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"Poverty, By America" (Part I)
"Poverty, By America" (Part I)
POSTED MAY 1, 2023
The United States, the richest country on earth, has more poverty than any other advanced democracy. Sociologist Matthew Desmond's Poverty, By America attempts to answer the question: "Why?"
Why does this land of plenty allow one of eight of its children to go without basic necessities. permit scores of its citizens to live and die on its streets, and authorize its corporations to pay poverty wages?
Matthew Desmond's answer is blunt: Poverty in America persists because the rest of us benefit from it.
In his opening chapter, "The Kind Of Problem Poverty Is", Desmond presents a litany of the emotions and conditions that define poverty in the United States:
"Poverty is pain, physical pain...the cancer that forms in the cells of those that live near petrochemical plants and waste incinerators...the colostomy bag and wheelchair, the night terrors and bullets that maimed but didn't finish their cunning work...
"Poverty is traumatic and since society isn't investing in its treatment, poor people often have their own ways of coping...
"Poverty is instability....foreclosures...evictions...Some industries such as retail, leisure and hospitality, and construction see more than their work force turn over each year
"Poverty is the constant fear that it will even get worse...
"Poverty is the loss of liberty. The American prison system has no equal in any other country or any other epoch...Poverty measures exclude everyone in prison and jail - not to mention those housed in psych wards, halfway houses, and homeless shelters...
"Poverty is the feeling that your government is against you, not for you; that your country was designed to serve other people; and that you are fated to be managed and processed, roughed up and handcuffed...
Before getting to the crux of Mathew Desmond's research and argument, we need to take a look at how we define poverty and at some observations about poverty in America.
Technically, a person is considered poor when they can't afford life's necessities like food and housing. Since the 1960's the extent of poverty in the United States has been determined by the poverty line - a calculation that takes into account the bare minimum income required to have the essential necessities of life. The poverty line in 2020 was $12,760 for a single person and $26,200 for a family of four.
Some observations about poverty in America
To stay above the poverty line, a single person would have to earn $6.38/hour; a provider for a family of four, $13,10/hour for 50 weeks of 40 hour employment.
An inflation-adjusted Federal minimum wage based on the $2/hour minimum wage in 1974 would be $12.10/hour. In actuality, today's Federal minimum wage is $7.25- barely above the poverty level for a single person. Just 12 of the 50 states have a minimum wage above $13.10/hour - the amount necessary to keep a family of four out of poverty.
One in eighteen people in America live in "deep poverty" - that is, their annual income is less than half of the poverty line.
Black and Hispanic Americans are twice as likely to be poor, compared to white Americans. The life expectancy of poor Black men in America is similar to that of men in Pakistan and Mongolia.
Spending on the 13 largest means-tested programs - aid reserved for Americans who fall below a certain income level - has also fallen seriously behind inflation. Spending on these programs rose just 65% of the inflation rate between 1980 and 2021.
A large amount of government aid intended for the poor never reaches them. When welfare was administered by the Aid to Families with Dependent Children, almost all of the spending went directly in cash payments to the families. In 1996, the welfare system changed to a block grant approach that sent money to the states to dispose of as they saw fit - TANF . By 2020 poor families were directly receiving just 22% of the money allocated for TANF. Some of the creative uses that some states found to spend the money are in the sidebar.
America's poverty level has hovered between 10 and 15% for the past half-century. Why the lack of progress? Among the causes analyzed and soundly rejected by Matthew Desmond are the usual scapegoats: how the poor are counted, immigration, and the decline of the nuclear family. In a future post, we'll examine the factors that actually are the causes for this lack of progress as established by Desmond's analysis.
Sources: Poverty, By America by Matthew Desmond (Crown Publishing, 2023); US Bureau of Labor Statistics; US Dept of Labor
"The worst thing Bill Clinton has done"
"The worst thing Bill Clinton has done"
Long-time Clinton friend and an official in the Department of Health and Human Services, Peter Edelman resigned in protest over TANF famously calling it "the worst thing Bill Clinton has done."
