The War on Poverty at 50

Today marks the 50th anniversary of the War on Poverty, a set of federal policies that President Johnson announced in his 1964 State of the Union Address. This anniversary provides us with the opportunity to consider the impact and implications of safety net and social insurance programs at a time when poverty persists and inequality is increasing. Nonetheless, anti-poverty programs have significantly improved the lives of millions of Americans and have had important long-term benefits.  

Building on the Great Society’s Legacy

President Johnson’s original War on Poverty was part of his ‘Great Society’ initiative and included major programs such as Medicare, Medicaid, Head Start, federal funding for public education and college loans, and expanded and permanent food stamp program, and expanded social security benefits. Today, these programs are complemented by more recent policies that share the goal of reducing poverty and providing economic opportunity for the working poor. These programs include the Earned Income Tax Credit, the Child Tax Credit, and WIC, which helps improve nutrition for young children and their mothers.

In addition, many original great society programs have been expanded. Maryland is one of 26 states to expand Medicaid under the Affordable Care Act, saving money in the process, while the original food stamp program has become the Supplemental Nutrition Assistance Program, or SNAP.

Evaluating the War on Poverty

While anti-poverty and social insurance programs do much to improve people’s lives, that 50 million Americans, including 13 million children lived in poverty in 2012 is evidence that there remains much work to do to foster broad prosperity. However, we cannot simply view the persistence of poverty as evidence that government programs to alleviate it are ineffective. Instead, we must consider how these programs not only improve people’s lives but keep more people from falling into poverty.

One method of doing so is the Census Bureau’s Supplemental Poverty Measure. In contrast with the official national measure of poverty that is used to calculate the Federal Poverty Level and is based on narrow measures of income and expenses to determine whether individuals and families make enough money to satisfy their basic needs, the Supplemental Poverty Measure seeks to account for both the full range of expenses that Americans face as well as the benefits they receive from the government. The Supplemental Poverty Measure takes into account both cash income as well as non-cash and tax-based benefits, such as SNAP, the Earned Income Tax Credit, and rental assistance.  The Supplemental Poverty Measure also seeks to more fully account for the range of expenses that individuals and families face such as income and payroll taxes, out-of-pocket medical expenses, and child care, as well as geographic differences in living costs.

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When measuring poverty using the Federal Poverty Level, poverty has increased slightly from 14 percent in 1967 to 15 percent in 2012. But a new study by researchers at Columbia University applies the Supplemental Poverty Measure to this time period, and finds that safety net and social insurance programs have contributed to reducing the percentage of Americans in poverty from 26 to 16 percent between 1967 and 2012. Further, the authors argue that the safety net has been particularly important in keeping children and senior citizens out of poverty, as the Supplemental Poverty Rate fell from 29 percent to 19 percent among children, and it fell among the elderly from 47 percent to 15 percent.  

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But more than keeping individuals and families out of poverty, these programs have important long-term effects as well. For example, a recent study by the National Bureau of Economic Research of the nationwide expansion of nutrition assistance in the 1960s and 70s found that poor children who had access to food stamps (and whose mothers had access during their pregnancy) were less likely to have stunted growth, heart disease, or be obese later in life than those without access to nutrition assistance. Children whose families received nutritional assistance were also more likely to graduate from high school. More broadly, access to health insurance through public programs, especially Medicaid, have reduced infant mortality considerably.

The Columbia Supplemental Poverty Measure study also addresses the expansion of the safety net that occurred in the wake of the great recession, including additional tax credits, extended unemployment benefits and a more generous SNAP program, in keeping poverty stable during this time. Had the safety net not been expanded to address the recession, the study’s authors argue that poverty would have increased by 5 or 6 percentage points. This is particularly noteworthy as some policy makers at the national level are refusing to extend emergency unemployment insurance and seek to further cut SNAP assistance even after the post-recession expansions have expired.

More Work to Do

But the persistence of poverty, by any metric, is important as well, and is indicative that despite the importance of safety net and social insurance programs, economic conditions have worsened for those with low incomes. The percentage of men who are employed has decreased from 87 percent to 74 percent since President Johnson’s began the War on Poverty and long-term unemployment persists in the wake of the Great Recession. The struggling labor market plays a key role in the persistence of poverty. The poverty rate is 3 percent for those with full time jobs, and 33 percent for those that are not working, according to statistics provided by UC Davis. Thus, poverty persists because of the failure of government programs intended to end it, but jobs that might help workers escape poverty on their own are not there. 

But this story is not the same for all Americans since the start of the War on Poverty. During this time, the share of income gained by the top 1 percent of households has doubled, from 11 percent to 22 percent. Meanwhile, the share of income going to the bottom 20 percent has decreased. Clearly, wealth has accumulated unevenly since President Johnson sought to end poverty, hampering these efforts.

As Maryland's 2014 legislative session begins today, we will be keeping track of how proposed laws can reduce inequality and foster broad prosperity for all Marylanders. Check back here for more on the War on Poverty and the work that remains. 

Graduation, Education, and Sequestration

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With all of the June graduations around Maryland, it's a good time to think about our investments in children and their education.

