Scare Tactic Alert

January 8th, 2014 at 10:41 am

There’s a lot wrong with Robert Rector’s we-lost-the-war-on-poverty oped this AM in the WSJ, much of which I prebut here, but here’s a “tell” that he’s trying to mislead rather than inform.  He accumulates spending on low-income programs since 1964 and tells us that the “country has invested $20.7 trillion in 2011 dollars over the past 50 years.”

Without context, it’s impossible to attach relevant meaning to that number.

More on context in a moment, but the main substantive point against his broader claim is, as I stress in the link to my piece above, that in fact we’ve achieved a great deal of poverty reduction and useful investment in retirees, families, and children (take a close look here as well).  Of course, there’s more work to do, but that will involve not just poverty policy but economic policy as well, given large structural changes in the economy that have made it harder for the poor to get ahead.

Relative to the 1960s, we have a much more effective safety net, but we also have both slower macroeconomic growth and more inequality, meaning the historical poverty-reduction-function of growth is constrained in two portentous ways (growth is both slower and less likely to reach the poor).

But re the big number–the $21 trillion–is clearly supposed to scare and alarm you.  Dean Baker has a cottage industry putting such numbers in context by dividing them by relevant other numbers.   For example, as a share of the $450 trillion of cumulative real GDP over these years, it’s 5%.

Read the CBPP stuff and my piece in the NYT and decide for yourself if what we’re describing is worth 5% of the economy’s output over these years.  I’m not saying you’ll come out where I do–you may agree with Rector.  But that’s the correct cost/benefit framework.

In this post from a while back based on data from the Congressional Research Service, I show you the way most analysts look at the spending on low-income programs.  The figure there (and below) shows that outside of Medicaid, spending on low-income programs was relatively constant as share of GDP, ranging between 1.5-2%, expanding in the great recession, but then slated to fall back to historical levels.

The largest non-health-related increase, btw, is from the EITC, a pro-work, high-effective, anti-poverty wage subsidy that Reagan loved.  As far as Medicaid is concerned, there you’re seeing the impact of cost-increase problems that have little to with poverty policy and much to do with our uniquely inefficient health care sector (though recent evidence shows that’s improving as well).  It’s also the case that 2/3 of Medicaid expenditures are on the elderly (many of whom are former middle-class persons in long-term care facilities) and disabled.

There are unquestionably substantive arguments on both sides of this question re the effectiveness of our anti-poverty policies.  But you won’t learn about from those more invested in scaring than informing you.


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2 comments in reply to "Scare Tactic Alert"

  1. rationalrevolution says:

    The stupid thing about the rising Medicaid spending is that if we spent more on the other programs, and actually lifting people OUT of poverty, then we wouldn’t even need Medicaid in the first place, or at the very least the demand for Medicaid would be reduced.

    You don’t need to spend so much to subsidize the medical care of poor people if there are fewer poor people in the first place…

  2. jeff says:

    You can’t lift people out of poverty unless wages increase.

    This notion that education is going to save us ignores something called the bell curve (not the book). We can’t all by PhD Google Engineers.

    Custodians need to make enough to live on, and if they don’t , inequality will only get worse.