Why Does America Have Poor People?

I’ll start with an old parable.  One man makes $1,000/day, and another makes $10/day.  The “high income” man then opens a factory and hires the “low income” man, and two or three others, at $100/day.  The high income man, with his factory, now makes $2,000/day.  The income disparity difference certainly has increased, markedly, from the original $990/day to $1,900/day.

But has the disparity increased, really?  The high income man, from his factory and hirings has gone from making 100 times the low income man’s earnings to only 20 times that man’s earnings.  And while the high income man’s earnings have doubled, the low income man’s earnings have gone up 10 times.

This brings me to the subject of my post.

We have poor people exactly because the US is the quintessential country where poor people have the opportunity to better themselves, and to do so a very great deal.  They come here from other countries to take advantage of just such opportunities as the parable illustrates, and other opportunities—to be the one who starts the factory, employs others, and both prospers and gives their employees increased prosperity in return for their work.  The same opportunities exist for those who start out as poor US citizens, also.  It’s economic upward mobility that lets people stop being poor and start being middle class, to continue and join the rich, and to set the conditions for their children to do the same and more.

But there’s another reason we have poor people in this country, also.  Despite having spent $20 trillion on poverty programs (I hesitate to call them poverty fighting programs) over the last 50 years, we still have the same per centage of poor people in our population as we had at the start of LBJ’s War on Poverty: 15% of Americans are classed as living in poverty.

Our anti-poverty programs—or at least our programs intended to be anti-poverty—do not encourage people to get off welfare and get a job or get a better job.  Quite the opposite, these programs engender dependence on government in these people.  Here’s how.

As recently as 2005, for instance, poor families spent about two times their income:

A four person-household is in poverty today, according to federal poverty guidelines, if they earn less than $23,550 per year, but the consumer spending of this same household is around $45,000 per year.

They do this not by being able to borrow the difference but because government welfare payments of a variety of sorts, from “assistance” transfers to (refundable) tax credits, make up the difference.  However, because the payments and credits are keyed to household income and not to efforts to work or improve their training and/or education or otherwise to become more self-sufficient and independent, a family whose wage earner(s) get better jobs that increase their income to $40,000 per year—a 70% increase in income—will lose those welfare payments and credits, and will see a net income drop of $5,000 per year to those $40,000—an 11% decrease in actual family income/spending power.

America’s poor aren’t lazy (indeed, the only ones who say so are political hacks trying to make political points by accusing others of saying so); they’re making entirely rational economic decisions, and maximizing (as they see it) their household income.  They’re staying dependent on government rather than coming to rely on their own devices, and opportunities, by logical choice.

And that’s the dead end of our welfare programs.  As structured, these poverty programs do nothing to help our poor, but they do keep our poor poor—and short circuit their opportunity for economic upward mobility.

Filibusters and the Senate

Senate Majority Leader Harry Reid (D, NV) blew up the Senate filibuster with his manufactured claim of Republican obstructionism and with his Senate rules-breaking move to eliminate it (for now only regarding Presidential nominees) with a (Democrat only) majority vote.

Yet Republican-led (note that: not the Republican satrapy, as Reid views his Senate to be for Democrats) House passed 200 jobs- and economy-related bills in 2013 and some dozen that were passed with 250 or more votes—i.e., with considerable Democrat (that would be bipartisan, for those Progressives following along at home) voting support.

The Democrat-ruled Senate?  An immigration bill and a farm bill.  A budget, but only under the embarrassment of having Senators’ pay withheld if they didn’t pass one.  Under real pressure, a sequester bill (that originated with President Barack Obama) and a natural disaster relief bill.

Indeed, of the 70-ish bills Obama signed last year, 56 originated in the House, and all of 16 came from Reid’s fiefdom.

The rest of those 200 House-passed bills?  Reid wouldn’t even let them come to a vote.  There are, for instance, 40 explicitly jobs-related bills that Reid refuses to allow the Senate even to discuss.  Of the Senate-originated bills, Reid wouldn’t let the minority party even offer amendments.  Under Senate rules, there are only so many amendments allowed to be proposed for a bill.  Reid routinely, and universally, “filled the tree” with his own or those of his trusted lieutenants, Senator Chuck Schumer (D, NY) and Senator Dick Durbin (D, IL).

There is the filibuster.

Friday’s Unemployment Numbers

The unemployment rate declined from 7.0% to 6.7% in December, while total nonfarm payroll employment edged up (+74,000)….

However, 347,000 Americans gave up and stopped trying to find work in this December of the fifth year of President Barack Obama’s failed recovery.  Had they kept looking, December’s unemployment would have remained at 7%.  Had the labor force participation rate—which includes those looking for work and still unemployed, mind you—matched December 2012’s rate of 63.6% instead of last December’s 62.8%, December’s unemployment figure would have been 7.7%.

Instead, nearly 2 million Americans have been pushed out of our labor force by Obama’s failed economics.

That’s the last year.  The graph below, from The Federalist, illustrates the failure over the last five years:

The red line in this graph starts in June 2009, the month in which the Panic of 2008 officially ended, and the present “recovery” began.

A Thought on Income Inequality

Inequality in incomes and in accumulated material prosperity are the inevitable outcomes of our inalienable right to equality of opportunity, as exercised through our differing endowments of talents, skills, work ethic, and luck.

