Paul Ryan’s Not Playing Dirty With The Poverty Rate

Paul Ryan’s Not Playing Dirty With The Poverty Rate

There are two ways to look at poverty and welfare programs. Rep. Paul Ryan’s emphasizes one, and it’s not a ‘lie.’
Charles Hughes
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Rep. Paul Ryan’s recent focus on poverty has met opposition and criticism, as might be expected almost anything dealing with politics. In the most recent round of backlash, some outlets have taken aim at comments Ryan made on CBS’s “Face the Nation,” where he said, “After a 50-year war on poverty and trillions of dollars spent, we still have the same poverty rate.”

At Vox, in an article that has quickly gone viral, the author minces no words. In it, he writes that Ryan “keeps getting basic facts wrong,” and that this statement is “an out-and-out lie.” People can use such responses to dismiss what Ryan is saying without engaging with his underlying points, because if he can’t even get basic facts right, how can he have anything worthwhile to say?

Some of this may be the result of talking past one another: having different conceptions about the ultimate goals and purpose of the welfare system. Another aspect could simply be that both sides might be too quick to dismiss the other’s claims without trying to understand the full context. Either way, the debate surrounding poverty and our welfare system suffers.

The War on Poverty Started Later than 1965

One of the first critiques is that Ryan’s claim isn’t technically accurate, “because the poverty rate was 19 percent in 1964, when the War on Poverty was announced.” While it’s true that the official poverty rate (or official poverty measure, OPM) was 19 percent in 1964, and President Johnson announced the War on Poverty in his State of the Union in January 1964, the slate of anti-poverty programs did not spring into being the moment the speech ended (although he probably wished this was the case).

The slate of anti-poverty programs did not spring into being the moment President Johnson’s War on Poverty speech ended.

This is worth noting because it’s especially important to remember that it’s not words or even good intentions that matter when analyzing the effectiveness of these programs, but policies and results. As with all other things, there was a lag between the announcement and actual outlays on programs.

The chart below shows welfare spending in 2015 dollars (left axis) and the change in welfare spending from the preceding year (right axis). Welfare spending in 1964 and 1965 was largely indistinguishable from the levels in 1963, which preceded the War on Poverty, and annual spending growth was actually lower in 1964 and 1965. It is not until 1966 that spending growth ramps up and this continues through the period.

Ryan’s point about the War on Poverty focuses on spending, so it would makes some sense to look at the years where this spending took place. As such, 1966 would appear to be a reasonable baseline.

HughesChart1

This difference of a starting point might seem like a small quibble, but it is important because of what was happening prior to the War on Poverty programs—namely, significant reduction in the official poverty rate.

Poverty Was Declining Until the War Against It

Using data from Wisconsin’s Institute for Research on Poverty and the Census Bureau, the following figure shows poverty was already declining significantly in the years prior to the War on Poverty, which leads to questions about how big a role those programs played in further reductions (although this is less the case in the elderly population).

HughesChart2

As this figure shows, the OPM was declining before the War on Poverty, falling from 32 percent in 1947 to 14.7 percent in 1966, the first year of significant War on Poverty outlays.

Many proponents of the War on Poverty object to using the OPM at all, because the measure does not account for many of the programs that Ryan and other would-be reformers criticize. To a degree, they have a point—the official rate only really accounts for market income (and some direct cash-assistance programs), which fails to capture how much transfers like food stamps and the Earned Income Tax Credit can alleviate material deprivation.

The official poverty measure was declining before the War on Poverty, falling from 32 percent in 1947 to 14.7 percent in 1966.

These defenders of the War on Poverty usually point to a different preferred metric, the Supplemental Poverty Measure (SPM). The SPM does account for these programs, but it differs in that it is a relative poverty measure based on the thirty-third percentile of expenditures on a basket of basic necessities. The problem with relying exclusively on a relative measure like this is that, as articulated by President Obama’s Council of Economic Advisers, “eliminating poverty defined with a relative measure may be nearly impossible, as the threshold rises apace with incomes.” Just to give an illustration, if somehow everyone’s incomes doubled tomorrow, there would be no perceivable effect on the supplemental measure, while the official poverty rate would plunge to near zero.

Instead of an either/or proposition, the two poverty measures should be used in combination because the official rate remains useful in a specific role: it conveys what percent of the population cannot earn enough to support themselves without government assistance.

Going back to the figure above, this measure was declining rapidly prior to the War on Poverty, and since 1966 has been relatively flat. There are many things outside of the welfare system that contribute to this, such as a changing labor market that has less to offer low-skilled workers.

Two Conceptions of Handling Poverty

That being said, Ryan is right that the welfare system should be doing more to reduce the share of Americans unable to earn enough on their own, because our welfare system actually has two related but distinct aims. The first, the amelioration of the worst forms of material need, our system has done an adequate (if inefficient) job at addressing. In the second, improving the economic prospects and opportunities for people in the welfare system, our current welfare system does very little, and sometimes actually inadvertently makes it harder for low-income people to escape poverty.

Fifty years into the War on Poverty, we are still not sure what constitutes a successful welfare system (or program) or how to measure success.

This gets back to the root causes of poverty that Ryan talked about in the interview. For him, this lack of economic opportunity is the root cause, while for some of his critics, the lack of material resources is the most important component. I think these two different conceptions might explain part of why the two sides often seem to be talking past each other when it comes to this issue. Fifty years into the War on Poverty, we are still not sure what constitutes a successful welfare system (or program) or how to measure success.

For Ryan and other would-be reformers, a successful welfare program would shrink over time, with fewer participants and less spending in the future, but not for the reasons critics allege. Instead, these programs would have helped the participants get to the point where they no longer need them and transition out of welfare and into the mainstream American economy.

This is, admittedly, an very complex problem, and we do not yet have the answers, but that does not mean we have to stop trying to find one or resign ourselves to the status quo.

Charles Hughes is a research associate at the Cato Institute.

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