by Madeleine Kando
I was. But there is nothing more complicated and mind boggling than diving into the world of poverty and coming out knowing more than you went in.
Poverty is such a convenient concept. ‘Yes, poverty is terrible. I am glad I am not poor. But, hey, we always had poverty, so it’s just one of those things..’ True. But there is poverty and then there is true poverty. Here are some statistics about poverty in America:
• Of 25 countries in the OECD, (the group of affluent Western societies), the US has the highest poverty rate, at 17.8%. This means that 59 million Americans are poor. That’s the entire population of Italy. Compare that to Ireland’s poverty rate at 5.4%, or Holland at 8.3%.
• Not only does America have the highest poverty rate in the OECD, it also has the highest poverty gap ratio, which measures how poor the poor are. In the US the poverty gap ratio is 40%, which means that a poor person would need to earn 60% more just to get to the poverty line of $13,000. We would have to give that person $7,800.
In Ireland, (remember that country where many of our immigrants used to come from because they couldn’t survive?), the poverty gap ratio is 3.3%. If we assume the poverty threshold to be equal in both countries, it would take $390 to bring that person up to the poverty line.
| Us | Ireland |
Poverty line | $13,000 | $13,000 |
Poverty gap | 40% = $5,200 | 3%=$12,610 |
Difference | $7,800 | $390 |
But what does being poor really mean? People in Africa are poor. The poor in America are far better off, right? Does that include the 1.5 million families, most of them with children, who live on less than 2 dollars a day? Not only are they as poor as the African poor, but they are even worse off. In Africa there is a rich barter economy, where you might not need cash to survive. That is why the very poor in the US resort to selling blood plasma to get cash. For health reasons, twice a week is the maximum allowed. They go home with $30, to pay their bills.
Why is America’s Approach to the Poor so Poor?
The US welfare system is relatively recent compared to the ones in Europe. It has its origins in the Great Depression. The Social Security Act of 1935 created a safety net for Americans who could not work due to old age, illness, or disability. In 1964, President Lyndon B. introduced legislation called ‘the war on poverty act’, as a response to a national poverty rate of 19%.
In 1996, President Bill Clinton, signed the Personal Responsibility and Work Opportunity Act,. It reduced the number of people receiving government assistance, but it also increased poverty. It required the poor to get a job, which in many cases was not possible. He gave control to the states, who spent the money on all sorts of other things and a small amount flowed to the people who really needed it.
Welfare in this country is like the game of musical chairs. If you don’t run as fast as the other players (handicapped) , or you are just in a bad position, you are out. Nobody thinks of adding more chairs, instead of submitting to the rules of the game. Which is exactly what Europe has done.
The European Welfare State is an ideal that I grew up with. It gives most Europeans their (national) identity and it makes Europeans proud to be part of it.
But you only have to look at the Gini index to see that a strong welfare system improves a country’s quality of life.
On the other hand, Americans consider Welfare as a necessary evil, an unavoidable trade-off between economic growth and social justice. But you only have to look at the Gini index to see that a strong welfare system only improves a country’s quality of life. Do Americans not read these indexes?
People complain about the size of the Welfare budget and list three main arguments against it:
1. Welfare is too expensive and unmaintainable in the long run.
2. It is bad for the economy because redistribution impedes investments.
3. It is a kind of ‘Robin Hoodism’, because it take from the rich to give to the poor.
Of course Welfare is expensive. It always has been. On the other hand it makes for economic stability by creating more demand (more people have money to buy things) and it stimulates the economy by investing in human capital (education, training and social services).
As far as taking from the rich to give to the poor, most transfers happen horizontally, i.e. within the same economic class. You pay into Social Security and Medicare, which then comes back to you later in life. The idea that the rich pay for the poor is absurd. In fact, a large percentage of social benefits go to the high and middle earners in the form of mortgage interest deductions, subsidized employer provided healthcare and all sorts of other tax subsidies that the poor don’t qualify for.
When you look at statistics that say that the US has the second highest social benefits expenditure (after France), there is no distinction between public social spending (think Medicaid) and private social spending (think employer-sponsored health insurance.) The private spending benefits mostly flow to the middle and upper class. They are not examples of the government spending directly on social transfers, but rather the government encouraging private social spending. In terms of direct cash expenditure, America spends a lot less on welfare than other OECD countries.
Political Representation
One of the reasons the American Social Safety Net is so weak, is that the poor are not represented politically. In a two-party system it is very difficult to have minorities represented in government. Unions and Workers are not politically represented here. In European countries the lower class is guaranteed representation in government because of a multi-party system.
Inequality and Poverty
America is the most unequal society in the western world. But what does inequality have to do with poverty, you might ask. Statistics show that the more unequal a society, the higher the poverty rate. Income inequality creates inequality in other areas. It excludes certain groups from being able to buy a house or get credit. It limits their access to information, education, health, even water and prevents them from participating in politics.
The richest 0.1% of Americans own almost a quarter of all American wealth. That’s like a four-story hotel with one guy on the top floor and 999 people sharing the other three (800 of whom are on the first floor).We’re a rich nation, but wealth is not trickling down to the bottom.
Taxes
And of course, there is tax code. Rich Americans benefit from skewed income tax deductions, loopholes, and rate preferences. Payroll taxes are regressive and so are sales taxes. Long-term capital gains tax is much lower than income tax, which benefits the rich and the bigger your house is, the more you can deduct in mortgage interest rates.
The US Government relies heavily on the private sector to deliver ‘social’ services. Private prisons, private healthcare, even distributing food stamps is done through private firms in some states. Now there is talk of privatizing Social Security and Medicare, all in the name of efficiency and cost cutting. But cutting costs is f
or the benefit of the shareholders, not for the benefit of the recipients of these services.
The cost of poverty doesn't just affect the poor. It affects us all in the form of increased healthcare costs and criminal justice costs. It reduces productivity and economic output. But above all, childhood poverty robs a nation if its own future by reducing its human capital.
But above all, it is a moral abomination, unnecessary and fixable. Why on earth does America put up with it? leave comment here
