Redefining Poverty

There is a problem of definitions in American politics.  Although not a new phenomenon, it is unfortunately one that is rarely discussed.  In many instances, challenging the accepted political definition of certain words leads to harsh, acerbic, and often unwarranted attacks by those who wish to defend a political definition for their own partisan uses.

In a recent report, the Heritage Foundation has courageously taken a stand against the definition of one of these words - "Poverty".  The abstract to the full report states the following:

For decades, the U.S. Census Bureau has reported that over 30 million Americans were living in “poverty,” but the bureau’s definition of poverty differs widely from that held by most Americans. In fact, other government surveys show that most of the persons whom the government defines as “in poverty” are not poor in any ordinary sense of the term. The overwhelming majority of the poor have air conditioning, cable TV, and a host of other modern amenities. They are well housed, have an adequate and reasonably steady supply of food, and have met their other basic needs, including medical care. Some poor Americans do experience significant hardships, including temporary food shortages or inadequate housing, but these individuals are a minority within the overall poverty population. Poverty remains an issue of serious social concern, but accurate information about that problem is essential in crafting wise public policy. Exaggeration and misinformation about poverty obscure the nature, extent, and causes of real material deprivation, thereby hampering the development of well-targeted, effective programs to reduce the problem.

The report continues by discussing the standard of living experienced by most "poor" Americans and how high these are, both in historical comparisons and vis-à-vis other countries.  It makes the key argument that there is a need to separate the truly destitute (eg. those that chronically lack shelter, food, or clothing) from those that are just defined as poor.  Due to limited resources, this expansive definition of poverty has not only injured the truly destitute but provided for those that are arguably not needy.

The U.S. Census Bureau, which determines the poverty thresholds, bases their calculation of these thresholds on a 1963 study that looked at the Department of Agriculture's low cost food plan.  Surprisingly, it was not designed to reflect the daily needs of an individual or family.  "...[They] did not develop the poverty thresholds as a standard budget... a list of goods and services that a family of a specified size and composition would need to live at a designated level of well being." 

While the Census Bureau's "poverty thresholds" are only used for statistical purposes, the Department of Health and Human Services (HHS) further complicates issues by setting forth "poverty guidelines" for administrative purposes.  While these are generally based on the Census Bureau's numbers they are modified for various programs (for instance scaled up by some percentage).  These guidelines are what are used in most welfare programs.

Arguably both the Census Bureau's and HHS's definitions are exceedingly arbitrary.  As the Heritage report empirically supports, far too many are able to achieve substantial luxuries while nevertheless being deemed poor by the government.

A secondary source of definitional challenge comes from politicians who often use the term "poverty" in a relative sense.  A relative definition of poverty signifies that poverty is determined by some distance from a measure of "middle-class" - for instance the median income. This necessarily implies that the problem of poverty can never be solved, unless all incomes become very narrowly distributed around a median income.  Taken to its logical conclusion, in some perverse world, poverty could easily be eradicated by evaporating the wealth of the richest in a country without any concomitant change in the position of the poorest. By thus diminishing the "wealth gap," relative poverty would no longer exist. Obviously such a precept is laughable - no state would be better off by removing wealth from society - but it nevertheless is the natural conclusion of a doctrine of relative poverty.  In reality, "relative poverty" is nothing but a euphemism for "income inequality."

Instead, poverty should be measured in relation to what a person needs to achieve certain necessities, such as food, shelter, and clothing. By using an such an absolute measure, poverty is defined by essential characteristics not an arbitrary statistical formulation or relative comparison. This is undoubtedly a more just definition of poverty and puts the state in a better position to provide resources to alleviate poverty. It also provides proponents of the welfare state with a better position from which to defend the need for state assistance in eradicating poverty.

[By claiming the American definition of poverty is wrong, one does not mean there are not people who truly are in need, nor that there are not those who are truly poor in America.  But it does imply that a changed definition can have significant implications for welfare policies.]

It is to be expected that vested interests will attempt to avoid any discussion, let alone any changes to the definition of poverty.  Expansive definitions of poverty allow numerous constituents (particularly but not exclusively of the Democrats) to gain benefits at the expense of others.  It is unlikely that recipients of handouts (whether low- or high-income) will be willingly to abdicate their lucrative positions.  This is unfortunate and unfair.  In such times of economic difficulty and budgetary disorder it is necessary to carefully study if our current definitions and resulting policies have stepped beyond what is appropriate and into the realm of social and economic largess.

