Poverty in America

The Economist included one of its excellent special reports last week, this time on the subject of poverty in America – meaning the US. I found the report enlightening and thought provoking, but also perhaps with a few gaps.

My first takeaway from the report was just how many archetypes of poverty exist in the US. The report looked into former mining communities in Appalachia and black towns in the Deep South. It also highlighted smaller cities in the rust belt, such as Youngstown, which have lost their only significant employer and seen a drain of resources ever since. Then there is urban poverty, both in struggling cities such as Detroit and in generally thriving ones like New York. In the latter it is possible to get a job, but sometimes not one paying enough to escape a life of constant hustle and rent arrears, mainly due to the lack of affordable housing. Then there are Native American communities, hidden places of suffering out of the public view.

We can add a few more categories. There are many people with outwardly affluent lives but who are riddled with debt and with no feasible way out. Addicts, of opioids or alcohol or anything else, have a similar prognosis. Often, people from these latter categories are hidden in plain view.

While it is hard to get a full picture, I have managed to observe people from many of the categories. Last week I was in Europe, and they exist there too, but somehow I get the sense that the numbers are smaller and the plights usually less desperate.

Other reading tells a similar story. I am still haunted by the book “Evicted”, about the poverty trap in Milwaukee. I also read a long article last week about workers on a tipped minimum wage. While we all read about the regular minimum wage and cheer that it is finally shifting upwards in many cities, we are rarely reminded that workers designated as tipped staff do not qualify; indeed the federal tipped minimum wage has remained unchanged at just over $2 per hour for decades, and over the bridge in New Jersey it is just over $2.50. In a poor town, many folk on that wage will work at a  down-at-heel diner, where tips will hardly be abundant. 

My instinct is supported up by the second takeaway from the Economist report. Data confirms the US to be an outlier among rich nations. Despite the official definition for income poverty being much lower than elsewhere, the US has a higher proportion of poor people than its peers. To be classed as poor in the US, you have to be very poor indeed. By the definitions of poverty in most of Europe, over a third of US households would be classed as poor. That is one large contingent of households, of voters, of misery and of lost opportunity.

My next takeaway from the Economist report is that it seems that not enough people care about poverty in the US. Otherwise, why is it so large? Why is that I watch Democratic presidential debates, and there is little discussion of poverty? Instead there is an emphasis on particular programs, such as higher minimum wages, universal healthcare and eliminating student loans.

While all of these would reduce poverty, they are not well targeted. A high federal minimum wage would work in affluent cities, but be wrong in poorer places where the cost of living is lower – there it would probably reduce employment. Universal healthcare would be good, but the bigger issue with healthcare is its overall cost to the economy, due to monopolies and poor incentives. And student loans are irrelevant to most of the poor, and eliminating them would on balance subsidise richer people with better prospects.

Sadly, I reach the conclusion that reducing poverty would be great policy but is currently seen as bad politics. The reasons for this are depressing. The most prevalent is that Republicans have managed to sell the line that a lot of poverty is due to individual laziness or bad character. The Economist report demonstrates plainly that this is rubbish, but the notion makes it hard for Democrats to champion poverty reduction as a goal – they can be painted as promoting handouts for the undeserving.

Then there are other Democratic calculations going on. I suspect that the reason they don’t highlight the tipped minimum wage is that they rely on donations from businesses that exploit it and from the organisation representing the minority of tipped employees who do very well from tips. A more defensible possibility is that they realise that grand federal programs are not the best way to address poverty, yet grand federal programs are all the news media wants to hear about. Lastly, there is the calculation that poor people don’t usually vote.

Perhaps this is a major missed opportunity. The media like grand federal programs, but even more they like grand federal goals, and eliminating poverty would be a powerful one. It is the antithesis of everything the Trump administration stands for. It would lead to many practical policies. And it might enthuse voters. A good argument can be made that poverty drives outcomes that swing voters really do care about such as crime.

The Economist report argues that Lyndon Johnson won an election on precisely that messaging back in the 1960’s. It also shows the good and bad side of what happened next. Civil rights were improved, and programs of Medicare and Social Security lifted a lot of people out of poverty. These policies were good for their time, but they ended up helping older people on average, and the policies failed to evolve to meet other needs. The Economist makes a compelling argument that the primary focus of a new federal goal should be children. That would even help the political marketing, because not even Republicans argue that poor children are undeserving.

It appears that Elizabeth Warren has an almost unstoppable path to the Democratic nomination. She is a master of detail, with a catchphrase of “I have a plan for that”. The problems are that big goals can get drowned out by all the detail, and that many plans feel more like nasty retribution towards the wealthy than anything more worthy. An umbrella goal of eliminating poverty within a generation and child poverty within fifteen years could alleviate those problems. It is positive, exciting and completely differentiated from anything Trump has to say. The many existing plans can fit neatly under the umbrella, while the umbrella helps with prioritisation and also indicates suitable policies locally. Cities need reformed housing support and more housing supply; struggling smaller cities need regeneration plans; the Deep South needs quality education for all. As a result, her campaign can focus on meaningful policies in swing states and districts.

Trump may often seem to be imploding but his message is simple and his base seemingly robust to anything. Warren is a powerful candidate, but is vulnerable to appearing vindictive and geeky. The Economist report on US poverty might have revealed an opportunity to give her a better chance of winning, and then a better chance of implementing good policies. We can all pray for those outcomes.