Special Report

Poverty and Welfare in America

Barack Obama just doesn't get it. But Edgar Browning does.

By 8.21.08

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Last Saturday night Barack Obama and John McCain participated in a structured debate hosted by Pastor Rick Warren of the Saddleback Church in Orange County, California. If you missed the broadcast on Fox News, you should watch it online. For the interviews provide stunning insight into the two candidates.

I was shocked by the degree to which McCain overwhelmed Obama in these exchanges. McCain's crisp, clear, unequivocal answers on the issues were far superior to Obama's postmodern philosophical meandering. In answering the question about evil in the world and what to do about it, McCain said, "Defeat it." Obama said there was evil at home here in America too, and we should be humble about combating evil because a lot of evil has been done in the name of combating evil. So in answering a question about evil in the world, he thinks about America, and never brings up Al Qaeda. People who might think Obama's answer was better are dangerous to the rest of us. We can't have a national leader who is uncertain and plagued with moral doubts about confronting evil threats to America.

On the question about the most difficult decision each man made in his life, McCain talked about his time as a prisoner of war during Vietnam. Because his father was a top admiral, the Vietnamese respected that by offering him early release. Even though he was being tortured and he was suffering what would be permanent physical harm, he declined the offer of favoritism, condemning himself to years of even worse torture. Obama talked about his struggles with personal drug abuse at nearly the same age as McCain exhibited his wartime valor. What a contrast, the same sharp contrast that appears on the substantive issues over and over.

If I was to put a football score on the event, it would be McCain 63 Obama 0. The event revealed as well that the "religious right" is the most civil social group in America, with both Warren and his audience polite almost to a fault. That contrasts quite favorably with the nasty media and the vicious critics who constantly deride them.

BUT I WANT TO FOCUS here on Obama's answer to the question about why he wants to be President and what motivated him to go into politics. He referenced the biblical injunction from Jesus Christ in the Book of Matthew, saying, "Whatever you do to the least of these you do unto me." Obama expressed his concern that America is not doing enough for the least among us, the poor, the sick, the old. He wants to be President most of all to lead the government to do more for these most vulnerable and weakest of citizens, and ensure that they are cared for adequately.

This sentiment is what motivates most grassroots Democrats, who hold the vague and uninformed notion that America is not doing nearly enough to combat widespread poverty. Obama's background, rhetoric and policy proposals suggest to me there is something more to his motivation, that he fundamentally rejects our entire economic system as immoral, and is really looking for basic "change" in that system. But I want to focus here on the more moderate grassroots Democrat sentiment about the poor, which is widely held among our upper income professional classes.

A recent book that explores this issue in great depth is Stealing From Each Other: How the Welfare State Robs Americans of Money and Spirit, by Edgar K. Browning, Professor of Economics at Texas A&M University. Browning is a world-class scholar who grounds his discussion in thorough facts and careful analysis reflecting decades of academic work (though the book's title may be overly provocative). What leaps out at you in reading the book is that you are dealing with a top mind.

Let's look first at our current welfare state for the poor, the sick, and the old. Browning reports that the federal government maintains 85 means tested programs targeted to the poor and low income families. In 2005, total Federal, state and local spending on these programs was $620 billion. This was 25% more than was spent that year on national defense.

The largest of these programs is Medicaid, which pays for essential health care for those who lack sufficient funds. The program pays for doctor's bills, hospitals, and long-term care in nursing homes. Federal and state spending on this program alone this year is an estimated $330 billion.

For food stamps and other food and nutrition assistance, the Federal government is spending $60 billion this year. For housing assistance programs, the Feds are currently spending another $40 billion. Federal spending on income security programs such as the old Aid to Families with Dependent Children (AFDC) program, now renamed Temporary Assistance to Needy Families, will total $130 billion this year.

Government spending overall this year for the 85 federal means tested welfare programs will total about $735 billion. That compares to the national defense budget for this year of just over $600 billion. We are still spending almost 25% more on welfare than national defense.

Moreover, this does not even include the major programs for seniors, Social Security and Medicare. Total spending for Social Security this year will be $615 billion. Another $400 billion will be spent on Medicare, for a total spent for senior citizens of over $1 trillion.

That leaves our total welfare state costing us about $1.7 trillion, almost 3 times national defense. Those are the funds spent for the poor, the sick, and the old. Our total Federal budget is about $2.9 trillion.

EVEN WORSE IS WHAT is projected for the long term, which I have mentioned in this column several times. Social Security, Medicare, and Medicaid are projected to explode in spending over the next several decades, as the baby boom ages. They are currently projected to lead federal spending to almost double as a percent of GDP over the next 35 years or so, from around 20% today, where it has been for over 50 years now, to close to 40%, an astounding, unmanageable burden.

In the face of this long-term burden, to think we can handle any sort of big increase in welfare and entitlement spending over current programs is ludicrous. That would ultimately just crash our economy and ruin our prosperity. This applies as well to the notion of any sharp increase in spending for national health insurance, which liberal Democrats seem to think is just a natural and obvious development.

The U.S. poverty rate currently stands at 12.3%, with new updated numbers expected soon. Poverty rates declined sharply during the 1940s, '50s and '60s. But the decline stopped in 1970, right after the War on Poverty was adopted in the mid-1960s. The rate stood at 12.6% in 1970, virtually the same as today's rate almost 40 years later.