His intent in signing TANF into law may have been to end poverty but it certainly did not. Perhaps he underestimated the extent that some states would go to redirect monies meant for the poor.
A partial listing of the creative uses to which the states put the grant money:
Between 1999 and 2016, Oklahoma spent more than $70 million in TANF funds on the Oklahoma Marriage Initiative, open to everyone in the state, whether poor or not.
Arizona used welfare dollars to pay for abstinence-only education.
Maine used the money to support a Christian summer camp.
And then there's Mississippi, where the child poverty rate of 28% is the highest of all the states and the same as that of Costa Rica. Aming the uses of funds meant for the poor in Mississippi:
hire an evangelical worship singer
purchase a Nissan Armada, Chevrolet Silverado, and Ford F-250 for the head of a local nonprofit and two family members
a 12-week fitness camp that state legislators could attend for free
sent funds to a ministry run by a former professional wrestler for speeches and wrestling events
Since there is no requirement that the states actually spend their TANF dollars, states sit on surpluses. in 2020, states had $6 billion in unspent welfare funds. Among the more egregious:
Nebraska $90 million
Hawaii $380 million
Tennessee at the top of the list: $790 million
Poverty, by America (Part II)
Poverty, by America (Part II)
POSTED MAY 29, 2023
The United States, the richest country on earth, has more poverty than any other advanced democracy. Sociologist Matthew Desmond's Poverty, By America attempts to answer the question: "Why?" Desmond's blunt answer: Poverty in America persists because the rest of us benefit from it.
An earlier post looked at Desmond's work on the emotions and conditions that define poverty, made some observations about poverty in America, and listed several scapegoats for the problem - how the poor are counted, immigration, and the decline of the nuclear family - that Desmond, citing numerous research studies, dismisses.
After Desmond destroys other myths for the persistence of poverty - most notably, "the poor are lazy and just looking for a handout" and "welfare leads to a decline in self-sufficiency" - he proceeds to examine more likely causes:
The low wages paid to the working poor, including an inadequate minimum wage
The exploitation of migrant workers
The demise of unions
An unfair housing market which discriminates against the poor and forces them to pay more in rent than they should
A banking system that leads to predatory practices such as payday loans and check cashing services in poor neighborhoods
Low tax rates on the rich
Unclaimed benefits by the poor because of lack of knowledge that these benefits exist or because of the stigma that the wealthier among us have attached to "being on the dole"
As in the old standardized multiple choice tests, Matthew Desmond's analysis concludes that the answer as to why poverty persists in the United States is "all of the above." Then Desmond takes it further. He asks why we have let the situation continue for so long, why we have incorporated these conditions and inequities into our economic system and why we accept it. His answer is: we accept it because many of us benefit from it.
Besides the obvious - higher profits for corporations, higher stock prices for shareholders, and cheaper goods and services for all of us - there are two, more subtle, elements that come into play: the the overall tax structure and the enduring myth that the middle class is carrying the poor on their backs.
Tax structure
The top US federal tax rate is 37%, well below that of other advanced democracies whose top income tax rate ranges from 43% in Italy to 55% in Japan. The US also taxes capital gains at a lower rate (15%) than nearly every European country (20% to 34%). But as Desmond points out, there is more. While the federal income tax rate is progressive, if not as progressive as other high income countries, other taxes are regressive. For example, says Desmond, "Take sales taxes. These hit the poor the hardest...poor families can't afford to save, but rich families can and do. Families that spend all of their money every year will automatically dedicate a higher portion of their income to sales tax than families who spend [a lower] portion of theirs."
The enduring myth
One of the commonplaces of American political discourse, at least among the politicians of the right, is that the middle class carries the poor on their backs. A closer look at the data shows that, when we recognize the equivalence of tax breaks and means-tested benefits, this is simply not the case.
