- Key Facts
- U.S. taxpayers have spent $22 trillion on anti-poverty programs since the War on Poverty started in 1965.
- In 2016, the official poverty rate was 12.7%.
- The federal government operates 122 different anti-poverty programs with an annual budget of $725 billion.
- One third of all Americans receive benefits from at least one welfare program, according to the U.S. Census.
“A key tenet of the American Dream is that where you start off shouldn’t determine where you end up…if you work hard and play by the rules, you should get ahead. But the fact is, far too many people are stuck on the lower rungs … In fact, rates of upward mobility are no lower or higher today than in the 1970s.”
Speaker Paul Ryan, Expanding Opportunity in America
Historically, America has taken care of its poor by helping them to improve their circumstances to help them rise out of poverty. As Thomas West writes “America has always had laws providing for the poor. The ultimate goal for the Founders was lifting the poor out of poverty as quickly as possible and preventing permanent dependence.”
Franklin D. Roosevelt, whose New Deal laid the foundation for today’s welfare programs with the Aid to Dependent Children program in 1935, said welfare could tear apart the American spirit, stating that, “continued dependence upon relief induces a spiritual disintegration fundamentally destructive to the national fiber. To dole our relief in this way is to administer a narcotic, a subtle destroyer of the human spirit.”
Government assistance to the poor was never meant to keep people trapped in poverty, yet many of today’s programs do just that. So if current policy is not working, what needs to happen to increase opportunity and upward mobility for all?
Framing the Issue
In 1965 President Lyndon Johnson declared the War on Poverty and since then U.S. taxpayers have spent approximately $22 trillion on 122 anti-poverty programs, more than three times the cost of all military wars since The Revolutionary War. Yet the number of Americans living in poverty has fluctuated from around 11% to 15% since 1973. In 2016, the official poverty rate was 12.7%.
Facts to Know
- The Federal Government spends over $725 billion annually on 122 different anti-poverty programs (including Medicaid). When you add in Social Security and Medicare, U.S. welfare programs add up to approximately 19% of the federal budget.
- One third of all Americans receive benefits from at least one welfare program, according to the U.S. Census.
- In 2010 it was found that only Norway spends more per person on welfare.
- In 2008, SNAP (Supplemental Nutrition Assistance Program, a.k.a “food stamp”) enrollment was below 30 million and cost $40 billion. In 2016, SNAP cost more than $66 billion. As of April 2018, food stamp enrollment had dipped slightly, to just over 42 million recipients.
- In 2016, state and local governments spent $220 billion on anti-poverty programs including $48 billion on welfare programs and $172 billion on Medicaid. (FederalSafetyNet.com)
- According to the U.S. Department of Health and Human Services, the following are the poverty guidelines for 2018, which rose slight from 2017 figures:
- $12,140 is the threshold for an individual
- $16,460 is the threshold for a couple
- $25,100 is the threshold for a family of four
What is the Safety Net?
According to Federal Safety Net, The Social Safety Net (Safety Net) of the United States is made up of various Welfare Programs that protect low-income Americans from poverty and hardship. The theory is that by catching Americans if they fall on hard times, Americans of sound body and mind can get back on their feet. For those individuals without sound body and mind, the Safety Net protects them with a minimum standard of living. These Safety Net programs are “non-contributory transfer payment programs”, meaning low-income Americans don’t have to contribute into the programs to receive benefits.
Thirteen categories of Federal Welfare Programs are shown on the Safety Net Programs Page. State programs and non-profit organizations also make up the Social Safety Net available to Americans. These programs vary by location and typically include food, housing, counseling and other benefits. Some of the more commonly known programs are:
Medicaid: Medicaid is a joint federal-state program designed to provide health coverage to low-income families, single mothers, and disabled individuals through coordinated federal and state efforts. One third of all federal safety net spending goes to Medicaid spending.
Earned Income Tax Credit (EITC): EITC provides cash assistance to low-income working families, it was designed to offset Social Security taxes and to do so in a way that encouraged work.
