(By Capital Spectator) Poverty is a hardy perennial. But while no one will be surprised to learn that eradicating poverty is difficult, perhaps impossible, there was at least some modest progress over the last several decades. But now even that thin reed appears headed for the dustbin of history as the U.S. poverty rate looks set to return to heights last seen in the 1960s.
Decades of progress on lowering the U.S. poverty rate is evaporating before our eyes, or so some analysts say, based on expectations for the scheduled release of the Census data for 2011 later this year. A recent survey of economists by the Associated Press found that a "broad consensus" expects that the 2011 poverty rate may rise to as high as 15.7%, up from 15.1% in 2010. As the chart below shows (via the Census Bureau's "Income, Poverty and Health Insurance in the United States: 2010 report), the poverty rate rose for three straight years through 2010 and the data for 2011 is on track to make it four in a row.
There's no great mystery for explaining the reversal of fortunes that may raise the U.S. poverty rate to the highest since the 1960s, when the Johnson administration launched the so-called war on poverty program. The Great Recession, for obvious reasons, has set back the cause of prosperity by, well, years if not decades. It's disturbing, frustrating and disheartening all at once to realize that the nation, for all the money and effort spent on trying to reduce if not eliminate economic distress, has made no headway in more than 40 years on this front. That's an exaggeration, of course, but at least one statistic suggests that we've gone nowhere since a President with a Texas drawl was working the phones at 1600 Pennsylvania Avenue.
We can debate cause and effect, and dissect the finer points of policy prescriptions—and we should, as a nation. But first things first. According to AP:
Poverty is spreading at record levels across many groups, from underemployed workers and suburban families to the poorest poor. More discouraged workers are giving up on the job market, leaving them vulnerable as unemployment aid begins to run out. Suburbs are seeing increases in poverty, including in such political battlegrounds as Colorado, Florida and Nevada, where voters are coping with a new norm of living hand to mouth.
Considering the big picture inspires rethinking what's happened over the last several years. Volumes have been written on this vast topic, of course, and no doubt many more books in the years ahead will enlighten us. Meantime, a few thoughts from one observer of the macro scene.
First, President Obama, for all his efforts (informed or otherwise) to respond to the Great Recession, came up short. Maybe that was inevitable—Presidents are mortals, not gods. That said, the focus should have been, from day one, jobs, jobs, jobs. Yes, there was quite a lot of that early on in the Obama presidency, but he became sidetracked. Healthcare, for example. Whatever the pros and cons (and there are many on both sides) of attempting to reform the mess that is healthcare in this country, it should have taken a back seat to jobs, jobs, jobs. When you're faced with the worst economic crisis since the Great Depression, it doesn't take a rocket scientists to figure out where the policy priority lies.
The $787 billion fiscal stimulus enacted in 2009 arguably was a strong response to the economic crisis. But as critics have pointed out, the program's design was less than encouraging if the goal was to maximize job growth.
Beyond that, the White House seems to have lost focus on the jobs-creation topic. Yes, there's plenty of blame for Congress too--for Republicans and Democrats. In any case, it seems clear that the government's efforts overall at fostering a pro-growth climate for jobs creation has fallen well short of what's needed—then and now.
Monetary policy has been lackluster too. Without going into details at this point, let's just say that the Federal Reserve hasn't earned any accolades for doing all that it could have done (or could be doing now) to boost the prospects for economic growth and fostering jobs creation. (For some background, you might start with Paul Krugman's "Earth to Ben Bernanke" article or Scott Sumner's market monetarist analyses on his blog TheMoneyIllusion.com.
Hashing over the past, and what could have or should have been done, is a job best left to economic historians at this point. In the here and now, a burning question remains of what to do? Everyone has a prescription, and here's one more. Cut corporate taxes on anything and everything related to jobs creation. Cut it to the bone, if only for a year or two. A tax holiday to stimulate the hell out of private-sector jobs creation. Not on the margins, but boldly so. We need a bombshell jobs-creation program that's on par with taking the country off the gold standard in 1933 to inspire the captains of industry to invest in labor. Something similar should be applied for individual taxes as it relates to investing.
Ditto for monetary stimulus. The Fed should start targeting a higher level of nominal GDP in a very public and clear way. As Scott Sumner argued last fall:
Monetary policy is not an answer to structural policy problems. It cannot make up for a failure to control the growth of public spending or the explosion of entitlement costs. But it can do a great deal to help create a stable environment of consistent growth, and thus make the difficult structural reforms ahead both more effective and easier to tolerate. At the moment, our monetary policy risks making the hard task facing fiscal reformers all the more challenging. A Federal Reserve with its eyes firmly set on the right target would greatly ease their way.
What's clear is that half-hearted measures that pick around the edges of a very big problem won't do much. Been there, tried that, with disappointing results. It may seem like fiscal and monetary policies over the last several years have moved heaven and earth to respond to the blowback of the Great Recession. But after closer inspection of the results, it's clear that the nation did a lot less than it could have or should have. Some of this is just politics as usual, but some of it is also misguided thinking.
Meantime, we're paying the price for policy failure with a sluggish economy that remains vulnerable to any number of risks lurking on the horizon. More importantly, we're allowing the modest progress in poverty reduction to fade into history. That's a high price to pay—too high, in fact, particularly for roughly 15.1% (and rising?) of the population.