The Unfinished War on Poverty

July 5, 2012 at 11:17 am

Fifty years after Michael Harrington’s groundbreaking book, The Other America, shed light on widespread poverty in the United States, Demos, CBPP, and the Georgetown Center on Poverty, Inequality, and Public Policy will hold a conference next Tuesday where we’ll examine factors affecting poverty today and promising strategies for lifting and keeping Americans out of poverty.

With that anniversary in mind, we thought we’d take a look at the important role that public benefit programs have played in reducing poverty.

In his 1964 State of the Union, President Lyndon Johnson announced an “unconditional war on poverty in America.”  That same year, Sargent Shriver, a key Johnson advisor on poverty issues, argued that we could set 1976 as “the target date for ending poverty in this land.”

We made enormous progress during those years.  The poverty rate under the official measure of poverty, which counts only cash income, fell by half between 1959 and 1973, from 22 percent to 11 percent.

Despite these early and impressive successes, millions of Americans today live with incomes below the poverty line.  A major reason why we didn’t make even more progress is that beginning in the mid-1970s, economic growth no longer meant rising incomes for everyone.  That was a sharp change from the previous post-war years, in which a growing economy led to a roughly similar rate of growth in family incomes whether one was poor, middle class, or wealthy.

Research by economist Sheldon Danziger of the University of Michigan’s National Poverty Center indicates that if the relationship between economic growth and median earnings growth from 1959 to 1973 had continued in the years after 1973, official income poverty would have fallen to very low levels.  It’s clear that the surge in income inequality was an important factor in impeding progress.

The growth in inequality has made government’s role in fighting poverty even more important.  Public benefits delivered through benefit programs and tax credits are very effective (see chart), lifting about one in ten Americans out of poverty each year.  We all need to do more, however, if we are to reduce poverty further.

My colleague, Arloc Sherman, using a measure of poverty that is more comprehensive than the official measure and includes non-cash benefit programs and tax credits, finds that public benefits cut poverty nearly in half in 2010, despite the deepest recession in generations.

Widely shared economic prosperity is critical for poverty reduction, and the growth in income inequality is now placing added importance on public benefits and tax credits in keeping poverty from climbing still higher.

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More About Indivar Dutta-Gupta

Indivar Dutta-Gupta

Indivar Dutta-Gupta joined the Center as Policy Advisor in January 2011. His work primarily focuses on federal budget and tax policies and cross-cutting low-income issues.

Full bio | Blog Archive | Research archive at CBPP.org

3 Comments Add Yours ↓

Comments are listed in reverse chronological order.

  1. 1

    Indivar,

    You note that LBJ declared a war against poverty in 1964 and that 1976 was set as the year for its elimination, and go on to claim that “enormous progress” was made during those years. As evidence, you point out that poverty “fell by half between 1959 and 1973, from 22 percent to 11 percent.”

    But why are you using 1959 as the starting point? Wouldn’t it make more sense to use 1965, given that the first elements of the War on Poverty weren’t passed until late August of 1964, with a presuming lag of at least a few months until the new government agencies created by the Economic Opportunity Act were up and running?

    Also, later in the post you assert that “It’s clear that the surge in income inequality was an important factor in impeding progress.” Can you please expand on this? How does one person getting rich, thus increasing income inequality, consign another person to poverty? What is the relationship?

    Thanks.

  2. Jack Underhill #
    2

    It is not clear what you are including in the red line because last poverty numbers (2010) are 46 million, not the 80 million you show. The current poverty number excludes non-cash benefits and tax rebates, but includes cash welfare. Need more detail. the supplmental povery measure is higher at 49 million, but still nowhere near 80 muillion.

    • Indivar Dutta-Gupta #
      3

      Thank you for your comment. I am happy to clarify.

      Our red and blue lines both use a poverty threshold that is based on the National Academy of Sciences (NAS) recommendations, rather than the official poverty measure. To look at the impact of the government tax and transfer system on poverty rates, we took the NAS-based measure — which includes taxes (including tax credits) and transfer programs — and compared it to the same NAS-based measure, but without taxes (including tax credits) or transfer programs. The difference highlights the impact of the tax and transfer system on poverty rates. In other words, both lines in the graph use an NAS approach to setting the poverty threshold, but the red line excludes taxes and transfers, while the blue line includes them.



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