This resulted from intentionally implemented synergies among the programs along with synergies with civil rights legislation and court rulings. In their book, Bailey and Danziger write:
“Less well known is that the War on Poverty is intertwined with the 1964 Civil Rights Act (CRA). The War on Poverty’s “assault on discrimination” (Council of Economic Advisers 1964) leveraged federal funds to push for desegregation. Iconic depictions of forced desegregation and heroic narratives of activism shape the collective memory of the 1960s. A less-remembered aspect of the War on Poverty is the Johnson administration’s decision to withhold federal money in cases where local organizations failed to desegregate. The War on Poverty’s expansion of federal funding gave the Johnson administration the ability to apply pressure to local governments and private organizations to reduce racial discrimination and segregation, making compliance with the CRA a pocketbook issue.”
The impact on desegregation was not an isolated effect, but part of a broader, expansive pattern. They go on to note:
“The War on Poverty initiated a new era of direct federal involvement in schools, hospitals, labor markets, and neighborhoods. This involvement engendered considerable controversy but has left a large footprint on the conceptualization, design, and implementation of antipoverty, social, and health policies; American politics; racial inequalities; and social science research.”
8) Economic deterioration has caused more poverty than family breakdown, which conservatives blame on the War on Poverty. A paper by Sheldon Danziger and Peter Gottshalk, "Diverging Fortunes: Trends in Poverty and Inequality," used demographic and economic information to separate out the impacts of demographic changes and changes to the economy as whole from 1975 to 2002. In the first case, they created a simulation which assumed that family income adjusted for family size doubled between 1975 and 2002, just as it had between 1949 and 1969, rather than increasing by just 53 percent, as it actually did. Second, they assumed that income inequality remained constant at the 1975 level. This was, in effect, the picture of the economic future as Johnson's advisers and early poverty researchers expected it to be. This simulation produces a 2002 poverty rate 5.2 points below the actual poverty rate. In contrast, a second simulation, examining the impacts of changes in family structure found that they only accounted for a 1.2 percentage point increase in poverty over this same period—less than a quarter as much.
Of course, there's no proof of conservative claims that the War on Poverty, or anti-poverty programs more generally, cause breakdowns in family structure. But even if they were the sole cause of such breakdowns, this research shows it would be a trivial impact compared to the impact of a stagnating economy with skyrocketing levels of inequality.
9) Cumulative impacts produced added benefits—but costs as well. Because multiple programs impact many of the same people, it's extremely difficult to measure their impacts in combination, Bailey noted. “Evaluating the impact of the entirety of the war on poverty including the interactions of the individual programs is challenging to say the least,” she said. “To my knowledge, no one has really been able to do that. Most evaluations examine the independent effects of one program taking the others as given.”
“These program-by-program types of evaluations have strong research designs but will also tend to understate the effects of war on poverty programs accruing through interactions of programs—both across programs (as with the Civil Rights Act and Medicare) and across time (as with the human capital programs). In these cases, the combined benefits of war on poverty programs may be larger than the sum of the independent contributions of programs.”
There is new reserach into long-term impacts, such as those due to food stamps on adult self-sufficiency, conducted by Hilary Hoynes. Such impacts were not expected, or used to justify programs in the first place. But they do support the intuition that immediate and short-term benefit measures underestimate the benefits such programs provide.
However, there may be long-term costs as well. “Healthcare programs are the obvious counterexample, because the long-run, general equilibrium effects of these tended to increase healthcare costs,” Bailey said. “One might speculate that Medicare had a role in creating some of the problems the ACA is trying to remedy.” Ironically, the British system, essentially Medicare for all ages, has built-in incentives to reduce costs by encouraging preventive care, healthy lifestyles, etc. So even this example of a downside may be partially due to the limited nature of program, only serving those over 65.
10) The War On Poverty is both partisan/ideological and bipartisan/pragmatic. Bailey and Danziger's focus on the War on Poverty as defined by LBJ and his economic advisers in January, 1964, tends to give it a partisan, ideological flavor, whether they intend it to or not. This is an inescapable result of how conservatives since the time of Reagan have responded.
But there is another way to see it, as described by Shawn Fremstad, a senior research associate at the Center for Economic Policy Research. Fremstad takes a more expansive view of the legislation that ought to be included, extending as far forward as 1977:
"It was legislation adopted during the Nixon administration (particularly in 1971 and 1973) that made food stamps a truly national program with uniform eligibility standards and availability nationwide. By October 1974, about 7 percent of Americans were receiving benefits. And it was the Food Stamp Act of 1977, which owes its existence in large part to the bipartisan efforts of Senator Bob Dole and George McGovern that established the modern program we have today.
Similarly, Supplemental Security Income was established in 1972 to replace state programs for the elderly and disabled (funded under the Social Security Act) with a federal program with uniform eligibility criteria throughout the nation. And the EITC was first established in the Tax Reduction Act of 1975, signed by President Ford. Both SSI and the EITC had their beginnings in Congressional debates in the early 1970s over President Nixon’s otherwise ill-fated Family Assistance Plan proposal.
And, in 1969, Nixon called for adding an automatic COLA to Social Security as well as an across-the-board benefit increase); he signed both into law in 1972.
While Johnson may have initiated the War on Poverty, it was Nixon who institutionalized much of it. Given this, I’d define the war on poverty as encompassing the investments and initiatives flowing from the Johnson declaration in 1964 and enacted by 1977."
This redefinition matters, Fremstad argues, because it replaces the image of the War on Poverty as a liberal Democratic initiative, with a more accurate picture as a relatively centrist, largely bipartisan one. But in fact, one can say that it was both. It reflects a time when the liberal vision that saved America from the Great Depression still defined our politics, and was embraced by politicians of both parties—by a George McGovern and a Bob Dole.
A much clearer picture of just how successful the War on Poverty has been reminds us that there was good reason for that liberal consensus: it worked. But also, it was a good deal more nuanced and complicated than today's conservatives make it out to be. Which are two good reasons why, even today, a substantial number of Republican voters continue to oppose their party's attempts to undo that enduring success.