Temporary Assistance for Needy Families (TANF): The 1996 Welfare Reform law replaced Roosevelt’s program that was born out of the great depression (Aid to Families with Dependent Children – AFDC) with fixed annual grants to states under the Temporary Assistance to Needy Families (TANF).
Food Stamp (SNAP) and Housing Assistance: The Supplemental Nutrition Assistance Program (SNAP), also known as “food stamps,” helps low-income families buy food so they can maintain a healthy diet. SNAP time-limits aid for able-bodied adult recipients without dependents who do not work. However, for other able-bodied, non-elderly adults, for the most part, states are only required to have those who are unemployed or underemployed register for work.
Families seeking housing assistance may apply through a Public Housing Authority for more than one kind of assistance, and they can accept assistance through various programs based on their eligibility as additional Section 8 vouchers or units through other HUD programs become available.
Opportunity Grant Proposal: This is a proposal that would create a pilot program to coordinate aid for families in need. By allowing states and community groups to test different ways of fighting poverty, federal aid will help people not just avoid hardship—but build a career and thus a path to self-reliance.
The “Social” Safety Net
Another term used to refer to government programs that provide benefits to individuals or families to keep them from falling into poverty is “Social Safety Net,” which includes Social Security, Medicare and Unemployment among other programs. The Social Safety Net includes both contributory and non–contributory programs. For contributory programs such as Social Security and Medicaid, Americans pay into the programs during their working years and receive benefits later in life. Unemployment is partially contributory; the extension of benefits in recent years has shifted program to be more non-contributory.
Problems with Current Anti-Poverty Programs
Anti-poverty programs suffer from from duplication and overlap across agencies which cause inefficiencies and waste. For example:
- There are 33 federal housing programs run by four different cabinet departments.
- Six federal government cabinet departments and five independent agencies oversaw 27 cash or general assistance programs in 2011.
- In 2011 The CATO Institute reported that eight different health care programs were administered by five separate agencies within the Department of Health and Human Services.
- Medicaid made $14.4 billion improper payments in 2013.
- The Government Accountability Office reports that despite great progress, “the amount of SNAP benefits paid in error is substantial, totaling about $2.2 billion in 2009,” according to FreedomWorks.
- Administrative costs for SNAP equals about $5.5 billion per year, or about 10 percent of the value of food stamps distributed.
- Additionally, a report compiled by the Government Accountability Office (GAO) stated that, “the 18 food assistance programs show signs of program overlap, which can create unnecessary work and lead to inefficient use of resources.”
- In 2014 the Social Security Administration improperly paid $5.1 billion in Supplemental Security Income (SSI); Department of Labor improperly paid $5.6 billion in Unemployment Insurance; IRS improperly paid an estimated $17.7 billion in Earned Income Tax Credit (EITC) payments.
We are spending extraordinary amounts of taxpayer money on fighting poverty yet the poverty rate remains the same.
Factors that Lead to Poverty
To understand how to fight poverty it helps to better understand the underlying causes.
Those living in poverty are often cut off from three crucial sources of support: education, work, and family.
- They’re less likely to have graduated from high school. Education spending per pupil has nearly tripled over the past four decades with largely stagnant achievement to show for it.
- They’re less likely to work full-time. Male labor-force participation has fallen to record lows.
- And they’re less likely to have gotten married before they had kids.
Brookings Institute scholars Ron Haskin and Isabel Sawhill in their well-known “success sequence” identify three steps to joining the middle class: “At least finish high school, get a full-time job and wait until age 21 to get married and have children. … Our research shows that of American adults who followed these three simple rules, only about 2 percent are in poverty and nearly 75 percent have joined the middle class (defined as earning around $55,000 or more per year). There are surely influences other than these principles at play, but following them guides a young adult away from poverty and toward the middle class.”
According to Census Bureau, poverty rates for those who work in full-time, year-round jobs are just 3 percent.
What is the Poverty Trap?
People fall into the “poverty trap” when what they earn at a job is not much more than what they can get from the government by not working, which functions as disincentive to work more. For a five minute overview of the poverty trap, view this five minute clip produced by Prager University.