The American Prospect recently issued a special report that examines the effects of the economic downturn and America’s budgetary reactions on the nation’s youth. In its first article, “The Children of the Great Collapse,” Jared Bernstein looks primarily at the national effects of sequestration on low-income children and families, with additional commentary about how further cuts in Paul Ryan’s budget proposal could make matters worse. Bernstein explains that while the helpful stimulus of the Recovery Act prevented millions of children from slipping into poverty during the height of the Great Recession, now that the apparent crisis period is over and this aid to individuals and states has long been spent, working-class Americans may actually suffer worse now in the period of “economic recovery,” as wages and opportunities stagnate.

The emerging effects of sequestration and other Congressional budget fights push attainment of the American Dream farther away for low-income citizens by reducing the possibilities that come from a robust education system. Funds for public schooling have declined for the very beginning of a poor child's education up through the college level. The sequester’s automatic spending reductions cut roughly five percent of federal funding for Head Start. That may not sound severe, but the National Education Association estimates this will reduce access to public preschool programs for roughly 50,000 American children. Over 13,000 Maryland children took part in the program last year, and in most counties, over 90 percent of children eligible for the program were enrolled. This blind budget cutting will reduce access to early education for low-income families and will leave many children unprepared to start their education.

Local K-12 education also feels the pain of these budgetary contractions since, as Bernstein points out, federal aid to local schools makes up over eight percent of the sequestered federal dollars. Much of this money would have targeted schools in low-income communities. As for higher education funding for low-income young adults, if the Ryan Budget became law, funding for the Pell Grants that help millions of college students afford higher education would be frozen at current levels, while tuition around the country rises.

All this comes as Maryland has made progress in educational achievement among its low-income students, according to Education Sector, a nonprofit, nonpartisan think tank on education policy. The organization’s recent special report studied students’ scores on the National Assessment of Educational Progress tests between 1995 and 2009. It shows that Maryland has made more progress than any other state in improving achievement in reading and math scores of free-and-reduced-price-lunch eligible fourth and eighth grade students. The state raised scores of its economically disadvantaged students on average by more than 50 points. That is nearly twice the national average for improvement. It indicates that these Maryland students have attained an increase in nearly two additional years of learning. 

Cuts to school aid risk derailing the state’s trajectory in this area.

Sequester supporters in Washington argue that this austerity move helps reduce “government waste” and will result in a leaner, more efficient government. Local critics of government stewardship of public funds point to Baltimore City’s school system, which has been in the news recently after a federal audit uncovered some extravagant and unnecessary spending. 

Of course, in both good and bad economic climates, school system officials need to use the public dollars they are allocated wisely and responsibly. And of course when they do not, they must be held accountable. However, despite these sensational findings, evidence shows that our public school dollars are improving teaching and learning in classrooms around the state, and we are getting results that will help Maryland’s economy, communities, and families for a generation to come. We’re getting a great return on our investment in education. Now is not the time to divest in our future.

Sequester Update

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Three months into sequestration, effects have started surfacing from the first round of remarkable and random federal cuts to discretionary outlays. According to a poll this week by ABC New/Washington Post, the sequester now directly affects the lives of almost forty percent of Americans to some degree, and half of those affected claim substantial personal injury from this $85 billion slash in spending.  How this expenditure reduction will specifically affect Maryland’s residents remains uncertain, but a report released Wednesday by the Economic Policy Institute (EPI) that analyzes the net change to states’ federal grants sheds some light on possible consequences for the state’s budget.

According to the issue brief, while sequestration reduced total federal grants to states by $5.1 billion overall in 2013, Maryland fared better than average, receiving a $44 million increase in its federal aid (which represents a 0.5 percent increase relative to the 2012 funding level). The report provides state residents some reason for optimism, but this analysis does not suggest that Maryland as a whole has dodged the fiscal bullet. While the net effect on federal aid to the state may show an increase, some support for programs such as housing assistance, Meals on Wheels, and Head Start has waned. The state has also seen a $3.4 million decrease in federal support to administer unemployment insurance, according to a study by Pew. Many nonprofits in the state face grant reductions, with some shedding staff as a result; others yet to be hurt by the sequester see their own cuts looming next year. Additionally, a full seven percent of Maryland’s workforce is employed by the federal government, and many major agencies have issued furlough orders.  The economic effects of these lost wages will inevitably ripple through the economy.

Results for other states were mixed. Virginia likewise saw its grants grow (up $271 million, or 2.7 percent from last year), while others in the region like the District of Columbia, Pennsylvania, and Delaware suffered millions of dollars in federal revenue losses. EPI attributes the difference in states' outcomes to the mechanics of the sequester— it only reduces spending on discretionary programs, so states with increases in beneficiaries under mandatory spending formulas saw grants expand amidst this great spending contraction. Overall, 25 states experienced reductions in federal grant funding that will decrease their ability to provide public goods such as infrastructure, education, and social services for elderly and low-income residents.

Sequestration and its effects are far from over, as Evan Soltas of Bloomberg News points out in his blog post this week, reminding Americans that another $92 billion in cuts await us in 2014, and a portion of the spending reductions from this year have yet to go into effect.