Being Poor in America

The federal poverty line for a family of four in 2011 is set at $22,350. Each state has a lower or higher number, depending on their cost of living adjustment. According to the federal government, 35 percent of the poor are children. This is an interesting data to ponder since children do not live alone, do not earn an income, and few are likely to have accumulated wealth. If they do, they cannot touch it until they become of age. The 2010 Census Bureau’s exaggerated definition of poverty includes 40 million Americans in the category of poor. These families have air conditioning, TV, cable television, refrigerators, vacuum cleaners, XBOX game players, washers and dryers, a heated home, adequate shelter, and microwaves.

Progressives bemoan the homelessness, illegitimacy, drug dependency, and ill health of the poor. Conservatives argue that official data badly overstate the numbers because official definition should include free goods received such as education, public housing, healthcare, food, cell phones, and other assistance. If you ask ten individuals if they are poor, you are likely to get the same answer, yes, they are poor but for 10 different reasons. Some will actually say they are cash poor in the bank, some are cash poor in their pockets, some consider themselves poor because they do not own a home or the car of their dreams, some because they do not have enough scholarships or grants to go to college, others who do not have wealth, cannot go on vacations ever or as often as they want, or cannot retire to the golf range.

People confuse cash with income and accumulated wealth

People confuse cash with income and accumulated wealth. Cash is something on hand to spend, income is derived through hard work on a bi-weekly, monthly, or yearly basis, and accumulated wealth is either inherited or derived from hard work and entrepreneurship over time, taking risk with business ideas and investing capital to bring ideas to reality. The optimistic economic concept of poverty is absolute – if you fall short of a minimum standard of living, you are poor. If you pass this standard by one dollar, you are no longer poor. The pessimistic concept of poverty is relative – if you fall too far behind the average income, you are poor. Absolute poverty is obviously arbitrary. Who is to decide what is too far behind? I am sure Romanians would be very happy and would consider themselves prosperous to have much less than the poor in this country. Americans in the 1900s would have considered themselves rich to have what the poor in America have today. Poverty is determined culturally and is thus a relative concept. The European Union (EU) determines the poverty line to be half the average national income. If the EU becomes richer, the poverty line rises and thus people become richer.

Taking from the rich and give to the poor, the tenets of Marxism

The lines become blurred and thus poverty becomes income inequality, making progressives scream that we must bring about social justice, taking from the rich and give to the poor, the tenets of Marxism. Our market system does not guarantee income equality. Progressives write and talk ad nauseam about the distribution of income in the U.S. having grown substantially more unequal since the 1980s. Liberals demand that incomes be equal. If their demands were rational, they would understand that it is impossible, even under their beloved communism to have income equality. There are many reasons why incomes are unequal:

• People have different capabilities, some can do math quicker, speak better, run faster, ski better, type more accurately, paint better, have better entrepreneurial skills, better IQs, are more inventive, more creative, more musical than others
• People can work longer hours than others, labor more intensely – such disparities of income are largely voluntary
• People take risks with stock market, a new business – Bill Gates and Steve Jobs come to mind
• People work in dangerous jobs that are reflected in compensating wage differentials – people who work the night shift receive higher wages
• People who are schooled or better trained receive higher pay; they have sacrificed current income to study in order that they may receive a higher income in the future
• More work experience commands higher wages
• People who have inherited wealth do not necessarily derive their income from work – think of the Rockefellers
• People who inherit human capital wealth command higher wages – persons whose families have attended Ivy League colleges will likely benefit from this tradition and attend the same college, thus the process will result in higher wages for them.
• Luck is an insidious cause of wage differentials – good or bad fortune can help one digger to find gold or oil and other to find water or just rocks

People in general understand why incomes are unequal and find these variables rational. Liberals tend to find these differentials intolerable and “socially unjust,” claiming discrimination with every perceived wrong. Economic discrimination does exist and may or may not be deliberate. Economic discrimination is said to exist when “equivalent factors of production receive different payments for equal contributions to output.” In real life, it is difficult to decide when two factors of production are “equivalent.” It is not called discriminatory if a woman with a high school diploma receives less compensation than a man with a college degree. If a man and a woman have the same education but the man may have 10 years more experience than the woman does, and they receive different wages for this reason, is it discriminatory? If men and women were equally productive but received different wages, then that would be discriminatory. It is quite impossible to measure productivity in many white-collar jobs. To combat poverty, besides the obvious better education, the government implemented programs collectively called welfare such as Aid to Families with Dependent Children (AFDC), replaced by Clinton’s Temporary Assistance to Needy Families (TANF), food stamps (currently 40 million people are on food stamps, the highest on record), WIC, and Medicaid. The problem with these programs is that it encourages people to remain on the dole. As their incomes rise, they are taxed some and the incentive to work becomes quite weak. Furthermore, the more out-of-wedlock children they have in the absence of a father, the more benefits they receive. The Earned Income Tax Credit was also established to combat poverty. As earnings rise from zero to some threshold, the federal government supplements the earnings of the poor by giving them a grant proportional to their earnings. The EITC dates back to 1975 and it is now “America’s biggest income-support program, reaching over 22 million families.” The federal government, in its quest to control every aspect of our lives, made it illegal to discriminate. The Civil Rights Act of 1964 outlawed many forms of discrimination and established the Equal Employment Opportunity Commission (EEOC). Affirmative Action was controversial from the start and it remains so today. Many claim that it is insufficient “social justice,” while others claim that it is “numerical quotas and compulsory hiring of unqualified workers simply because they are female or minority.” Proponents argue, “affirmative action is needed to redress past wrongs and to prevent discriminatory employers from claiming that they are unable to find qualified minority or female employees.” Robert Rector of the Heritage Foundation states, “Census officials continue to grossly exaggerate the numbers of the poor, creating a false picture in the public mind of widespread material deprivation.” “Most news stories on poverty feature homeless families, people living in crumbling shacks, or lines of the downtrodden eating in soup kitchens,” Rector says. “The actual living conditions of America’s poor are far different from these images.”

Why is the federal government deliberately keeping a large portion of the U.S. population dependent on welfare

In spite of our escalating debt ceiling problems, we spend nearly one trillion dollars a year on welfare although many recipients are not the typical poor in need of government assistance. Many people on welfare and Medicaid drive up to pharmacy windows to pick up their prescriptions in brand-new expensive SUVs. In the recession of 2009, only about 4 percent of the poor became temporarily homeless. Rector and co-author Rachel Sheffield writes, “The media ‘amplified’ the Census Bureau’s annual misrepresentation of poverty over the past 40 years. News reports routinely suggest that poor Americans typically are homeless and hungry — and U.S. foes and rivals such as Iran, China, and Russia are delighted to report the same.” “Regrettably, most discussions of poverty in the U.S. rely on sensationalism, exaggeration, and misinformation,” Rector says. “But an effective anti-poverty policy must be based on an accurate assessment of actual living conditions and the causes of deprivation.” Are we then truly poor in the U.S. and why is the federal government deliberately keeping a large portion of the U.S. population dependent on welfare and other social programs while bankrupting the country with its out-of-control spending?