What with the Kavanaugh confirmation, the approaching mid-term elections, the “civility” controversy, the UN’s latest climate scare, and everything else, it’s hard to find time to pay attention to the trillion dollar plus government scams that fly on beneath the radar day after day. Like the “poverty” scam — the scam by which governments at all levels in the U.S. spend well over $1 trillion per year supposedly to combat poverty, and then put out statistics indicating that poverty once again remains at the same level, even as bureaucrats demand yet more hundreds of billions in “anti-poverty” funding, none of which will ever raise a single person out of poverty as measured.
Which is why I want to thank the Wall Street Journal for publishing an op-ed on Thursday by former Senator Phil Gramm and John Early headlined “Government Can’t Rescue the Poor.” Unfortunately the piece may be behind their pay wall. I’ll just have to give you some extended excerpts.
The Gramm/Early op-ed covers ground that has been well trodden by the Manhattan Contrarian previously, for example here, here and here. The gist is that despite spending a large multiple of what ought to be sufficient to end measured “poverty” once and for all, instead the government publishes poverty statistics that indicate that poverty has not decreased at all. Where did all the money go?
While the Census Bureau reports that in 2016 some 12.7% of Americans lived in poverty, it is impossible to reconcile this poverty rate, which has remained virtually unchanged over the last 50 years, with the fact that total inflation-adjusted government-transfer payments to low-income families have risen steadily. Transfers targeted to low-income families increased in real dollars from an average of $3,070 per person in 1965 to $34,093 in 2016. Even these numbers significantly understate transfer payments to low-income families since they exclude Medicare and Social Security, which provide large subsidies to low-income retirees.
$34,093 per person would be $136,372 for a family of four. The so-called federal “poverty threshold” for a family of four in 2017 was $24,600. If the money were just handed out in cash, it would be sufficient to put these “poor” families well into the top 10% of the income distribution. How is it even possible to distribute $136,372 in government largesse to each such family and not raise them all out of poverty?
The secret, of course, is that almost none of the government spending is counted in determining who is or is not in “poverty.”
The measured poverty rate has remained virtually unchanged only because the Census Bureau doesn’t count most of the transfer payments created since the declaration of the War on Poverty. The bureau measures poverty using what it calls “money income,” which includes earned income and some transfer payments such as Social Security and unemployment insurance. But it excludes food stamps, Medicaid, the portion of Medicare going to low-income families, Children’s Health Insurance, the refundable portion of the earned-income tax credit, at least 87 other means-tested federal payments to individuals, and most means-tested state payments.
And suppose that the government handouts actually got counted in determining “poverty” status. What would be the effect?
If government counted these missing $1.5 trillion in annual transfer payments, the poverty rate would be less than 3%.
And that 3% rate would arise solely from adjusting the Census Bureau’s “poverty” figures for government handouts. How about other things available to low income people to support themselves?
The 3% poverty rate would fall even further if it accounted for transfers within families, some $500 billion of private charitable giving, and the multibillion-dollar informal economy, where income is unreported.
I think when they refer to the “multibillion-dollar informal economy” it is a typo — it should be “multitrillion.”
The good news is that there are plenty of things, this among them, for President Trump to work on in the second two years of his first term. Even if the mid-term elections go badly for the President, he should need no legislation to get the Census Bureau (Commerce Department) to count government redistributions in the poverty calculations and start putting out some real information. And while he’s at it, how about having someone start riding herd on NOAA (also in the Commerce Department) to stop putting out fraudulent temperature data?