Time for New Thinking About Poverty

October 10, 2005 • Commentary

Too many journalists seem unable to break free of their old assumptions, even when new evidence should cause some new thinking. Three articles in the Sept. 22 edition of the Washington Post endorsed the view that giving more money to poor people and poor countries can solve the problem of domestic and global poverty. It’s remarkable that so many smart people in our society are unaffected by the evidence that such transfer programs just don’t work.

In a front‐​page article, two reporters talked about the destitute people fleeing Hurricane Katrina and wondered if America would finally face the problem of poverty. They quoted a foundation president who lamented that Americans “ignore the problems of poverty” until a catastrophe happens. They suggested that only a renewed “War on Poverty” could both help the poor and tell us whether Republicans are ready and able to govern.

A column by David Broder, the dean of Washington journalists, likewise deplored the miserly treatment of the poor. Even Lyndon Johnson, he said, the architect of the War on Poverty, “diverted the resources it required to the other war, in Vietnam.”

Meanwhile, a Post editorial called for more aid to the governments of poor countries. It suggested that rich countries measure their commitment to development by a benchmark that emphasizes the amount of aid along with trade, investment, and other criteria.

In every case the assumption that transfer payments are the solution is not even explicitly stated; it’s just taken for granted. But where’s the evidence supporting this for welfare and foreign aid?

The United States has spent $9 trillion (in current dollars) on welfare programs since President Johnson launched the War on Poverty in 1965. Critics have challenged this figure, saying it includes more than welfare alone. It does include more than Aid to Families with Dependent Children, now known (hopefully) as Temporary Assistance to Needy Families (TANF); it also includes food stamps; Medicaid; the Special Supplemental Food Program for Women, Infants, and Children (WIC); utilities assistance under the Low‐​Income Home Energy Assistance Program (LIHEAP); housing assistance under a variety of programs, including public housing and Section 8 Rental Assistance; and the free commodities program. Clearly, those are all transfer programs for the poor.

Look at Louisiana alone: Michael Tanner, author of The Poverty of Welfare, writes, “The federal government has spent nearly $1.3 billion on cash welfare (TANF) in Louisiana since the start of the Bush administration. That doesn’t count nearly $3 billion in food stamps. Throw in public housing, Medicaid, Child Care Development Fund, Social Service Block Grant and more than 60 other federal anti‐​poverty programs, and we’ve spent well over $10 billion fighting poverty in Louisiana.”

If all that spending didn’t cure poverty, then surely more spending isn’t the answer. Indeed, maybe it’s the problem. Welfare and other aid programs ensnare people, leading them to become dependent on their monthly check rather than finding jobs and starting businesses. In 1960, just before the Great Society’s dramatic increases in welfare programs, the out‐​of‐​wedlock birth rate in the United States was 5 percent. After 30 years of rising welfare benefits, the rate was 32 percent; young women had come to see the welfare office, not a husband, as the best provider. Welfare created a cycle of illegitimacy, fatherlessness, crime, more illegitimacy, and more welfare.

Likewise, the United States has spent over $1 trillion on foreign aid. And yet, the Clinton administration reported that “despite decades of foreign assistance, most of Africa and parts of Latin America, Asia and the Middle East are economically worse off today than they were 20 years ago.” Government‐​to‐​government aid has tended to strengthen governments in poor countries at the expense of business and individuals and has made governments increasingly dependent on their rich lenders. Few countries have “graduated” from aid to self‐​sufficiency. After all that aid, according to a National Bureau of Economic Research study, sub‐​Saharan Africa is actually poorer than it was 30 years ago.

It’s not even that the Post reporters weren’t aware of the facts. In the 19th paragraph, the front‐​page story notes that “there are more than 80 poverty‐​related programs, which in 2003 cost $522 billion.” The next line reads, “Yet despite those programs, 37 million Americans continue to live in poverty.”

Maybe “despite” is the wrong word. The reporters should consider the possibility that the sentence should read “Because of those programs, 37 million Americans continue to live in poverty.”

Similarly, the editorial notes that other policies such as free trade and liberal immigration laws may benefit poor countries more than government‐​to‐​government aid. But the editorial writers still can’t break free of the idea that giving taxpayers’ money to bad governments will help their oppressed citizens.

It’s time for new thinking about poor people and poor countries. Transfer payments don’t work; they trap both people and countries in a state of dependence instead of self‐​reliance.

Markets work. People who get a job–any job–and stick with it until they find a better one will stay out of the welfare‐​and‐​poverty trap. But welfare is a powerful lure away from the world of work.

Markets work internationally, too. If you rate all the countries in the world by the degree of economic freedom they have, that turns out also to be a ranking of their prosperity. Per capita income in the freest 20 percent of countries is 10 times what it is in the least free countries. Those latter countries need property rights, free markets, honest courts, and low taxes–not foreign aid.

And reporters need new glasses, to let them see the evidence in front of them rather than relying on their outmoded assumptions.

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