Speaker Paul Ryan draws attention to the causes, highlighting the “little to no coordination among” the myriad government programs and that “the way these programs are structured, families become ineligible for them as they make more money—so poor families face very high marginal tax rates [i.e., the rate you pay on additional income], in some cases over 80 percent. Government actually discourages them from making more money.”
The following graph illustrates how marginal tax rates affect income levels:
Example 1, an eligible taxpayer (or couple) with two or more children loses 21 cents of Earned Income Tax Credit benefit for each dollar earned above the prior year’s income. While the normal income tax rate on this additional dollar of income may only be 10%, the reduced EITC combined with the income tax results in a marginal tax rate of 31%. By contrast, married taxpayers have to earn over $300,000 before paying a marginal tax rate over 30%.
Example 2, for a single mother with two children living in Colorado whose income jumps from $10,000 to $40,000, she will not keep much of that extra $30,000. Instead, she will lose most of it to higher taxes and benefit cuts. If she is enrolled in programs like food stamps, Medicaid, and SCHIP, her marginal tax rate on each additional dollar earned will be as high as 55 %. And if she is enrolled in other programs—like housing assistance and welfare—the marginal rate could rise above 80 %.
Means testing is utilized to determine who qualifies for government benefits at lower income thresholds. Once an individual’s means exceeds an established level, they receive fewer benefits thus creating a disincentive for work. Making more money should help Americans to break free from poverty. Instead, current policy encourages them to stay in it.
Understanding The Four Types of Poverty
Robert Woodson of The Woodson Center, who has addressed poverty in toxic urban centers for 40 years, outlines four categories of poverty and how each requires different solutions. There is no “one-size-fits-all” solution for eradicating poverty. Woodson’s testimony on poverty before the U.S. House Committee on the Budget outlines the following categories:
- Unexpected setback – loss of job, home, spouse or other supporting family members. “Due to circumstances beyond their control—such as job loss, their factory’s closure, or illness of a breadwinner—this group has fallen into poverty. Assistance to them serves as a bridge back to economic stability. They use government programs as originally intended: as an ‘ambulance service’ not as a transportation system.”
- Stuck in the poverty trap – generations trapped in a vicious cycle from which there seems no escape. “Those whose character and values are intact but have not moved out of dependency on government assistance because they have ‘done the math’ regarding the benefits of the welfare system and have reasoned that the disincentives for becoming independent outweigh the incentives. They know that as they earn or save money, their benefits will be reduced or terminated. In the case of one single mother in Milwaukee, saving $5,000 over time from her welfare assistance to help with her daughter’s college tuition resulted in her being charged with a felony.”
- People with disabilities and suffering mental illnesses, many of whom will always be in need of some support. The country’s aging population may fall in this category.
- People suffering of alcoholism and addictions “Those who are poor because of the chances they take and the bad choices they made. They are people who indulge in self-destructive behavior and have serious character deficits. Giving “no-strings” assistance to this group enables them to continue their self-destructive lifestyles and injures with the helping hand. For this group, intervention is a necessary precondition for assistance so that they move to the ranks of Category 1, where assistance and opportunities can be a stepping stone toward self-sufficiency and upward mobility.”
Notably, work incentives and time limits are not the correct focus for the third and fourth categories.
- For the third category, our population with disabilities needs a reliable safety net in place that is not abused by misuse and fraud.
- For the fourth category to move out of poverty, they must have a personal desire and commitment to get their life back on track and require constant, long-term and personalized attention from leaders within their community.
The Power of a Local Approach
Often, programs to eradicate poverty are designed afar from the field and fail to address local conditions on the ground better understood by local leaders who have knowledge and credibility to implement change.
In his recent column for The Ripon Society Robert Woodson of The Woodson Center writes:
“History clearly demonstrates that achievements against the scourge of poverty must originate among those experiencing problems. It begins with a belief that self-development is possible, and no matter what their circumstance, they have the capacity to be agents of their own uplift.
If 70% of black families are raising children who are engaged in self-destructive behavior, it means 30% are not. The Woodson Center goes into these drug-infested crime-ridden neighborhoods and identifies these healthy elements. It then helps to buttress these community anti-bodies with the support that can enable them to become the foundation of an immune system which can restore families and revitalize entire neighborhoods. There are contemporary examples of neighborhoods leaders who are applying the old values of the black community to a new vision.
