How Much Money Would It Take to Eliminate U.S. Poverty?
Last week, the Census put out its annual income and poverty figures for 2012. The big news on the poverty front is that the percentage of Americans living in poverty is unchanged at 15 percent, which amounts to 46.5 million Americans. More than 1 in 5 kids under the age of 18 are in poverty and nearly 1 in 4 kids under the age of 6 find themselves impoverished as well. These are numbers we’ve all become accustomed to, but they can still shock the conscience if you make an effort to soak them in again.
The sheer scale of poverty in the U.S. is so massive that it can seem as if eliminating or dramatically reducing it would be nearly impossible. After all, 46 million people is a lot of people. But in reality, if we stick to the official poverty line, the amount of money standing in the way of poverty eradication is much lower than people realize.
In its annual poverty report, the Census includes a table that few take note of which actually details by how much families are below the poverty line. A little multiplication and addition later, and the magic number pops out. In 2012, the number was $175.3 billion. That is how many dollars it would take to bring every person in the United States up to the poverty line. In 2012, that number was just 1.08% of the nation’s Gross Domestic Product (GDP), which is to say the overall size of the economy.
To be sure, you probably don’t want to run a program that hunts out every family below the poverty line and brings them right up to it. Such a program would effectively involve imposing a 100% marginal tax rate for all income made below the poverty line. But, things like strategically expanding the Child Tax Credit, the Earned Income Tax Credit, SNAP, and related programs could make enormous strides towards poverty reduction. Implementing a mild basic income and a negative income tax would also help a great deal. The policy solutions for dramatically cutting poverty exist, they are used by countries elsewhere, and they could be used here, if we chose to do so.
It might be helpful to put the $175.3 billion magic number in perspective. In 2012, this number was just 1/4th of the $700 billion the federal government spent on the military. When you start hunting through the submerged spending we do through the tax code, it takes you no time to find enough tax expenditures geared toward the affluent to get to that number as well. The utterly ridiculous tax expenditures directed toward the disproportionately affluent class of people called homeowners — mortgage interest deduction, property tax deduction, exclusion of capital gains on residences — by themselves sum to $115.3 billion in 2012. Throw in the $117.3 billion in tax expenditures used to subsidize employer-based health care (also a disproportionate sop to the rich), and you’ve already eclipsed the magic number.
Eradicating or dramatically cutting poverty is not the deeply complicated intractable problem people make it out to be. The dollars we are talking about are minuscule up against the size of our economy. We have poverty because we choose to have it. We choose to design our distributive institutions in ways that generate poverty when we could design them in ways that don’t. Its continued existence is totally indefensible and our nation’s biggest shame.