How Reform Conservatives Like Reihan Salam and Paul Ryan Misunderstand Poverty

Oh boy. Reihan Salam has a piece riddled with confusions, some conceptual, some technical, and some just downright strange. It is so confused that I will eschew the normal narrative type reaction and just go line-by-line.

Poverty Measurement

Here's when the good stuff starts:

But getting more money from the government doesn’t really make you less poor.

The federal government’s official poverty measure, as Ryan’s report reminds us, doesn’t take into account benefits like the earned-income tax credit and food stamps.

Three things:

First, food stamps are not money. So I don't know what they have to do with the question of whether money makes you less poor.

Second, the official poverty measurement does take into account cash benefits. I am begging all lay commentators who want to try to make a clever wonky point on this to actually seek to understand the ins and outs of this complicated metric (here, I've made it super-easy). The official poverty metric measures all cash income from any source, but not tax credits, not capital gains, and not non-cash benefits. It includes Social Security income for instance, which pulled 22 million people out of official poverty last year. It includes TANF. It includes unemployment benefits. It includes SSI. And so on. Cash benefits that are not implemented through the tax code would reduce poverty under the official poverty metric. This is why I can say that a child allowance would have reduced official child poverty by 42 percent in 2012.

Third, we have another government-tracked poverty measurement that also includes tax credits (like the EITC) and non-cash benefits (like SNAP) called the Supplemental Poverty Metric. If Reihan is worried about how we track the gains from credits and non-cash benefits, he needn't be because we have a metric that does so. By the way, that more inclusive metric has shown that the only thing that has reduced poverty since 1967 is non-market benefits. That's it. Those advocating non-market benefits to cut poverty are not the crazy ones. Those thinking the market will do it are.

Poverty Measurement (Again)


The official poverty measure is very useful because it tells us how much people are earning.

No it doesn't. The OPM counts as income all cash income from any source except tax credits. If you actually only track "earnings," the poverty rate using the OPM poverty lines in 2012 would have been 60% higher (74 million impoverished instead of 46.5 million). This sentence is so misleadingly false that Slate should issue a correction. It is indisputably incorrect that this metric measures earnings.

Conceptual Confusions

The rest of Salam's piece is just the usual mistakes about what "dependence" is and what "supporting yourself is" and what the economy is. So let's just make some things clear on this point.

Market income is not distributed according to desert (i.e. each get what they produce). Nobody produces nature, yet its massive marginal productivity flows to random private owners. Capital owners produce nothing, but get one-third of the national income each year. Laborers are not paid according to their personal productivity, but their marginal value to a firm, which are entirely different things. And the majority of the national output each year is attributable to inherited technology and knowledge (aka TFP) that nobody alive produced. Market income distributions do not provide to people what they produce.

Nobody is economically independent from the government. The government distributes 100% of the national income each year through its economic institutions. The same is true of national wealth. If you want to make people's flow of material resources independent of the government, you must repeal property law first and foremost, the biggest government welfare program in history.

Poverty is solely caused by a lack of disposable income, which is solely caused by our choice of economic institutions. The only thing that has reduced poverty in this country over the last half-century was income-boosting strategies that did not rely on the horrible market. The only way super-low-poverty countries get that way is through non-market distributive institutions. Conservatives who are trying to coax people and markets to distribute market income in such a way that everyone is above poverty are not serious people. It won't ever work that way because the market is not designed to meet each families particular income needs.

The best way to deal with the thousands of reasons a given family might have inadequate market income is to just give them non-market income. If their problem is they don't have a car, there's money for them to buy one. If their problem is they can only go to work part time because they are taking care of a special needs child, they have more money to stay home and do that. If their problem is that they are in community college and cannot work enough, they can stay in community college while also having the luxury of food. Making them go to condescending case workers to beg for money and lay out their lives in front of them is neither dignified or effective (cognitive bandwidth, time poverty, etc.).

More disposable income doesn't solve all of the problems in the society, but it does solve the problem of inadequate diposable income. Anything else you want to try to solve, go at it. There is no need to starve people of basic resources to do it though. Or, if there is some need to do such, it's not worth it.