One such leader was Kimi Gray, a one-time welfare mom who became a national figure because of her efforts to empower residents of public housing. She was a divorced mother of five children in her early twenties living in one of Washington, D.C.’s most notorious open-air drug markets. Chronically neglected by the D.C. Housing Authority, the residents were often without heat or hot water for weeks at a time. Kimi took on management duties for her development. Within six months, she organized and hired residents and instilled discipline and a sense of hope that revived the entire complex. Even though she was a high school dropout, she managed to send all five of her children off to college. Countless residents sought her help in sending their children to college as well.
As a consequence, Kimi created an initiative called College Here We Come that enabled 600 youths from her public housing development to attain higher education. The initiative made national news. Yet when four of the students came home on semester break, they were ashamed to bring their friends. That set Kimi on a quest to promote improvements in her complex. She was elected resident leader and galvanized the entire neighborhood in a massive restoration effort that drove out the drug dealers and promoted personal responsibility. Kimi’s approach was no-nonsense and entailed high standards. Her efforts virtually wiped out teen pregnancy and helped to make Kenilworth Parkside not only one of the safest places to live, but a place that saw a dramatic reduction in welfare dependency, as well…
Unfortunately, there is no magic policy lever we can pull to eradicate poverty. However, there are effective community-based models that are successfully solving some of our nation’s most intractable problems.”
What Role Should Government Play?
Historically, government has played a role in alleviating poverty and should continue to do so but centered around these core ideas:
- “Where you start should not determine where you end up,” as noted by Speaker Ryan.
- Work is an opportunity for everyone to add value, including those with physical and intellectual disabilities. Through work, people feel needed and valued, become part of a community and learn responsibility.
- Children should see the value and reward of hard work to better their lives and help break the generational cycle of poverty.
So, with these values as an outline, what role should government play?
Some favor an approach that emphasizes improving the immediate material living conditions of people in poverty and reducing income differences. Success in the war on poverty is viewed in terms of numbers of people receiving benefits and of programs that equalize income to reduce poverty, including:
- Increasing the minimum wage
- Extending long-term unemployment benefits
- Spending more money on current and new poverty programs
- Higher tax rates on high earners to fund additional Safety Net programs
Yet others believe policies must encourage people in poverty to seek work to improve their lives and incentivize economic growth and job opportunities. To move out of poverty, people need work opportunities where they can experience “earned success” as noted by Arthur Brooks of AEI. It is interesting to note that the poverty rate among those engaged in the labor force for more than half of the year was 5.6 percent, compared to a total poverty rate of 13.5 percent in 2015.
To provide work opportunities, economic growth is key. According to Michael Tanner of The CATO Institute, the policy focus should be “less on making poverty comfortable, and more on creating the prosperity that will get people out of poverty.”
Recently economic growth rates have been strong – around 2.9% in the 4th quarter 2017. Strong growth rates tend to lead to business expansion and job creation. In January 2018, black unemployment hit an historic low of 6.8%, the lowest rate since the government started recording it in 1972.
Government programs are more efficient, effective and accountable when they are designed and implemented closest to the people they aim to assist, as outlined in this report and embodied by the example above of Kimi Gray. Anti-poverty programs should partner with local leaders who have the knowledge to design targeted solutions rather than a one-size-fits-all approach.
Principles of Reform
- A strong economy provides opportunity. As outlined in the The Policy Circle Economic Growth Brief, business and entrepreneurship represent the largest and most successful anti-poverty program in human history. It is essential to re-open avenues for entrepreneurship as a component of fighting poverty.
- Opportunity Zones is new program resulting from the 2017 Tax Reform. The Governors of each state select a limited amount of census tracts that meet the eligibility criteria of distressed communities to receive favorable tax treatment in the form of delayed or forgiven capital gains tax, depending on the length of the investment. The most upside goes to an investor who holds their investment for 10 years or longer. The goal is to drive capital and opportunity into communities that currently lack such investment.
