Happy 50th to America's War on Poverty - it is a bittersweet one. On January 8, 1964, President Lyndon Johnson mobilised the government to establish welfare programmes and create tax credits and other non-cash transfers that improved the lives of the old and minorities - even more than official statistics suggest, even if they also worsened incentives. But history shows that economic growth, above all, remains the best poverty reducer.
The War on Poverty consisted primarily of costly centralised initiatives such as food stamps and Head Start, mostly aimed at directly increasing the incomes of the poor. This approach was already questioned because of its effect on incentives; President Franklin Roosevelt, in his State of the Union message 29 years earlier, had said: "To dole out relief in this way is to administer a narcotic, a subtle destroyer of the human spirit."
The programmes had two unequivocal positive effects. For the elderly, unable to work and whose savings had proved inadequate to their longevity, they provided much direct relief. For minorities, they provided a corrective to workforce discrimination still prevalent in 1964. However, they didn't reduce poverty dramatically; the Census Bureau poverty rate has declined only from 19 per cent of the population in 1964 to 15 percent in 2012.
Economic growth has done so much more. In the great post-war boom, poverty rates declined from 41 per cent in 1949, measured by current methods, to a low of 11 per cent in 1973. The modest rebound since then is also somewhat misleading, as poverty rates take account only of pre-tax income without in-kind benefits, so the War on Poverty's food stamps and the Earned Income Tax Credit, introduced in 1975, both provide income to the needy that isn't counted in poverty statistics.
If there's any lesson to ponder on this anniversary, it is that government's greatest success in reducing poverty lies in encouraging growth, and avoiding programs that hurt the less fortunate. Higher low-skill immigration since 1965 has increased competition for jobs. The potential for food stamps to increase dependency is worth studying in light of their growth since 2007 from 26 million participants to 47 million. Conversely, some tax credits reinforce incentives to work, and may need to be recognised in poverty statistics.
Poverty is a complex problem. And 50 years on, Johnson's War on Poverty looks suboptimal and its victory incomplete. But it should continue to be waged, not abandoned.
The War on Poverty consisted primarily of costly centralised initiatives such as food stamps and Head Start, mostly aimed at directly increasing the incomes of the poor. This approach was already questioned because of its effect on incentives; President Franklin Roosevelt, in his State of the Union message 29 years earlier, had said: "To dole out relief in this way is to administer a narcotic, a subtle destroyer of the human spirit."
The programmes had two unequivocal positive effects. For the elderly, unable to work and whose savings had proved inadequate to their longevity, they provided much direct relief. For minorities, they provided a corrective to workforce discrimination still prevalent in 1964. However, they didn't reduce poverty dramatically; the Census Bureau poverty rate has declined only from 19 per cent of the population in 1964 to 15 percent in 2012.
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If there's any lesson to ponder on this anniversary, it is that government's greatest success in reducing poverty lies in encouraging growth, and avoiding programs that hurt the less fortunate. Higher low-skill immigration since 1965 has increased competition for jobs. The potential for food stamps to increase dependency is worth studying in light of their growth since 2007 from 26 million participants to 47 million. Conversely, some tax credits reinforce incentives to work, and may need to be recognised in poverty statistics.
Poverty is a complex problem. And 50 years on, Johnson's War on Poverty looks suboptimal and its victory incomplete. But it should continue to be waged, not abandoned.