Why We Are Losing the War on Poverty

Michael Tanner, Director of Health and Welfare Studies at the Cato Institute, published a study that cuts to the heart of the poverty problem in the U.S. Tanner writes that the war on poverty has failed miserably despite the government spending nearly $1 trillion per year (for context our entire national defense budget is $685 billion).

In 1964, when the “War on Poverty” began, about 19 percent of Americans were below the poverty line. Nearly 50 years and $15 trillion later, 15.1 percent of Americans find themselves in poverty, and the rate is climbing. Pennsylvania is in the same boat, with poverty rising over the past ten years, despite a 52 percent increase in welfare spending.

It’s safe to say more spending does not equal less poverty. In fact, Tanner argues more spending actually encourages dependency.

The nature of government is such that programs are al­most always implemented in a way to bene­fit those with a vested interest in them rath­er than to actually achieve the programs’ stated goals. As economists Dwight Lee and Richard McKenzie among others point out, the political power necessary to transfer in­come to the poor is power that can be used to transfer income to the nonpoor, and the nonpoor are usually better organized po­litically and more capable of using political power to achieve their purposes. . . . Thus, anti-poverty programs are usually more concerned with protecting the prerogatives of the bureau­cracy than with actually fighting poverty.

This spring, the political power of providers and the welfare bureaucracy is on display in Pennsylvania as lawmakers consider relatively small welfare reductions—Gov. Corbett’s proposed General Fund budget would reduce welfare spending by a scant 0.3 percent after decades of unsustainable growth.

A few of the welfare reforms include:

  • Hospital Application Process Revisions (Savings $10 million): Keeps recipients enrolled through the fee-for-service program until redetermination. Often individuals are added to capitated plans but rarely use care. Instead an individual can apply for continual insurance, placing the responsibility with the person, not the state.
  • High Cost Case Reviews (Savings $45 million): Intensive case management for high cost consumers enrolled in Medical Assistance programs that reimburse for services based on utilization and fee schedules.
  • Child Care Reimbursement Reform (Savings $10 million): Requires rate reductions for unregulated relative and neighbor care and reduces the number of days of free childcare after a parent loses a job from 30 to 60.

Tanner’s argument is that the best way to fight poverty is by reducing government programs that require high taxes and regulatory excess, which inhibit job and wealth creation.

But more important, the concept behind how we fight poverty is wrong. The vast majority of current programs are focused on making poverty more comfortable—giv­ing poor people more food, better shelter, health care, and so forth—rather than giving people the tools that will help them escape poverty.