Human Events | Walter E. Williams | Oct. 30, 2007
For the most part, long-term poverty today is self-inflicted. To see this, let’s examine some numbers from the Census Bureau’s 2004 Current Population Survey. There’s one segment of the black population that suffers only a 9.9 percent poverty rate, and only 13.7 percent of their under-5-year-olds are poor. There’s another segment of the black population that suffers a 39.5 percent poverty rate, and 58.1 percent of its under-5-year-olds are poor.
Among whites, one population segment suffers a 6 percent poverty rate, and only 9.9 percent of its under-5-year-olds are poor. Another segment of the white population suffers a 26.4 percent poverty rate, and 52 percent of its under-5-year-olds are poor.
What do you think distinguishes the high and low poverty populations? The only statistical distinction between both the black and white populations is marriage. There is far less poverty in married-couple families, where presumably at least one of the spouses is employed. Fully 85 percent of black children living in poverty reside in a female-headed household.
Poverty is not static for people willing to work. A University of Michigan study shows that only 5 percent of those in the bottom fifth of the income distribution in 1975 remained there in 1991. What happened to them? They moved up to the top three-fifths of the income distribution — middle class or higher. Moreover, three out of 10 of the lowest income earners in 1975 moved all the way into the top fifth of income earners by 1991.
Those who were poor in 1975 had an inflation-adjusted average income gain of $27,745 by 1991. Those workers who were in the top fifth of income earners in 1975 were better off in 1991 by an average of only $4,354. The bottom line is, the richer are getting richer and the poor are getting richer.
. . . more
It’s easy to be lulled into a false sense of security by Heritage foundation researcher Robert Rector’s selective use of census data which is presented by Walter E. Williams. “The rich are getting richer and the poor are getting richer too” is the central argument both Rector and Williams are making. However both fail to disclose that the rich have been improving their economic posittion at a rate much, much greater than the poor. Also the modest gains of those in the middle and lower income brackets have been accompanied by other ominous trends.
1. Declining rates of upward economic mobility. The Brookings Institute has reported that men in Their 30s Today Earn Less Than Men in
Their Fathers’ Generation and Family Income Growth Has Slowed.
Source: “Economic Mobility: Is the American Dream Alive and Well?”
http://www3.brookings.edu/views/papers/sawhill/200705.pdf
2. The increasing shift of economic risk to middle class families. Jacob Hacker writes:
Source: “The Great Risk Shift”, http://www.greatriskshift.com/qanda.html
3. Increasing concentration of wealth in the hands of the few: The richest one percent of Americans hold a greater percentage of aggregate national wealth than at any time since the early 1920s. According to the Minneapolis Federal Reserve Bank, in 1998:
• The bottom 40 percent of all households have only about 1 percent of all the wealth in the nation.
• The top 1 percent of all households have nearly 30 percent of all the wealth; the top 5 percent, 55 percent of the wealth; and the top 20 percent, 80 percent of the wealth.
Source: “Understanding the U.S. Distribution of Wealth”, Minneapolis Federal Reserve Bank
https://www.minneapolisfed.org/research/QR/QR2122.pdf
Since 1998 the distribution of wealth has become even more skewed. Additionally, current Federal Reserve Ben S. Bernanke (who I hope everyone will acknowlege to be an objective source) has stated:
Source: The Level and Distribution of Economic Well-Being, Chairman Ben S. Bernanke, Before the Greater Omaha Chamber of Commerce, Omaha, Nebraska
February 6, 2007
http://www.federalreserve.gov/newsevents/speech/bernanke20070206a.htm
Note: Because of the recent accusations that I present my own opinion as fact without proper attribution I have carefully sourced every assertion made above with objective sources. The Federal Reserve Bank and it’s chairman should be acknowleged to be an objective sources. The Brookings Institute has a reputation as a centrist-leaning organization, and includes Michael O’Hanlon, a prominent Iraq war Hawk as one of it’s principal researchers. Jacob Hacker, a respected economist, cannot to be said to be any more biased to the left than the conservative think tank, The Heritage Foundation from which Mr. Williams facts are drawn, is biased to the right.
Fed Chairman Ben Bernanke’s speech in Omaha last February makes an important point regarding why we should not gloss over or ignore increasing income inequality in the United States. The health of our Capitalist system, Bernanke asserts depends on an expectation of upwward economic mobility by all participants in the economy. A dynamic economy produces unequal outcomes, he says, but it cannot be so unfair and unequal that participants lose faith in their ability to be rewarded for their hard work.