The well off—including those best off—use their gains from those inequalities in a variety of ways.  Some of these ways are purely personal: luxuries and luxuries for their families.  Some of those ways also include support for what are often termed, loosely, “the arts,” and other cultural supports and advancements.  It is from these, and not from government, for instance, that support for museums of all sorts come, support for many artists originates, support for invention ideation and development begins.

These well off, also, serve as an example and a goad: I can do that.  I want that stuff, too.  And the efforts to emulate and/or to make oneself able to obtain those material symbols of “I’ve arrived” feed into the ideation/development/support cycle.

Of course this generates a steady supply of those less well off, a steady generation of poor.  These folks see the prosperity—they’re not as stupid or as dead-end as Progressives make them out to be with the latters’ drumbeat of offers of welfare and dependency—and they do what they can to go where the success stories are, and then they do their best to achieve those same successes or something like them.  In the absence of interference by governments [sic], they almost always succeed, almost always by their children’s generation if not of themselves directly.  The Statue of Liberty stands as the quintessential beacon, inviting everyone, but especially inviting those seeking personal and familial betterment.

Our greatness, our exceptionalism, our status as a magnet for the world, though, is jeopardized when government gets in the way of our poor.  Reread the preceding paragraphs.  The thick cord that runs through them is the idea that our poor want to—and most importantly can—make themselves better off than they were.  Our poor are fully capable of moving themselves up the economic ladder, fully capable of stopping being poor and becoming middle class, of leaving the middle class and entering upper classes, ultimately of reaching the top.  If they cannot do that for themselves (although some do), they can create the conditions within which their children can (and most do), and those children can—and most do—create the conditions that enable their own children, the grandchildren of our first generation in these paragraphs, to move up still further.

But to do that, government must stay out of their way, or, today, get out of their way.

And so we’re back to income inequality.  That inequality is what provides the motivation.  And—hated concept of the Left—it trickles down from the top, too.  As I alluded above, it’s the rich that provide the market for new things, for luxuries.  These become desired by the middle class and poor and so while increased demand props up prices, increased production—and growing competition to produce in order to get some of that new market—outstrips demand, and prices fall—and the middle class and poor ultimately can afford what was exclusively the goodies of the rich.  See air conditioning in houses, power steering and brakes in cars, televisions, telephones, and pocket computers that also run phone apps, and so on.

If, however, being successful is punished through government-mandated wealth redistribution, rather than that “redistribution” being the outcome of individual choices in a free market (where wealth is redistributed, simultaneously, in both directions, by every voluntary exchange leaving each participant in possession of things he wanted but did not have before the exchange) and individual choices in the means and objects of satisfying individual Judeo-Christian duties to help those less well off, then two things occur: the heretofore successful cease working so hard to be successful, and so the high end of wealth steadily lowers, except for those few who can find adequate favor from government.  And the poor cease striving to better their own and their family’s lots, satisfying themselves with government handouts from other’s wealth; and so, from that dependence on those handouts, the low end of wealth also steadily lowers, and each one’s absolute “share” also steadily dwindles in size as the wealth from which those “shares” are confiscated steadily shrinks.

And that destroys both the capacity and the impetus for upward mobility.

The final outcome is a more subtle and general impoverishment, both materially and morally—the latter is especially insidious, as it is the moral that gives strength to the capacity for increasing the prosperity of all.  The well-off lose their moral sense of helping others, both from malaise, as government confiscates their output, and from a surrender of their moral responsibility to that government, expecting instead that it will satisfy the imperative instead of them.  The poor lose their capacity for responsibility for their own betterment, and so the drive to better themselves and their families in ways that best suit them, through their acceptance of their status as dependents of government.

Obamacare and Health Spending

John Goodman, over at NCPA, has an interesting point-out on Obamacare (and on a Paul Krugman New York Times column, but that’s neither here nor there).*  OK, a little bit of here: Goodman cited Krugman as claiming that

Since 2010, when the [the Affordable Care Act] was passed, real health spending per capita—that is, total spending adjusted for overall inflation and population growth—has risen less than a third as rapidly as its long-term average.  Real spending per Medicare recipient hasn’t risen at all; real spending per Medicaid beneficiary has actually fallen slightly.

Then Goodman presented this chart

and then Goodman noted

[T]he chart clearly shows[] nothing happened to the rate of increase in health care spending in 2010—the year ObamaCare was passed.

Yes, the growth rate of health care spending that year was well below the historical average.  But it was just as much below it in 2009, the year before the act was passed!  Health care spending growth in 2010 was exactly the same as it was in 2009.  It remained exactly the same in 2011.  And again in 2012.  Looking only at the numbers, we would have to conclude that nothing that happened in 2010 had any impact whatsoever on health care spending.

On that last point (no Obamacare impact whatsoever), though, I have to disagree with Goodman.  It looks pretty clear to me that Obamacare has utterly halted the downward trend in health care spending growth: that growth has stopped decreasing toward no growth.  If allowed to continue, the trend would have reached zero growth and gone to outright decreases around 2012.

Keep in mind, too, that the spending aspects of Obamacare have not yet kicked in.  Other than the increases in premiums and deductibles, I mean; those are getting started.

 

*Interestingly, Jason Furman, White House Council of Economic Advisers Chairman, had an op-ed in Monday’s Wall Street Journal that also burned through over 1,000 words showing all the ways he alleges Obamacare has slowed “health inflation.”  While also carefully ignoring that already in place declining trend in the years prior to 2010.