- Empower the states and communities who are on the front lines. The role of federal government should be coordinated, targeted, evidence-based and in line with the 10th amendment of The United States Constitution; that is, the federal government is to act as a referee, not a player.
Individuals, communities and states, in that order, are the key players that can truly break down barriers to opportunity and make the Safety Net more effective. As Speaker Ryan has stated, “far too often, federal aid is fragmented and formulaic; it doesn’t coordinate these services to help people achieve their goals – But there are organizations with intimate knowledge of the people they serve and a long-term view that do provide such comprehensive assistance. They are more effective than distant federal bureaucracies for a simple reason: They don’t just relieve the pain of poverty; they give people the means to get out of poverty.”
- Designing the programs at the local level, instead of from Washington, allows the assistance to be tailored to fit the needs of those in poverty. For example, the private, community-based organization The Woodson Center provides effective community and faith-based organizations with training and technical assistance, links them to sources of support, and evaluates their experiences for public policy.
The Woodson Center works with groups that believe self-development is possible, and no matter what their circumstance, people have the capacity to be agents of their own uplift. They have provided training to more than 2,600 leaders of community organizations in 39 states and helps community residents deal with issues such as youth violence, substance abuse, teen pregnancy, homelessness, joblessness, family dissolution, poor education, and deteriorating neighborhoods.
- Work requirements, to incentivize work and reinforce giving people a hand up not a hand out. Recently, the Centers for Medicare and Medicaid Services (CMS) issued a State Medicaid Director Letter directing states to impose work requirements in order to receive Medicaid. (Kaiser Family Foundation)
- Analysis and accountability. The federal government’s role should be to track metrics and provide accountability of the funds. This is the goal of the Evidence-Based Policymaking Commission Act passed by the House and Senate signed by President Obama in 2016. The federal government is in a position to act as the referee, setting benchmarks, publishing results and ensuring that states are not misusing taxpayer funds.
Examples of Innovative Solutions
Following are some examples of innovative government and non-government solutions:
- Wage supplement: Poverty Reduction Opportunity Wage. The proposal’s aim is to “configure a wage subsidy so that if a person works full time they will not be in poverty. The PRO Wage does exactly that. If a person (or couple) works full time for the year, the labor earnings are guaranteed to exceed the federal poverty line.” (Doug Holtz-Eakin)
- Housing: Shelters to Shutters assists the homeless, veterans, and domestic violence victims interview for entry level property management positions which offer discounted on-site housing.
- Violence: In Congressional testimony, Bob Woodson talks about a Milwaukee-based program – under the umbrella of The Woodson Center – called the Violence-Free Zone (VFZ) initiative. The initiative is reducing violence and disruptions in 12 Milwaukee public schools and is preparing students in the most disadvantaged communities to learn and to succeed.
- Return on investment: Based on a study done by Civic Enterprises, an annual federal investment of $6.4 billion a year in proven existing federal programs – like AmeriCorps, Back on Track Schools, Public Allies, Service and Conservation Corps, or YouthBuild programs – would reconnect one million young adults per year. Each 20-year-old permanently reconnected to education and/or employment will directly save the taxpayer $236,000 and will save a total social cost of $704,000 over his or her lifetime. Thus, if these programs succeed with just half of their participants, the lifetime direct return on investment to the taxpayer would be over $118 billion for each year of investment. The social benefit would be $350 billion. (National Council of Young Leaders)
- Temporary support for families in crisis: Safe Families operates in 70 cities in the United States, United Kingdom, Canada, and other countries, to provide temporary support for families in crisis due to unemployment, homelessness and other challenges, with the goal of keeping children safe and out of the foster care system and able to reunite with their families after the crisis has passed. Safe Families matches children with volunteers host families and provides coaching and other resources.
- Reducing recidivism: Often those re-entering society from prison face living in poverty and the challenges that accompany it.
- The Dannon Project is a community-based program in Birmingham, AL, that helps people struggling with re-entry to society, especially non-violent offenders from prison. Speaker Ryan recently referred to this program as an example of how community-based programs get results — only 3% of the programs participants return to prison, compared with a state average of 44% percent.
