A Tale of Two Countries

pie cut in half

It’s official:  the U.S. is split in half — not just on everything, as we already know, but also in economic terms:  half of us are poor, half of us aren’t.

Well, not quite. Joe Biden apparently got his math wrong when he said half of Americans are poor. More accurately, according to a 2017 Federal Consumer Financial Protection Bureau report,

“Measured by the By the Official Poverty Measure (OPM), more than 95 million Americans (nearly 30 percent of the total population) are either in poverty or considered ‘low-income’ (living below twice the poverty line) … That number rises to 140 million people (43.5 percent) when using the (SPM) [Supplemental Poverty Measure].”

Fact Checker:  Joe Biden’s Claim That ‘Almost Half’ Of Americans Live In Poverty, The Washington Post (June 20, 2019)

Right-leaning Ballotpedia also corrected Biden’s math, concluding that only 32% of Americans are technically poor. On the other hand, progressive Common Dreams is sticking with one-half.

Glad we got that cleared up.

Besides, what’s “poor” anyway? Are we talking poverty, poor, low income, or what? Again from The Washington Post’s Fact Checker:

“The OPM was adopted in the mid-1960s and has garnered widespread criticism because it measures pretax income and food-purchasing power, updated yearly to account for inflation. That methodology, experts say, fails to capture many people struggling financially in modern society.

“The Census Bureau responded with the SPM, which since 2011 has measured after-tax income, food costs and other necessities such as clothing, housing and utilities. The SPM accounts for geographic variations in the cost of living, includes welfare benefits such as food stamps and housing subsidies, and subtracts child-care expenses.”

Therefore, apparently “poor” is about food, housing, utilities, and child-care  — subject to how much you make on the dole. But what about childcare for people not on public assistance — are you poor if you can’t afford that? Or how about healthcare, education, transportation? Internet access? Cell phone? Or what if you can’t come up with $500 to cover an unexpected expense? (Something 63% of American’s couldn’t do, according to this Forbes article.) Or what about a car, washer and dryer, TV, air conditioning…maybe even home ownership, a shot at upward mobility, or relief from the insecurities of the gig economy?

We have now landed squarely in the center of the necessity vs. luxury debate, which will endure until the seas all melt, and to which the most reliable answer seems to be, it depends on what socio-economic level you’re talking about. For the middle class and up, things like a reliable car, smart phone, high-speed wireless, home ownership, savings… plus the occasional night out… are givens. As for the poor,

 “There is a moralistic presumption that poor people, especially those receiving benefits, should not be spending money on anything but the bare essentials, denying themselves even the smallest ‘luxury’ that might make their lives less miserable.”

Basic Income:  A Guide For the Open-Minded, Guy Standing (2017) [1].

If “only” 32%, or maybe 43.5%, or even half of Americans are below, at, or just above the official poverty line, the USA has truly become what one writer calls “the world’s first poor rich country.” That means look left, look right, and one of you:

  1. Does not plan for the future in the press of making ends meet right now;
  2. Makes money and purchases stretch as far as possible;
  3. Is shadowed by the what if? of emergencies and other unplanned costs;
  4. Regularly opts out of social engagements for lack of funds;
  5. Relies on unreliable transportation to get around;
  6. Constantly sacrifices this I order to do and havc that;
  7. Does not ask for help because it’s too embarrassing and shameful.

Everyday Things Poor People Worry About That Rich People Never Do, Everyday Feminism (May 7, 2015),

If none of those apply, then either you’re a member of the top 10% economic upper class or you’re part of the middle class that hasn’t vanished yet. Otherwise, “poor” can happen even right here in our house. If I’d thought about it back in the day (but of course I didn’t), I’m sure there were three things I would have thought I’d never be:  old, poor, and infirm. Now, by federal standards, I’m all three. I’m also certain I never would have thought that the best financial day I’d ever have was the day I qualified for disability income. Amazing what a social safety net can do for your outlook.

Old, poor, and infirm are three reasons why I’ve been writing about economics and jobs for the past couple years. One of the many things I’ve learned is that law and economics are inseparable — which is obvious if we ever think about it, but usually we don’t. Click here for an article about how law creates economic reality.

Next up:  we’ll meet a human species you’ve probably never heard of.

[1] The results of my Google searches on necessities vs. luxuries were fascinating. I highly recommend your own. See, e.g., this article that cites a 2009 Pew Research Center poll re: what Americans considered necessities at that time. I didn’t find an exact Pew follow up, but for something close, see this 2016 research study that identified job security and the ability to save money as prerequisites for being considered middle class.

