A new book by Princeton professor Matthew Desmond argues that the United States needs a “poverty abolition” movement along the lines of movements that abolished slavery, promoted the cause of organized labor and advanced the cause of civil rights. The title, “Poverty, By America” reflects his theme that the poverty among us is a deliberate choice, and it can be undone.
In our current political system, where money not only speaks but has a constitutional right to yell as loudly as it wants, it is difficult to imagine that his effort will meet with much success. But the book makes many telling points.
Our government defines poverty by calculating the cost of food a person needs in a year and multiplying that number by three. The poverty line today is $13,500 a year for a single person, which as it happens is a bit more than someone who earns the $7.25 an hour minimum wage could take home if employed full time. For a family of four the figure is $27,750.
Today one of every nine persons in the United States lives in poverty. That percentage has basically remained unchanged since 1970. He calculates that it would take $177 billion to eliminate it.
He never says exactly how he would distribute the money but he has several ideas as to where the money might be found. The IRS says we lose $1 trillion a year to tax avoidance and cheating. That includes corporate magic in shifting profits to Ireland. Our tax deduction subsidy to homeowners is $193 billion. Our tax deduction for employer health plans costs $316 billion.
He is eager to point out that deduction benefits are far greater than the $61 billion in Earned Income Tax Credits that go to the poor, or the $53 billion spent for low income housing, and together are almost as much as the $521 billion we spend on Medicaid.
This supports his fundamental contention, which is that the image of “welfare” as something that goes only to those who don’t work, is seriously mistaken. That is both because half of the poor who benefit are employed full time and because the recipients of “tax break welfare” fail to appreciate their benefits. In general we feel a loss – taxes paid – more acutely than a gain – taxes not paid.
And, on the subject of taxes, he reports that income levels do not mean very much. Because the poor spend a higher percentage of their incomes, sales taxes hit them the hardest. That, combined with the effect of deductions, means that the poor and middle income earners pay about 25% of their income in taxes while those with higher incomes pay about 28% on average.
To reinforce his belief that the United States could afford to eliminate poverty, he points out that in 1955 and several decades afterwards government spending was 22% of our gross national product. Today it’s only 18%.
To bolster his moral case that those better off should help the poor, he hits a number of lesser targets. Payday lenders collect $9.8 billion a year in fees from the financially desperate. Bank overdraft charges – 10 times higher than in the United Kingdom – cost $12 billion and hit those with the smallest accounts. Exclusionary zoning drives up the price of living in poor neighborhoods, where landlords’ profits are higher.
And, for good measure, he points out that the wages of ordinary workers, which rose 2% a year after adjustment for inflation from 1945 to 1979, have risen only 0.3% a year since then, which he attributes to the declining strength of unions. He says in a recent year political spending by just Meta, Amazon and Comcast was greater than the spending of all American labor unions combined.
He also discounts the ideas that stopping immigration, or promoting marriage, or increasing education, might help. The states with the largest percentages of immigrants do not have high poverty levels. European countries with a high percentage of single mothers do not suffer our level of poverty. Increased education levels have not made us more prosperous. And he believes welfare cheating is not as much of a problem as welfare avoidance – only 25% of those eligible for assistance to needy families apply.
It is disappointing that Professor Desmond leaves out what is perhaps the most compelling argument for aid to the poor. Our government maintains a deliberate level of unemployment in our economy. It uses that level to determine when it has “room” to raise interest rates to discourage economic demand and reduce inflation. In other words, people stay unemployed in order to protect money from inflation that would reduce its value. The people who benefit most are those with the most money. They should owe something to those who cannot find work.
Finally, Professor Desmond’s political aspirations blink at reality. As he reminds us, years ago John Kenneth Galbraith warned that, with affluence, the rich buy their way out of public institutions, the quality of the institutions left to the poor declines, and in the end not even poor support them. Not a pretty picture.
Luther Munford is a Northsider.