Desmond writes, "We're apt to think much more about the taxes we have to pay than about the money delivered to us through tax breaks....This is by design, the result of the United States intentionally making tax filing exasperating and time-consuming." He notes that in a number of countries including Japan, Great Britain, and the Netherlands, "citizens don't file taxes; the government does it automatically....Taxpayers check the government's math, sign the from and mail it back in." This could be done in the US too except for the fact that that certain elements on the right want the process to be painful. Desmond quotes President Reagan who famously said, "Taxes should hurt." Paying taxes does hurt, but Desmond calls the belief that receiving a tax break is fundamentally different from government aid, a "bit of magical thinking. Both welfare checks and tax breaks boost a household's income, and both are designed to incentivize behavior.
Explaining that massive tax breaks given to the non-poor are just as much government welfare as the assistance given to the poor, Desmond presents some data, "The most recent data... show that the average household in the bottom 20 percent of the income distribution receives roughly $25,733 in government benefits a year, while the average household in the top 20 percent receives abut $35,363. Every year, the richest American families received about 40 percent more in government subsidies than the poorest American families."
In the next post, we will examine Matthew Desmond's suggestions as to how we end poverty in the United States. In the meantime, below is a link to an interview with Matthew Desmond in The Atlantic.
Sources: Poverty, By America by Matthew Desmond (Crown Publishing, 2023), Tax Foundation, World Population Review
Poverty, By America (Part III)
Poverty, By America (Part III)
POSTED JUNE 4, 2023
"Poverty, By America" (Part I) - May 1 (above)
"Poverty, By America" (Part II) - May 29 (above)
The United States, the richest country on earth, has more poverty than any other advanced democracy. Sociologist Matthew Desmond's Poverty, By America attempts to answer the question: "Why?" Why does this land of plenty allow one of eight of its children to go without basic necessities. permit scores of its citizens to live and die on its streets, and authorize its corporations to pay poverty wages? His answer is blunt: Poverty in America persists because "the rest of us benefit from it."
In this final post on Matthew Desmond's Poverty, By America, we look at some possible solutions to the United States' persistent poverty, a crisis unique among advanced democracies and one in which we have all played a role in creating. Looking at the persistence of poverty from 30,000 feet, we see that we make the poor in America poor in three ways:
1) We exploit them by constraining their choice and power in the labor market, in the housing market and in the financial market.
2) We prioritize the subsidization of affluence over the alleviation of poverty.
3) We create exclusive communities.
Any ultimate solution to America's persistent poverty would have to address these underlying causes. Some ideas:
Empower workers by removing the barriers that have been raised to organizing (e.g. rules that require organizing shop-by-shop, the so-called right-to-work laws). Desmond points to a new strategy called "sectorial bargaining" in which workers in an entire work sector bargain for, say, $15/hour wage.
Raise the minimum wage. It's currently $7.25/hour. To support a family of 4, a person would need to work more than 80 hours/week to get above the poverty line. A $15/hour minimum wage would let a worker put in 40 hours/week and keep her family of four above the poverty line. For decades there was a consensus among academics that increasing wages for the poorest workers would result in higher unemployment. But, as Desmond shows, the bulk of the evidence says that this just isn't so, "that the employment effect of raising the minimum wage is inconsequential."
Get the "low-hanging fruit." Make sure that low-income Americans get connected with all the benefits for which they qualify. For example, SNAP (the federal program that provides food assistance to low-income individuals and families) served just 78 percent of all eligible individuals in pre-pandemic FY 2020. This means that nearly a quarter of the people who qualify for SNAP do not claim their benefits. We need to "advertise" the benefits better and remove the red tape and hassle of obtaining them.
Empower poor families looking for a safe, affordable place to live by strengthening our commitment (i.e. increasing the funding) to the housing programs we already have, by the government providing extra financing for lower cost homes to build "on-ramps" for first time home buyers *, by supporting "commoning" - the term for the creation of homes that are collectively owned and controlled by the residents.
Ensure fair access to capital by capping overdraft fees as done in the UK and Israel**, by reining in payday lenders (e.g., requiring full disclosure, capping interest rates) or outlawing the practice altogether, and by having the USPS or the Federal Reserve issue small-dollar loans or by enticing commercial banks to do so.