Poverty Gets Personal

poverty

“In the sixties we waged a war on poverty and poverty won.” – Ronald Reagan

Poverty is a “personality defect.” – Margaret Thatcher

The Gipper was referring to LBJ and his Great Society, but he got it wrong:  the Great Society failed to eliminate poverty because it never got all the way to dealing with it. Instead it took a more politically acceptable path focused on education and community involvement — not bad things, but there’s a difference. As for the Iron Lady, there’s actually some truth in what she said (we’ll look at that in a moment), but I suspect not in the way she probably meant it. She was more likely voicing the common attitude that the poor are intellectually impaired, morally flawed, prone to bad lifestyle choices, and criminally inclined, and therefore worthy of only the most grudging kind of help. That attitude and the Great Society’s reputed loss[1] in its War on Poverty explain a lot about today’s prevailing approach to poverty relief.

Rutger Bregman tackles this tough subject in his book Utopia for Realists: And How We Can Get There (2017):

“A world without poverty– it might be the oldest utopia around. But anybody who takes this dream seriously must inevitably face a few tough questions. Why are the poor more likely to commit crimes? Why are they more prone to obesity? Why do they use more alcohol and drugs? In short, why do the poor make so many dumb decisions?”

He continues with more tough questions:

“What if the poor aren’t actually able to help themselves? What if all the incentives, all the information and education are like water off a duck’s back? And what if all those well-meant nudges [toward self-help and away from government assistance] only make the situation worse?”

He then profiles the work of Eldar Shafir, a psychologist at Princeton, and Sendhill Mullainathan, an economist at Harvard, who formulated a theory of poverty based on the concept of “scarcity mentality.” Their research shows that the chronic poor are really good at scrambling after short term solutions, but tend to be inept at sustainable long-term thinking. It’s a matter of mental bandwidth:  today’s urgency gets all the attention, leaving other matters to go begging (sometimes literally). In fact, their research estimates that poverty costs a person about 13-14 IQ points. In other words, living in a chronic state of being poor can eventually rewire the human brain to the point where clear thinking and prudent behavior are challenged.

Hence the grain of truth in Margaret Thatcher’s comment.

One problem with that attitude, though, is that it uses the terms “poor” and “poverty” interchangeably. But not everyone who’s poor is also impoverished. At the simplest level, the poor are poor because they lack money. But poverty goes further:  it’s a chronic condition that generates a specific outlook and way of approaching life. When that condition is shared, it  becomes a culture. You know it when you’re around poverty; you might not know it when you’re around poor.

Government assistance programs don’t make that distinction. As a result, as Bregman states, social welfare has “devolved into a behemoth of control and humiliation.”

“An army of social services workers is needed to guide people through the jungle of eligibility, application, approval, and recapture procedures… The welfare state, which should foster people’s sense of security and pride, has degenerated into a system of suspicion and shame.”

Is it really that bad? Try applying for food stamps sometime.

Our bank account was thin after a business failure and some health issues. Following the advice of family. my wife applied for food stamps. Her experience was everything Bregman describes. Case in point: after two mandatory daylong job search classes (how to write a resume, set up a LinkedIn page, use the internet to check out online job postings…), she had to prove her willingness to work by reporting for 8 hours per week of wall-washing duty at a church community center. She washed the same walls every week — the same walls that other people were also washing every week — the cleanest walls in Denver. Washing walls — pointlessly, needlessly, endlessly — to prove you’re not a slacker.

Help with the grocery bill was bittersweet for a couple months, then we opted out. It’s easy to intellectualize and debate about “all the information and education” and “the jungle of eligibility, application, approval, and recapture procedures.” It’s not so easy when they get personal. We were poor but not impoverished, and the system was just too demoralizing to continue. Maybe that was the point.

Plus, earning money reduces or eliminates benefits — a result which economist Guy Standing calculates is equivalent to the imposition of a 80% tax. The quandary is obvious:  earn money or opt out of the system– either way, you pay the tax. Most people — even the cognitively-impaired — wouldn’t agree to a deal like that.

How did “Brother, can you spare a dime?” turn into this? Curiously, the current welfare system derived from the same post-WWII economic surge that rewarded working people. We’ll look at how that happened next week. In the meantime, have a listen:

brother can you spare a dime

This week’s post uses portions of a LinkedIn Pulse article I wrote last year about poverty, crime, and homelessness. Next week’s post will also tap that source. You might like to jump ahead and read the article:  Why Don’t We Just solve Some Problems For a Change?

[1] Not everyone agrees that we lost the War on Poverty. See this article that considers both sides.