David Brooks Makes Basic Poverty Mistakes

David Brooks has a misinformed piece on poverty in the New York Times. Blame for some of the mistakes falls on Brooks. Blame for others falls squarely on Brookings' Ron Haskins for promoting distorted interpretations of poverty data for decades.

The Poverty Trend Is Down

Brooks first tells us that, despite major anti-poverty spending, "over the last 30 years the poverty rate has scarcely changed." This is not true.

The official poverty rate has scarcely changed because the Official Poverty Metric (OPM) does not count the overwhelming majority of anti-poverty spending. Here is a screenshot from my (very handy) poverty calculator that shows you what the OPM does and does not count as income:

In addition to the unchecked categories, the OPM also does not count the $438 billion in annual Medicaid spending, which is the single biggest anti-poverty benefit. In fact, no poverty measure includes Medicaid or any other health benefits (including those provided by employers) as income. This doesn't mean being able to go to the doctor and get medicine isn't valuable. It certainly is. It's just that poverty metrics are fundamentally concerned with money and money-like income.

We have a poverty metric that counts the unchecked categories as well. It's called the Supplemental Poverty Metric (SPM) and it has officially been around since 2009. To see how the SPM has changed over time, a team of researchers extended a slightly modified version of the SPM back in time to 1967, using historical Census microdata. This is the resulting graph:

Not only has the poverty rate fallen by nearly 40% since 1967, but it also fell majorly since the 1980s, as you can see, with big falls in the 1990s owing to a roaring full employment economy and expansions in tax credits targeted at those just below the poverty line (however note that, at the same time as we were expanding transfer programs to bump up people just below the poverty line, we were viciously cutting transfer incomes to those in deep poverty).

Peering behind the overall SPM poverty figures, there are some other trends worth noting.

First, elderly poverty has taken the biggest dive. This is because we majorly ramped up Social Security benefits in this period. Social Security benefits, however, do not generally get counted as "anti-poverty spending" because doing so would make the horrible mistake of mixing up the deserving and undeserving poor.

Second, child poverty has also taken a considerable plunge.

It blew up in the 1980s, but fell down in the roaring 1990s that also featured expansions in the Earned Income Tax Credit and Child Tax Credit.

Finally, perhaps the most helpful graph in all of this is the following one that compares the SPM poverty rate only counting market income (green line) and the SPM poverty rate counting disposable income (i.e. income that includes public benefits):

Making these same calculations for 2013 in my (very handy) poverty calculator shows transfer incomes keeping 38.7 million people out of poverty, cutting the number of impoverished people by 44%.

Spending Per Poor Person Is A Nonsense Metric

Tallying up anti-poverty spending and then declaring its achieved nothing by using a metric that doesn't take the spending into account is pretty bad. But also bad is tallying up anti-poverty spending and dividing by the number of poor people. Spotting the problem with this requires only that you use some basic logical reasoning.

The way this metric works is you add up all the anti-poverty spending (which isn't actually all the anti-poverty spending because it excludes the major anti-poverty behemoth Social Security) and then you divide it by the number of people who are still poor. This means that if I spend $1 trillion to bring the number of poor people down from 45 million people to 2 people, the per-poor-person metric says that I am spending $500 billion per poor person ($1 trillion divided by 2) to fight poverty. What a waste, right? We could just cut those 2 poor people $500 billion checks and eradicate poverty, right?!

The per-poor-person metric perversely penalizes anti-poverty success. As your anti-poverty efforts pull more and more people out of poverty, the spending-per-poor-person metric goes higher and higher, not because spending is going up, but because the number of poor people is going down. It is truly the most unenlightening metric imaginable, though it obviously serves certain ideological ends quite neatly.

When you compound this problem with the fact that massive chunks of poor-people spending are not exactly anti-poverty spending (e.g. Pell Grants), are not counted under any metric because they aren't income (e.g. Medicaid), or aren't counted at all for ideological reasons (Social Security), this whole enterprise so falls apart that I have no idea how I'd even salvage it to tell you the true amount or whatever.

US versus Other Countries

A better way to go about quantifying and contextualizing the amount of effort the US puts into cutting poverty is to compare it to other countries. This is actually easier to do than you might imagine.

As I pointed out on Friday, 80%+ of the American poor in a given year are people who fall into vulnerable population categories: children, elderly, disabled, students, and those who faced at least one spell of involuntary unemployment during the year. The remainder are overwhelmingly carers, i.e. people who say they do not work because they are taking care of home/family, or working people who did not face involuntary unemployment.

Given this predictable pattern of impoverishment, the smart welfare state strategy is, initially, to have benefits for children, elderly, the disabled, students, and the unemployed. These benefits don't have to be "anti-poverty" spending because you can target them pretty reasonably at everyone in the category. This is how Social Security in the US works, for instance, which we don't count as anti-poverty spending even though it keeps 27 million people out of poverty under the SPM.

Here is how the US stacks up to the low-poverty Nordics on how much public expenditure it puts towards children (i.e. family benefits):

We do horribly on this metric, better only than Turkey in the entire OECD. It is not surprising why our child poverty rate is so high. Note also that these kinds of benefits help lift a great deal of working-age adults out of poverty as well, especially younger ones who tend to be caring for children.

Here is the same graph for old-age benefits:

We do better here, but still lagging quite a bit.

Here is disability benefits:

Not good.

Finally, here is unemployment benefits:

Unemployment benefits are somewhat harder to compare in this way because they will depend, in large part, on the economic conditions of your country in a given year. A better approach here might be looking directly at institutional details: length of benefit, how much income it replaces, and so on. I won't pursue that here though.

Similar figures are not available for students, but generally students will get some mix of tuition subsidies, living grants, and public loans. The US mix is more weighted towards loans (with some tuition subsidy in public schools and some means-tested living grants) while the Nordics generally subsidize tuition to zero, provide living grants, and then backstop with loans.

Conclusion

The failure of US poverty policy is, in fact, the failure of understanding the nature of poverty. The nature of poverty is the nature of vulnerability under capitalist institutions. The elderly, disabled, children, students, and unemployed (80%+ of the poor) don't work or work very little, and so the market gives them no income. But they need resources. You've got to have institutions that get them resources somehow. Anti-poverty policy that proceeds without this understanding is going to fail over and over again.

If you want serious anti-poverty policy that targets actual poverty and not stereotypes of it, then what you want is welfare state expansions targeted at vulnerable populations. Shower more money on children, the elderly, the disabled, and those who face spells of unemployment (as the Nordics do), while being somewhat careful so as not to reduce the size of labor force too much, and you will see your poverty rates fall dramatically. Bleat on about what you imagine inner-city blacks to be like and you will accomplish nothing.

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