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Poverty

Tevi Troy

Poverty is about unemployment, dropping out, and having children outside marriage – and we spend billions on almost everything except these.

The changing reality in Washington regarding the need for and inevitability of budget cuts has poverty advocates worried. According to the CATO Institute’s Michael Tanner, there are 122 different federal anti-poverty programs, spending well over $500 billion annually, which opens up a lot of opportunities for budget cuts, especially within duplicative or ineffective programs.

Republicans are understandably wary of how this budget war may play out: Lyndon Johnson’s creation of a national war on poverty has long put Republicans on the defensive when it comes to the issue of fighting poverty. But this need not be the case, especially since the face of poverty has changed considerably since the 1960s, and in ways that make conservatives better equipped to handle the problem.

The formula for avoiding poverty in the 1960s was to provide transfer payments for those unable to work, largely widows and retirees. Social Security and more widespread pension and 401(k) accounts have reduced the age of poverty, making seniors a smaller component of the poor than they were in 1960. According to the Census Bureau, approximately 35% of Americans over 65 were below the poverty line in 1959. By 2009, that number had shrunk to 8.9%. In 1959, working age Americans, those between 18 and 64, were the least likely to be poor. Today, it is the elderly.

The new face of poverty has created its own formula for fighting it, one laid out by my former White House colleague Ron Haskins and his coauthor Isabelle Sawhill in their book, Creating an Opportunity Society. According to an article Haskins and Sawhill wrote in the Washington Post summarizing their research: “if you want to avoid poverty and join the middle class in the United States, you need to complete high school (at a minimum), work full time and marry before you have children.” As Haskins and Sawhill put it, “If you do all three, your chances of being poor fall from 12 percent to 2 percent, and your chances of joining the middle class or above rise from 56 to 74 percent.”

Transfer payments may have been the Democrats’ bailiwick, but these recommendations, — work, finish school, and don’t have children out of wedlock – are more in the Republicans’ ballpark. Welfare reform is one example of how Republicans, with Bill Clinton’s eventual assistance, employed the conservative principle of work requirements to help encourage employment among populations that too often lacked work incentives. While some critics warned that welfare reform would drive people to homelessness and despair, the program has been a success. As Haskins wrote in a 2006 article: “Between 1994 and 2004, the caseload declined about 60 percent, a decline that is without precedent.”

Unfortunately, we have had less success in recent years on the other two legs of the anti-poverty stool. High school graduation rates – measured by students earning a diploma in the standard four year — peaked at 77% in 1969. The numbers have also declined in recent years, hovering around 69% in 2007. This differs from the high school completion rate, which measures whether individuals 18-24 have received a high school degree of GED, regardless of the time frame.

This figure stands at a more robust 89.9% overall, although the Hispanic rate is a worrisome 75.5%. Whichever figure you use, the economic results for someone getting that high school degree are considerably better than for the non-completers. According to the National Center for Education Statistics, in 2008, the median income of someone 18 to 67 who has completed high school was $19,000 higher than for non-graduates. This translates to a $630,000 lifetime penalty for not completing high school.

Out of wedlock births are a problem as well. The percentage of births to unmarried mothers reached 40.6% in 2008, up from 18.4% in 1980. This figure continues to challenge anti-poverty efforts, and constitutes the weakest leg of the anti-poverty stool. It is also the challenge that presents policy makers with the fewest tools for combating the phenomenon. Even though Daniel Patrick Moynihan warned of this problem in his 1965 report on the state of black families, our policymakers have yet to come up with a workable solution for this growing problem.

To the extent that poverty remains an issue today, it is not for lack of trying by the federal government, as shown by the $13 trillion the U.S. government has spent thus far in the War on Poverty. As we enter a season of retrenchment and necessary budget cuts, policymakers should take advantage of the opportunity to rethink things and end the diffuse approach that has led to these 122 separate programs.

Instead, we should create a more focused, consolidated method that focuses on shrinking the three main predictors of poverty in America today: dropping out, unemployment, and out of wedlock births.