- Hope for Prisoners is a Las Vegas-based training program for ex-offenders funded in part by The Woodson Center. Program support includes mentoring and skills training to prepare for employment. According to this UNLV study of 522 graduates of the program, 64% found stable employment. Of those employed, 25% found employment within 17 days of the training course. Only 6% of these 522 individuals were re-incarcerated during the 18-month study period.
What You Can Do
“In order to have a real impact, we have to encourage everyone to get involved. For too long, too many people have watched this effort from a distance. They’ve said to themselves: “I’m working hard. I’m paying my taxes. Government is going to take care of this.” And in so many ways, government is encouraging this view. Well, that doesn’t cut it. We need everyone to get in the game. We need everyone to get involved—person to person.”
Speaker Paul Ryan
There are a variety of ways individuals can get involved, both on a legislative and personal level.
- Research the committees on which your Senators and Representatives serve. Search the Members’ websites and their Committee websites to investigate his/her level of engagement on efforts to address poverty and welfare reform.
- Write to your Senators and Representative to ask for information on local leaders in your district/state when it comes to addressing poverty. See links to Policy Circle post here and here on how to do so. Ask them about consolidating safety net programs into flexible, accountable grants to states.
- Get involved with a local community organization and ask your elected officials to highlight successful examples of breaking the cycle of poverty at the local level.
- Highlight a local community organization success story in an Op Ed in your local paper.
- Take opportunities when related articles (on economic decline, inequality, lack of access to loans for entrepreneurs etc.) appear in your local paper to write a letter to the editor.
- Post short facts or timely articles on these topics and tweet @yourrepresentative. Post these on The Policy Circle website as well!
- Education Reform (see briefs here and here), and Regulatory Reform are also necessary to break down barriers to opportunity. Keep up with current and upcoming briefs to stay active in the conversation.
- Encourage friends and colleagues to learn about this topic. Create a social media hashtag and tell them how to get involved as well.
- Browse the innovative solutions and organizations listed below that are pioneering new tactics for alleviating poverty.
Robert Doar, American Enterprise Institute
Bob Woodson, The Woodson Center
Ron Haskins, Brookings Institution
Scott Winship, Manhattan Institute
Michael Strain, American Enterprise Institute
Michael D. Tanner, Cato Institute
- Arthur Brooks’ Ted Talk calling for innovative solutions and for conservatives and liberals to work together to lift more people out of poverty.
- Map of State by State poverty statistics and policies– Spotlight on Poverty
- AEI/Brookings Bipartisan Poverty Report 2015
- National Council of Young Leaders Report – Recommendations to Increase Opportunity and Decrease Poverty in America 2012
- Expanding Opportunity in America – A discussion draft from the House Budget Committee. Paul Ryan reform agenda 2014
- The War on Poverty: 50 Years Later – A House Budget Committee Report 2014
- Quick facts – Federal Safety Net and Welfare Reform
- Wilson Shaheen Lab for Economic Opportunities
- AEI Resident Fellow Gerard Robinson, “Help Ex-Inmates Lead Productive Lives” and “Prisoner Reentry and Why We Should Care” video (1:18).
- See Arthur Brooks’ comments on the economic consequences of the criminal justice system (below, 36:18 – Brooks’ comments begin at 8 min.)
Questions for Discussion
- What is the number one poverty issue you think should be addressed?
- What role should the federal, state, local governments and civic organizations should play in addressing poverty?
- If changes to poverty really happen at the local, individual level – what can we do as part of our day job or normal routine to have a positive impact?
- How can our federal government representatives take specific action to make $650 billion each year spent on ending poverty produce better outcomes?
- What steps can we take to build a coalition that highlights the good anti-poverty activity in our communities, in order to make sure more funds are spent on proven programs?
- What should be the policy priorities about the Safety Net?
- What is your opinion of the Opportunity Zone initiative?
- What key fact about poverty in America or your state that touched you?
- What are the prevailing views about poverty in your community?
- What do your representatives say about addressing poverty?
- What would you add to this portrait of poverty in America or your state? Are there other aspects we’ve not yet discussed or considered?
- What can you do influence the debate?
Updated May 2018
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