The War on Poverty's Surprising Winner
The War on Poverty's Surprising Winner
Good news that is rarely mentioned
Exactly 60 years ago President Lyndon Johnson used the State of the Union address to declare “unconditional war” on poverty, saying his goal was to help the “One-fifth of our people who have not shared in the abundance which has been granted to most of us, and on whom the gates of opportunity have been closed.” The federal government leaped into action, with The Economic Opportunity Act, Food Stamp Act, and Social Security Act all being signed into law in 1964-1965. The goal was ambitious: end poverty in the United States.
Since then a pernicious myth has developed that the War on Poverty has been a complete failure. Ronald Reagan said during his 1988 State of the Union that “the Federal Government declared war on poverty, and poverty won.” Others have declared the War on Poverty was worse than useless, and contend that some government welfare programs have instead entrenched poverty. It’s easy to understand that viewpoint. Especially in the last 10 years, the opioid epidemic has raged throughout the United States, killing hundreds of thousands and throwing millions into addiction. Homelessness has increased markedly in many American cities. Turn on the news, and things certainly seem to be getting worse.
The truth, however, is far different. First, consider the official poverty rate that is calculated by the Census Bureau:
When President Johnson declared war on poverty in 1964, about 19.5 percent of Americans were living below the official poverty rate. The beginning stages of the War on Poverty went very well. The poverty rate plunged from nearly one in five Americans to one in nine. Unfortunately, that’s when progress stopped. Since then, the official poverty rate has never dropped significantly below its 1973 trough. It seems like 10 percent is an unassailable wall that will never be breached.
The problem is that the official poverty rate is a garbage statistic. Since the 1960s, massive government programs have been established that aid the poor. Low-income Americans receive subsidized housing, healthcare, and food. None of those programs count towards “income” as far as the Census Bureau is concerned. A family of four with a 2023 income of $25,000 that receives $3,000 worth of food stamps, $12,000 worth of free housing, and $20,000 of free healthcare is viewed as identical to a 1963 family of four with the same (inflation-adjusted) income but with none of those additional government programs. The result is that government welfare programs seem to have a very small effect on the official poverty rate - because they aren’t even counted! Social Security is one of the only large government programs that is counted towards the poverty rate because social security distributes money rather than targeted assistance.
Why the Census Bureau insists on doing this is beyond me. One can certainly make the argument that having a consistent statistic that is calculated the same year after year has value. That’s fair enough. Also, determining the value of “in-kind government transfers”, that is, transfers that are not cash but things like food stamps and housing vouchers, is not straightforward. Subsidies are not equivalent to straight cash. Obviously, a $100 bill is more valuable than $100 worth of food stamps. But to discount these programs entirely makes no sense. In 2022 the US government spent trillions on in-kind welfare programs. $747 billion on Medicare, $592 billion on Medicaid, $581 billion on Income Security Programs, etc. These are government spending programs that have no equal in recorded history.
What happens when in-kind government transfers are included when measuring the poverty rate? It plummets. Again, these programs are huge. Receiving free or largely subsidized food, housing, and healthcare is an enormous boon to low-income families. Take a look at the new poverty rate, “Absolute Full-Income Poverty Rate” that Burkhauser et al. calculated:
Far from the War on Poverty being won by poverty, the opposite is true. Poverty has been shellacked. The poverty rate has dropped from 19.5 percent to 1.6 percent. That is an astonishing achievement. It's a victory that should be celebrated, and certainly not one that should be ignored, or worse yet, a victory that should be declared a failure.
There are, of course, a few caveats. First, none of this provides evidence that Johnson’s War on Poverty programs worked. As already stated, some economists believe that anti-poverty programs have entrenched poverty. The drop in poverty could be because of Johnson’s anti-poverty programs, the growth in the US economy, or (most likely) some combination of the two. Second, relative poverty, which the authors define as those who make 55 percent less than the median income, has remained stubbornly high. As the graph above shows, it fell from around 19.5 percent to 16 percent in the first 15 years of the War on Poverty, but has remained largely unchanged in the 21st century. In other words, inequality has remained largely unchanged. The percentage of Americans who are poor relative to the typical American has not improved much over the last half-century. This is probably what creates the disconnect between what people see around them and the statistics. If poverty is viewed as a relative wealth, it will never be eradicated. There will always be a large distribution of wealth across a capitalist society. The government can take steps to reduce inequality, but that can come with a high cost.
I think it’s more important to view poverty from an absolute level. By the standards of the 1960s, the lowest 20 percent of Americans are doing incredibly well. The vast majority of Americans live at a significantly higher level today than 60 years ago. It’s easy to forget how modern a lot of amenities we take for granted today are. In 1960, one in six American homes didn’t have indoor plumbing. Today the number is one in 250. Should we increase our poverty standards going forward, especially given today’s level of wealth to redefine poverty? Perhaps. But when comparing today to the past, it’s important to use the standards of the past. Doing so shows that the US has made tremendous strides.
It’s a victory worth shouting from the rooftops.
Note: This post owes a great debt to the wonderful NBER working paper: “Evaluating the Success of President Johnson’s War on Poverty: Revisiting the Historical Record Using an Absolute Full-Income Poverty Measure” by Richard V. Burkhauser, Kevin Corinth, James Elwell, and Jeff Larrimore (subsequently Burkhauser at al. 2021). Find the paper here.