Addressing poverty — and the poverty rate

BY RANDY BRECHBIEL, Guest Columnist
Posted 6/19/20

The U.S. needs a new approach to lifting Americans out of poverty

There have long been debates on income support programs — mainly stemming around whether they lift Americans out of poverty, or …

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Addressing poverty — and the poverty rate

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Posted

The U.S. needs a new approach to lifting Americans out of poverty

There have long been debates on income support programs — mainly stemming around whether they lift Americans out of poverty, or rather, disincentivize recipients from pursuing prosperity. It’s hard to believe anyone would want to be reliant on government aid; the government, both at the federal and state level, has shown time and time again just how unreliable it can be.

Just ask the hundreds of thousands in North Carolina who have yet to receive the unemployment benefits they filed claims for.

But not wanting to be reliant on the government is not enough to get off the income support and health programs that Democratic lawmakers have championed as “the core of our nation’s social safety net.” That’s because these programs, at best, prevent the poverty rate from rising. That sounds like a good thing — and it is — but when did prolonged poverty become acceptable?

The poverty rate in the United States has bounced between 10 to 15 percent for the past 50-plus years. As of 2018, it stands at 11.8 percent, which the Census Bureau notes is “the first time in 11 years, the official poverty rate was significantly lower than 2007.” Under normal circumstances, this figure could be flagged as an accomplishment. Under today’s circumstances, this figure will likely serve as the next “low” the U.S. will try to replicate following recovery from the recession that officially began in February.

Looking at past recessions gives an idea of what happens to the poverty rate during recovery. An April 2019 report by the Congressional Research Service (CRS) notes that the poverty rate is a lagging indicator, i.e. it changes after other changes in the economy have taken place. The CRS points out that since 1991, the poverty rate following a recession has hovered at elevated levels for longer periods of time before falling, which was not the case prior to 1991. “For example, during the 1961-1969 recovery, the poverty rate fell by 10.1 percentage points. During the 1991-2000 recovery, the poverty rate rose 1.6 percentage points during the first three years, then began to decline.”

The CRS was unable to explain why this change occurred. It notes that “gains from economic recoveries now need to develop over a greater length of time before the population below poverty, as a group, experiences the benefits.”

A question then arises: Will massive federal spending reverse this trend, and send the poverty rate down during the early stages of recovery? Recent history suggests no, but record spending, including the $1.9 trillion CARES Act, may beg to differ. Keep in mind, if the poverty rate does drop during recovery, that would be the result of a variety of factors, and attempts to tie it directly to increased government spending on individuals would conveniently ignore the $1.4 trillion that went elsewhere.

Regardless, is there any reason to believe the poverty rate will drop below 10 percent during or after recovery? Again, history suggests no, but perhaps a newfound approach to addressing poverty would prove otherwise. Safety net programs are only catching those who fall, and that’s being done at the cost of at least $857 billion federal dollars every year, and at most nearly $1 trillion per year.

The United States should not limit itself to status quo — 11.8 percent should not be acceptable, and current programs, while effective in certain areas, appear unable to reduce the poverty rate below a certain threshold. Re-evaluating how the country lifts people out of poverty is essential, and given that “students nationwide will return to school in the fall with roughly 70 percent of learning gains in reading relative to a typical school year, and less than 50 percent in math,” perhaps changes to education, which shapes the future workforce of America, would be the logical place to start.

Randy Brechbiel is a research and communications operator for The Results Company in Raleigh.

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