America's Rising Tide of Poor People

by Chris Farrell

Calculating who's poor is a tricky, controversial business. The official government data published by the Census Bureau shows that nearly 40 million Americans live in poverty (as of 2008, the latest data available http://www.census.gov/hhes/www/poverty/poverty08.html). It's an endless argument whether the actual number is more or less than that - the bulk of poverty research puts it higher - but it's clear that tens of millions of Americans are poor and the numbers are rising due to the Great Recession. And even as the economy gains upward momentum, the prognosis for poor people is grim.

Widespread poverty is deeply disturbing on moral grounds. The country has long had a strong egalitarian tradition, including a widely shared belief in social mobility and support for the ideal of equal opportunity. The historically powerful concept of American exceptionalism was rooted in the sense that an emerging middle class society would evade the decadence of aristocracies and avoid the troubles of poverty. The opening sentence of Alexis de Tocqueville's magisterial book Democracy in America powerfully captures the sentiment: "No novelty in the United States struck me more vividly during my stay there than the equality of conditions."

The persistence of poverty in America gives a troubling lie to these notions.

Poverty is worrisome on economic grounds, too. The competition for profits and markets is intense in an increasingly integrated global economy. Employers are putting a greater value on better educated employees who are comfortable working in teams, quick to adjust to new tasks, and well schooled in the latest high-tech gear. This kind of job market is devastating for poorly educated workers.

The national response to poverty these days seems to be a collective shrug. The economic concerns of a beleaguered middle class are a far greater priority in an election year. The American political system has been battered by contentious battles over bank bailouts, financial regulation and health care reform. There's also a widespread sense that social programs targeted at reducing poverty in America failed. Isn't that the record of President Lyndon Johnson's "War on Poverty" launched in 1964?

Not really. The better label to attach to the War on Poverty and subsequent anti-poverty programs such as the Earned Income Tax Credit (EITC) is "qualified success." The real lesson is that the potent combination of political will, concentrated public policy, and strong economic growth can sharply reduce the number of poor Americans.

Johnson announced his War on Poverty with bold words. "Our aim is not only to relieve the symptom of poverty, but to cure it and, above all, to prevent it," he said in his 1964 State of the Union address.

These weren't just words. Johnson put the power of the presidency and his unparalleled political instincts to work to create a breathtaking number of anti-poverty programs that focused on education, job training, housing, civil rights, income support, community engagement and improved access to medical care.

Why the desire to fight poverty on such a massive scale back then? A number of factors came together and reinforced one another at the time. It was a golden age of heady economic growth and widespread prosperity. The United States had "more automobiles, more telephones, more radios, more vacuum cleaners, more electric lights, more bathtubs, more supermarkets and movie palaces and hospitals, than any other nation," observed the American historian David M. Potter.

Still, many were left behind, and in the early 1960s an affluent nation took note. A New York Times series by Homer Bigart on the Appalachian poor captured a great deal of attention. So did Michael Harrington's provocative and polemical book, The Other America. African Americans were pushing hard for civil rights, the right to join the mainstream economy and society. Political elites were confident they could improve the lives of the poor and the prospects for their children. After all, they had engineered the New Deal and won World War II.

The drive to eradicate poverty soon faltered on several fronts though, undone by the escalating costs of the Vietnam War and doubts about the effectiveness of a number of anti-poverty programs. Many of the initiatives were hastily designed and poorly thought through. Criticism came from both sides. Conservatives attacked the War on Poverty for wasting taxpayer money and turning the poor into a permanent class dependent on government handouts. Liberals scorned the anti-poverty measures as too little and too small. After just a few years of a big national effort, it seems many people resigned themselves to the age-old idea from the Book of Deuteronomy: "The poor shall never cease from the land."

It may be true that there will always be poor people among us. But 40 million, or more, in the world's richest country? Should we accept this? For those who say we can't eradicate poverty, I would point out how much progress America made as a result of Johnson's crusade. The campaign was in fact part of a much larger endeavor to reduce poverty that began with Social Security in the 1930s. And it worked. A third of the U.S. population lived in poverty in 1940. By 1973 that figure was just over 11 percent. Much of the progress in reducing poverty came from a fast-growing industrial economy that generated healthy wage increases for most people, including unskilled workers.

But credit also goes to major initiatives that were begun or expanded during the War on Poverty. For instance, the 1935 Social Security Act was amended to include Medicare and Medicaid. The latter has provided health care to tens of millions of low-income families. Food stamps dramatically reduced hunger. Durable ladders of opportunity were established through civil rights laws and financial aid programs that made it possible for low-income students to attend college. "A lot of what the government did actually achieved what it was intended to achieve," says Christopher Jencks, professor of social policy at Harvard University's Kennedy School of Government.

Nevertheless, in the 1980s the official poverty rate did climb back up. It stabilized at a persistent 12 to 14 percent, dropping lower during economic expansions and rising higher during downturns. The political climate also turned away from government activism following the 1980 election of Ronald Reagan to the White House. The dramatic rise in single-parent families, especially within low-income African-American households, created a generation of financially vulnerable families. And a failing K-12 education system in poor neighborhoods led hordes of teenagers to leave school without bothering to get diplomas.

But perhaps the most significant impediment to further progress against poverty was a fundamental transformation of the economy. When the economy expanded during the robust years from 1948 to 1973, real wages for people on the bottom half of the income spectrum rose smartly. It was an era when a high school graduate or even a dropout with a willingness to work could get a well-paying job on the factory floor. Since then, thanks to a combination of increased global competition, the decline of private sector unions, rapid technological change and the deregulation of finance, telecommunications, airlines and other major industries, the real wages for less educated, low-skilled workers have declined. Yes, a growing economy is still better than a declining one for those living in poverty. But a rising tide no longer lifts all boats, the way it once did.

That means government has a bigger role to play in addressing poverty than it did back in 1964. The "invisible hand" of the market is less beneficial for poor people. And while something of a consensus has emerged that anti-poverty programs should focus on getting poor people to work, in this new economy there are fewer well-paying jobs for people with little education and few skills. "Make work pay" has been a mantra since the welfare reform debate in the 1990s, but fighting poverty is more complicated than that. Fighting poverty today means offering adult education classes and providing childcare. It might mean subsidizing employers to hire low-skilled workers. And in the long run, the real solution is to improve public education and make sure that American students are better prepared for the employment demands of the 21st century.

There are public policies that would improve the job prospects for poor people. But there's little appetite to initiate or expand anti-poverty programs and probably won't be anytime soon. American politics is likely to be defined in the near term by rising alarm over the increasing federal deficit and mammoth government debt. Meanwhile, state and local governments are slashing their support for the poor. If the government can't help, the economy will end up doing the heavy lifting by default. But so far the economy is generating little job and income growth, and even when it does come back, low-skilled workers are likely to be left behind. The risk is that the tragic combination of joblessness and poverty will lead to diminished dreams and social isolation which, in turn, will feed a cycle of unemployment and destructive behavior. It's morally and economically wrong.

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