Arguably, much of our welfare state has become a system of wealth redistribution rather than a social safety net.  This is not so much a critique of the concept of the welfare state but of its abuse to fulfill abstract notions of social justice.  As Heritage points out, our working definition of poverty has become one much more about "income 'inequality'" than one of need.  This has arguably caused the state to venture far outside of its appropriate bounds and has indubitably contributed to our expanding fiscal woes.  According to the authors of the study, "President Obama plans to make this situation worse by creating a new 'poverty' measure that deliberately severs all connection between 'poverty' and actual deprivation... giving the President public relations ammunition for his 'spread-the-wealth' agenda."  A redefinition of "poverty" to more accurately reflect individuals' needs may not only help alleviate America's budgetary problems but allow a misappropriation of the system to revert to its moral underpinnings.

Welfare Moms and Bailout Banks

Unfortunately, it has become far too acceptable, in modern American society, to expect government handouts. Through a long history of increased government assistance and programs, society has developed an inflated notion of entitlement. This problem is clearly seen in two nearly dichotomous phenomena in the news today- Nadya Suleman (the invitro-welfare mother of 14) and the economic bailout. In both instances, we see the excess of government “entitlements” run rampant.

The key parallel is that in both instances the government is serving as an enabler of poor behavior. By serving as an overinflated safety net, the government is encouraging future individuals or groups to behave in a similar fashion. Clearly, Suleman has seen no incentive to stop having children despite her past (and current) status of being on welfare (which she ironically denies is welfare). Likewise, what incentives will future investment bankers have to avoid taking on too much risk (or more properly, mispricing risk)? The government’s actions today essentially limit the downside risk an individual or group can face. This risk assessment is naturally a huge factor when an individual or group is making a decision. If they foresee less risk, because they know the government will bail them out, they will be more willing to make risky, poor decisions. This in turn spirals downward, increasing the role of the government and negating the individual’s personal responsibility.

Do not make the conclusion that I am calling for a complete end to social welfare or that I believe the government should completely be laissez-faire in dealing with the economic crisis. I don’t believe either. What I do believe is that government policies should be more principle-based (rather than rules-based). This is particularly true in the case of welfare. Abuse of the system should be punished harshly; thereby, precluding people from taking advantage. Welfare should only be available to those who absolutely need it AND who are taking steps not to need it any more. Abusers such as Suleman should not only be precluded from collecting any form of government aid but should be punished for their abuse. It would be worthwhile to consider charging her with child abuse (in regards to her current children and for purposefully and irresponsibly bringing 8 new children into the world when she does not have the means to support them). [The doctor who performed the procedure should at a minimum have a moral, if not a legal responsibility, not to perform elective procedures that will become a burden on the state- but this is a separate discussion]. Government resources should be used for the truly needy, in a more discretionary fashion that allows greater scrutiny in distinguishing between abusers and the truly disadvantaged.

Likewise, the economic bailout needs to be focused in more general fashions. I do believe that the government has a role to play in righting the economy. But, it does not mean just throwing away money to failing industries. The auto industry is a prime example. Giving a largely unrepentant, inflexible, and poorly structured industry a vast some of money only incentivizes it to continue its broken ways. What reason would GM have to make radical new changes if it gets money when it messes up? Furthermore, by supporting the old dinosaurs we squash the new upstart innovators that may have better and more efficient products and methodologies (and those we don’t squash will just set up shop in other countries). There will certainly be costs if the auto industry fails- but a few short term costs are much better if they enable a long term fix. We suffer more harm by building on a broken foundation rather than just tearing down the building and starting anew. (This is partially our own fault by having policies which encourage anticompetitive industries that are too heavily reliant on two or three companies).

The bottom line is that the government has to step back- let people and corporate entities fully assess the risk of a situation without the promise of bailout from Uncle Sam. If each actor knows they might have to fend for themselves, they’ll take the appropriate responsibility to make sure they are heading down the right path. Maybe it is simply tough love- after all, we would all ridicule a parent for doing their child’s homework because the child struggles. Sometimes failure is necessary to ensure that individuals learn the correct way to act, and thereby prevent future failure.