Among those classified as poor, there is rapid turnover. Browning cites studies showing that 45% of the non-elderly poor in any year are not poor one year later. Within 3 years, 70% are no longer poor.

In calculating the poverty rate, most government welfare assistance, the roughly $735 billion being spent this year, is not even counted. So many people are counted as poor who are really not after the government aid they receive is considered. Maybe that is why surveys find that the poor consistently consume more than twice their estimated incomes. When the poverty rate is calculated based on what the poor report they actually consume, the rate declines by half.

MOREOVER, OTHER STUDIES show that the poor consistently underreport both their incomes and their consumption levels. The poverty income thresholds are also adjusted each year for inflation, but economists recognize that these inflation adjustments greatly overcompensate for actual inflation. Adjusting for these data problems, Browning concludes, shockingly, that the actual "poverty rate would be in the range of 1 to 3 percent"! (emphasis added)

So not only is the notion that we are not spending enough for the poor completely wrong. The notion of widespread significant poverty is wrong also.

Maybe that is why studies of the actual consumption and living conditions of the reported poor are so inconsistent with the notion of actual poverty. Browning reports, based on official government data, that 46% of the poor own their own homes (compared to 65% for the non-poor). "The average home owned by the poor is a three bedroom, one and a half bath home with a garage," Browning writes, equal in value to about 70% of the median value of all homes in America.

Moreover, more than two thirds of the poor live in housing with more than two rooms per person. Only 5.7% of the poor live in housing with more than one person per room. Today, 76% of the poor have air conditioning, while 30 years ago only 36% of all Americans had air conditioning. Browning also reports that nearly three-fourths of the poor own a car or truck, with 30% owning two or more. Color televisions are owned by 97% of the poor, with more than half owning two or more, and 25% owning a large screen TV. Microwave ovens are owned by 73% of the poor.

In regard to food consumption and nutrition of the poor, Browning cites Robert Rector and Kirk Johnson, who write, "The average consumption of protein, vitamins, and minerals is virtually the same for poor and middle class children and, in most cases, is well above recommended norms. Poor children actually consume more meat than do higher income children and have average protein intakes that are 100 percent above recommended levels."

Rector and Johnson also report that only 2 percent of the poor state that they often do not have enough to eat due to a lack of funds. Doug Besharov of the American Enterprise Institute adds, "Adolescents from needy families are twice as likely to be overweight" as those from non-needy families. Besharov writes that "real hunger in America...is found predominantly among people with behavioral or emotional problems, such as drug addicts and the dysfunctional homeless." These facts again all come from official U.S. government data, surveys, and studies collected by these authors.

FINALLY, WE SHOULD ASK what causes the poverty that does exist in America. Browning states, "[T]he most fundamental cause of poverty: Most of the poor do not work full-time and, indeed, do not work at all. In 2005, among poor adults (aged 18-64), 56 percent did not work at all during the year, 30 percent worked part-time, and only 14 percent worked full time. With only one in seven of the poor working full-time, the very concept of the 'working poor' is nearly an oxymoron."

In the '60s and '70s, with the Great Depression still within collective memory, some could still believe the excuse that the poor just could not find work, though this argument was already an anachronism even then. But today with millions and millions of illegal immigrants pouring across our borders to work in America, arguing that the poor just cannot find work is so silly it should be against the law. Even among the poor themselves, only 6.2% say that the reason for their nonwork is that they cannot find a job.

Among those who do work full-time, the median annual earnings of male high school dropouts over the age of 25 was $27,189 in 2005, 36% above the poverty line for a family of four. For a married couple where the wife earns the median income for female full time high school dropouts as well, the combined family earnings would be $47,314, "nearly 85 percent as much as median family income, and 2.4 times the poverty threshold for a family of four," Browning writes.

Another important factor causing poverty is teen pregnancy and child bearing outside of marriage. Browning writes, "Among families with children who are poor...more than 60 percent are in single parent households, most of which are female headed households."

The Working Seminar on Family and Welfare Policy, a collection of leading academics and experts, summarized American poverty this way,

The probabilities of remaining involuntarily in poverty are remarkably low for those who: complete high school, once an adult, get married and stay married (even if not on the first try); stay employed, even at a wage and under conditions below their ultimate aims. Those who do these three traditional things may experience periods in poverty but are quite unlikely to stay involuntarily poor.

Or as the liberal Isabel Sawhill of the Urban League put it, "the poverty rate for those households where the primary wage earner had finished high school, was married, had no more than two children, and worked full time...was trivially small -- 1 percent."

So does that mean that everything is just fine with poverty and welfare in America? The answer is an emphatic no. The welfare system itself primarily causes the nonwork we see among the poor. It also strongly contributes to family break up, illegitimacy, and single parenthood. Most importantly of all, thorough welfare reforms are possible that would ensure the effective elimination of poverty in America, and eliminate all welfare incentives for non-work, illegitimacy, and single parenthood. Moreover, the new welfare system would cost taxpayers only a fraction of the current system. That will all be discussed in a future column.

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About the Author
Peter Ferrara is Director of Entitlement and Budget Policy at the Heartland Institute, General Counsel of the American Civil Rights Union, Senior Fellow at the National Center for Policy Analysis, and Senior Policy Advisor on Entitlements and Budget Policy at the National Tax Limitation Foundation. He served in the White House Office of Policy Development under President Reagan, and as Associate Deputy Attorney General of the United States under President George H.W. Bush.