By Emma Kaden
One of the most prominent economic issues in the current political climate is welfare. Some believe welfare should be expanded so that Americans in poverty can receive government support; others believe welfare should be reformed so Americans on welfare will seek employment instead of benefits. However, there’s one fact that cannot be overlooked: welfare spending has not decreased poverty. If anything, quite the opposite is true.
“Poverty is down relative to pre-welfare-reform levels even before taking into account the safety net programs that expanded after 1996, and even before taking into account the programs that conservatives propose to block grant,” wrote Forbes contributor Scott Winship in a 2016 article about welfare reform. “This is the coup de grace. Faced with the evidence that poverty has not gone up, welfare-reform-detractors attempt to argue that the only reason that happened was because other programs–typically SNAP is invoked–stepped up. But the evidence doesn’t support this claim.”
Congressional Research Service estimates show that, based on earned income only, poverty was lower in 2013 than before welfare reform for households headed by a single mother (48 percent compared with 50-56 percent before 1997).
Other evidence shows a missing link between welfare spending and poverty, such as a chart from the Heritage Foundation that outlines an odd disconnect between the percentage of individuals considered “poor” by the official poverty standard and total welfare spending.
It’s easy to see that, while welfare spending has only increased since the War on Poverty began, the percentage of Americans below the federal poverty line has been relatively stagnant. It even seems that it was decreasing more before welfare spending skyrocketed. So why hasn’t the avalanche of welfare payments and programs made an impact?
Perhaps it is because government involvement fosters government dependence. According to an article by Rachel Sheffield and Robert Rector of the Heritage Foundation, “Although President Johnson intended the War on Poverty to increase Americans’ capacity for self-support, exactly the opposite has occurred. The vast expansion of the welfare state has dramatically weakened the capacity for self-sufficiency among many Americans by eroding the work ethic and undermining family structure.”
Metaphorically speaking, this shouldn’t be surprising. Invite a stray cat into your home and feed it, and the cat will no longer wish to hunt for its food—it is much easier to simply accept the food it is given (and by no means am I comparing welfare recipients to cats). It’s time for the United States to stop letting Americans eat out of the taxpayers’ metaphorical palms. It’s time for freedom and self-reliance to replace government dependence.
Below is an article by Daniel J. Mitchell from the Foundation for Economic Education, with a partial transcript added for the referenced video.
Welfare Spending Did Not Decrease Poverty, Capitalism Did
Last September, I shared some very encouraging data showing how extreme poverty dramatically has declined in the developing world.
And I noted that this progress happened during a time when the “Washington Consensus” was resulting in “neoliberal” policies (meaning “classical liberal“) in those nations (confirmed by data from Economic Freedom of the World).
In other words, pro-market policies were the recipe for poverty reduction, not foreign aid or big government.
Sadly, the Washington Consensus has been supplanted. Bureaucracies such as the International Monetary Fund, the United Nations, and the Organization for Economic Cooperation and Development are now pushing a statist agenda based on the bizarre theory that higher taxes and more spending somehow produce prosperity.
To add insult to injury, some people now want to rewrite history and argue that free markets don’t deserve credit for the poverty reduction that already has occurred.
Esteban Ortiz-Ospina, writing for Our World in Data, wants readers to conclude that redistribution programs deserve credit.
“…the share of people living in extreme poverty around the world has fallen continuously over the last two centuries. …many often say that globalization in the form of “free-market capitalism” is the main force to be thanked for such remarkable historical achievement. …this focus on “free-market capitalism” alone is misguided. …Governments around the world have dramatically increased their potential to collect revenues in order to redistribute resources through social transfers… The reach of governments has grown substantially over the last century: the share of total output that governments control is much larger today than a century ago.”
And for evidence, Mr. Ortiz-Ospina included this chart.
I shared a version of this data back in June, asserting that the explosion of social welfare spending made this “the western world’s most depressing chart.”
So does Ortiz-Ospina have a compelling argument? Does poverty go down as welfare spending goes up?
Nope. Johan Norberg points out that there is a gaping flaw in this argument. An enormous, gigantic hole.
“The people over at Our World in Data…recently published this chart, which shows how social spending increased in Western countries dramatically after the 1950s. So the amazing reduction in poverty took place while redistribution increased to an all-time high. ‘More than a story of free market capitalism,’ as they put it. Pretty convincing, until you realize that they’re talking about two different groups of countries. Social spending increased dramatically in rich countries, but the simultaneous poverty reduction took place in the poor countries.”
Wow. This isn’t just a flaw. It’s malpractice. It’s absurd to argue that welfare spending in developed nations somehow led to poverty reduction in developing countries.
I hope Mr. Ortiz-Ospina is just an inexperienced intern because if he really understands the data, one might be forced to conclude that he’s dishonest.
But let’s set that issue aside. Johan closes his video by explaining that poverty in rich nations declined before modern welfare states. I want to expand on that point.
Johan cited Martin Ravallion, so I tracked down his work. And here’s the chart he put together, which I’ve modified to show (outlined in red) that extreme poverty basically disappeared between 1820 and 1930.
And guess what?
That was the period when there was no welfare state. Not only is that apparent from Our World in Data, it’s also what we see in Vito Tanzi’s numbers.
Here’s Tanzi’s table, which I first shared five years ago. And I’ve circled in red the 1880-1930 data to underscore that there was virtually no redistribution during the years poverty was declining.
The bottom line is that poverty in the western world fell during the period of small government. Yet some people want to put the cart before the horse. They’re making the absurd argument that post-1950s welfare spending somehow reduced poverty before the 1930s.
That’s as absurd as Paul Krugman blaming a 2008 recession in Estonia on spending cuts that took place in 2009.
P.S. For those who want U.S.-specific data, it’s worth noting that dramatic reductions in American poverty all occurred before Washington launched the so-called “War on Poverty.”
Despite the never-ending argument that more welfare spending will decrease poverty, evidence shows otherwise. Maybe the left ought to reconsider their “more welfare” mantra.