New evidence shows that our anti-poverty programs, especially Social Security, work well
Few U.S. government efforts are consistently more vilified than anti-poverty programs. They’re dismissed as ineffective and ridiculed as giveaways to undeserving recipients.
A new paper puts the lie to these assertions by showing that the nation’s most important anti-poverty efforts all succeed in serving their goals — in the case of Social Security, spectacularly. The authors, Bruce D. Meyer and Derek Wu of the University of Chicago, used administrative statistics from six major programs to demonstrate that five of the six “sharply reduce deep poverty” (that is, income below 50% of the federal poverty line) and the sixth has a “pronounced” impact among the working poor.
The programs that reduce deep poverty are Social Security; Supplemental Security Income; Temporary Assistance for Needy Families (TANF), which is what commonly is known as “welfare”; housing assistance; and food stamps, or SNAP. The sixth is the Earned Income Tax Credit, which helps mostly families that earn around 150% of the poverty line. (That line is about $25,100 in annual income for a family of four.)
The claim that poverty hasn’t gone down since the start of the war on poverty is nonsense.
Bruce D. Meyer, University of Chicago
Share quote & link
In each case, Weber and Wu found that the effect of each program has been materially underestimated by traditional measurements. That’s because the earlier estimates are based on Census Bureau surveys that underreport benefits from these programs. As a result, the authors say, the effects of food stamps and TANF are underestimated by one-third to one-half, and the impact of Social Security is underestimated by as much as 44%. Their research covered 2008-13, the period of the Great Recession.
“You don’t want to say that our programs haven’t reduced poverty,” Meyer told me. “They’ve had huge effects in reducing poverty.”
These findings are important because all these programs, with the possible exception of the EITC, come under constant attack by budget-cutters and other conservatives. The claim is that, despite the expenditure of trillions of dollars in public funds, the poverty rate has barely budged in more than a half-century.
Ronald Reagan’s quip on the topic, from his 1988 State of the Union address, has adorned reams of Republican screeds against the safety net: “The federal government declared war on poverty, and poverty won.” Republicans have exploited the notion to support proposals to cut program benefits, turn anti-poverty efforts over to private or philanthropic organizations, or block-grant the funds to states (a back-door means of cutting benefits).
The truth is, however, that poverty has lost. Meyer and Wu find that Social Security alone has reduced poverty among the elderly by 75%; the other programs do more for non-elderly households, though at lower rates.
The paper doesn’t specifically address the programs’ effect on the poverty rate, but Meyer has examined that effect in other research. In a 2012 paper with James X. Sullivan of Notre Dame, for example, he concluded that the official poverty rate failed to count tax credits received by needy households such as the EITC, and overlooked food stamps, housing benefits, and other in-kind transfers that have become an ever more important component of anti-poverty spending.
An inflation index that overstated price increases over time also tended to minimize the success of the war on poverty, as did a focus on household income rather than consumption, which Meyer and Sullivan suggested was a better indicator of a household’s standard of living.
The official measurement indicated that the poverty rate fell by a scant 4.4 percentage points from 1960 to 2010, ending at 15.1%. Adjusting for flaws in the measurement however, Meyer and Sullivan determined that the percentage of Americans living in poverty had fallen by more than 26 percentage points, to about 4.5%.
“The claim that poverty hasn’t gone down since the start of the war on poverty is nonsense,” Meyer says. “You can see there were big reductions in poverty over time due mainly to two things — all the transfer programs we’ve added such as SNAP, TANF, SSI, expanded Social Security, and housing benefits — and because the economy has grown.”
The findings of Meyer and Wu give a hint of what’s at stake in the debate over the federal safety net. It’s often pointed out that the elderly are among the economically best situated Americans. But for many of them — especially the lowest-income seniors — their economic status is dependent on Social Security.
“Most people who are very low-income and retired are getting almost all their income from Social Security,” Meyer says. “If you took it away, a lot of them would be below the poverty line.” To put it in terms of the paper’s specific findings, three-quarters of the elderly who would live below the poverty line are raised above that line by Social Security.
Meyer doesn’t think that all our anti-poverty programs are equally effective or well-designed. “It’s fair to say that we could try and encourage work more,” he says. “Even the poor prefer to have a job than to be on the dole. Support for work or even provide public service employment for those who can’t find a job would be improvements.”