Implement a fair tax structure by reversing the massive tax cuts given to high earners since the days of the Reagan Administration, by raising corporate taxes, by regulating tax havens, by closing "nonsensical" tax loopholes and by properly funding the IRS to catch the tax cheats.***
"Tear down the walls." End the de facto segregation that is doing so much to keep people poor. Change zoning laws to allow construction of more low-cost housing. As Matthew Desmond explains, "Simply moving poor people to high-opportunity neighborhoods, without doing anything to increase their income, improves their lives tremendously...they become less "poor" in the sense that their exposure to crime drops, and their mental health improves, and their children flourish in school. Studies have found that each year that poor children spend in a high-opprtunity neighborhood increases their income in adulthood - so much so that younger siblings experience bigger gains than their older brothers and sisters because of the additional years spent in a safer and more prosperous place."
Matthew Desmond makes a powerful call for "refashioning the American welfare state to support an aggressive, uncompromising anti-poverty agenda." In one section of his book, he calculates that it would take $177 billion in additional assistance to eliminate poverty in the United States and proposes a significant expansion of the Child Tax Credit to poor, working class and middle class families, confronting the affordable housing crisis by investing in new construction and public housing, and making deeper investments in public education and childcare and transportation infrastructure.
His suggestions for where the money would come from include a crackdown on tax cheats, raising the tax on corporations, and closing tax haven loopholes. Good as far as it goes, but Desmond misses totally the bonanza that would come from shifting money from the Pentagon to social programs. A recent WITW post shows just how much we forego because of excessive military spending.
Debt ceilings, war budgets, and poverty in America - May 23
And, in the link in the sidebar, Judd Legum summarizes a new report from Brown University's Watson Institute of International and Public Affairs on how decades of enormous military spending have reshaped the federal government and the US economy.
One story
One story
In Poverty, By America, Matthew Desmond tells stories of people he has met, who have either been failed by the system or who, given the opportunity, have risen above it. One such story is about Julio, a permanent resident from Guatemala living in Emeryville, California.
In 2014, 24 year-old Julio was working 80 hours a week at two full-time minimum-wage jobs to pay for the unfurnished apartment he was sharing with his mother and two younger siblings. He began his day on the 10pm to 6 am shift at a 24-hour McDonald's, rested and showered in the two hours before he started his second full-time job going wherever the temp service sent him from 8 am to 4 pm. Sleeping as much as he could, he then went back to McDonald's at 10 pm. As might be expected, this could not go on forever. One day, Julio fainted in a grocery aisle and was carried out on a stretcher.
In May 2015, the Emeryville City Council voted to raise the city's minimum wage to almost $16/hour by 2019. When Desmond spoke to Julio in 2019, Julio was earning $15-$16/ hour at his two current jobs and had managed to reduce his work week to "forty-eight hours when things were slow and sixty hours when they weren't. He slept more, took walks in the park. His health improved.
Julio is not an exception. Studies show that when poor workers receive a pay raise, their health improves dramatically, and that when the minimum wage is increased, rates of child neglect, underage alcohol consumption and teen births go down.
"Julio ended up on a stretcher, " writes Desmond, "because his employers paid him so little." Then he asks, "Did they have to?"
Notes:
*One such program already in place in rural areas is the 502 Direct Loan Program, which has moved over2 million families into their own homes. The loans, fully serviced and guaranteed by the USDA come with low interest rates, and, for very poor families, cover the entire mortgage, eliminating the need for a downpayment.
**Overdraft fees in the UK and Israel are one-tenth what they are in the United States. In the 1980's, I was working in Scotland. When once I spent over the balance in my checking account, my bank, rather than charging me for an overdraft, simply sent me a notice that balance was under zero.
***The IRS estimates the country loses $1 trillion per year in unpaid taxes, primarily through tax avoidance schemes by corporations and wealthy families.
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