poverty — good news and bad

Matt Yglesias says, despite what we all think, we’re actually winning the war on poverty:

[T]he way the government measures poverty actually by definition excludes the possibility that public programs are lifting families out of poverty. The truth, when examined correctly, is that we’ve hit upon a very effective means of waging war on poverty—give money to poor people—and we could make even more progress by doing even more of it….

Throughout the ’60s and ’70, the tax code was made friendlier to poor people. That was partially rolled back by Ronald Reagan in 1981, but then the 1986 tax reform changed the tide again by introducing the Earned Income Tax Credit. This important program—a form of wage subsidy for low-income families—pushed after-tax poverty down substantially in the early 1990s…. Social Security, especially through its disability insurance function, has also played a big role in pushing actual poverty between 1967 and 2010 down six percentage points more than the official stats say….

The authors also show that if you simply ignore income altogether and look at consumption—what people buy—things look even better. It’s not entirely clear why this would be. One theory is that people underreport government benefits they receive. Another is that they’re underreporting under-the-table income (perhaps to retain eligibility for benefits). Another factor is that consumption measures do a better job of capturing the existence of in-kind provision of social services—public housing, community health centers, and other efforts to give free or discounted goods to the poor….

But whether you look at it in terms of consumption or income, the news is good. The impact of the recession aside, we’re clearly winning the decades-long war on poverty.

This is good to know, and goes a long way toward debunking the idea that poverty is intractable.

During the same period, though, the middle class appears to have cratered completely. Check out this graph from the NYT showing that life expectancy for whites with no college has been steadily declining for two decades. In other words, the people who used to make up a substantial portion of the middle class have fallen into what effectively amounts to poverty (life expectancy tracks closely with income). Long-term, structural economic failure will be bad for everybody — bad for the formerly middle-class, who will slide into effective poverty even if they technically remain in the “middle class” in a statistical sense, and bad for those even lower on the scale, since an overall decline in the economy will mean less tax revenue available to pay for poverty-fighting programs.

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