Source: The Level and Distribution of Economic Well-Being, Chairman Ben S. Bernanke, Before the Greater Omaha Chamber of Commerce, Omaha, Nebraska
February 6, 2007
http://www.federalreserve.gov/newsevents/speech/bernanke20070206a.htm
Because of it’s dynamism, Capitalism is the most powerful engine for economic growth of all economic models ever tried. However, just as we wouldn’t drive a car with a powerful engine but no lubricants or shock absorbers, we shouldn’t expect our economy to operate without lubricants and shock absorbers to protect it’s human parts from bumps in the road and wear and tear as well.
Dean S., What does any of this have to do with the major premises of Williams’ article that talks about marriage being the key factor in observing and predicting poverty rates across population groups and explaining that being “poor” in America today has a totally different meaning than in years past or when compared to the poor in many other parts of the world? How is that “right wing”? I recall a great aunt of mine who had a favorite expression: “and what does this have to do with the price of eggs in China.”
What does any of this have to do with the major premises of Williams’ article
Nothing, except as yet another chance for Dean to post his hack policy…
Dean S., I am getting really tired of these kinds of over-simplistic and inane comments: “both fail to disclose that the rich have been improving their economic posittion at a rate much, much greater than the poor.” Well duh! Welcome to Reality and Common Sense 101.
Here’s a very simple explanation regarding why “the rich keep getting richer”:
Your First Million Is the Toughest
http://www.fool.com/personal-finance/general/2007/10/27/your-first-million-is-the-toughest.aspx
Assuming $250/month contribution at 9% Return:
To go from $0 to $1 million = 38.3 years
To go from $1 million to $2 million: = 7.5 years
To go from $2 million to $3 million: = 4.5 years
That’s simple MATHEMATICS Dean, not a giant right wing conspiracy or the rich getting rich at the expense of the poor. Last time I checked mathematics was value and policy neutral, at least in the real world I live in.
Chris:
1. I never used the phrase “right-wing”.
2. Williams makes two egregiously incorrect comments that could not be left to stand unchallenged. He writes, “For the most part, long-term poverty today is self-inflicted“, and “Poverty in the United States, in an absolute sense, has virtually disappeared“. Certainly marriage is a key variable for predicting poverty, but not the only one. The statistics that
3. I provided good sources to support my assertion that (1) rates of upward economic mobility in the US have declined, (2) Lower and middle-class workers are exposed to grater finacial risk and income volatility, and 3) Income inequality, associated with reduced social well-being, has increased in the United States to a level where it even concerns the chairman of the Fderal Reserve.
4. You assume everyone has $250 to put away each month. I volunteer at a Food Bank where we see hundreds of people each mothth who if they had $250, would buy some food to feed their families, but they don’t even have that.
Dean, Stop playing word games. You used the term “biased to the right” effectively the same kind of smear as “right wing”, implying that the data and observations were somehow tainted or biased. It seems that in your world only role models like Michael Moore and AlGore (whom you praise constantly) seem to qualify as “balanced” and “fair.” That’s like holding up Bill Clinton as a model for marital fidelity and truth telling.
Regarding point (4) again, “what does that have to do with the price of eggs in China”?
Your disingenous implication is that the reason Bill Gates and Warren Buffet are rich is because they stole it from the poor and therefore their wealth is the reason so many others are poor. That is completely false!
You again miss the point of the article regarding income mobility and the dynamic status of the poor. Here, let me highlight for you the key parts discussing the changing status of the poor:
Translation: 95% of the poor in 1975 were no longer poor just 16 years later! They moved up 3/5 UP the income ladder. Also, 30% of the poorest of the poor rose to the top 20% of the income charts. In other words almost a third of the poorest became some of the richest in just 16 years! All of this in this horrible and poor hating capitalist country. That is not good enough for you? Show me any other country in the world that is able to make this claim. Show me what other economic system is capable of raising 95% of its poor in just 16 years and helping them move into the middle class, with 30% of them reaching the richest 20% strata of society.
I think that focusing on “the poor” kind of misses the point. The article opens with “People who want more government income redistribution programs . . . ” I can’t speak to what “people” want, but for myself I favor programs that target specific populations and situations. We have a large population of elderly people living in nursing homes whose care is paid for by state Medicaid programs. Millions of other elderly people are covered by Medicare, and it is not clear what they would do without that. There are all sorts of community outpatient psychiatric programs. We have workers compensation and vocational rehabilitation programs. Many medically indigent people have their care paid for by Medicaid. These include people with cancer and other serious illnesses and people who are severely disabled. I spent years working in a hospital and saw many of these people, and some of them are in very bad shape. Most of these people would be considered poor, but we help them for other reasons, not just because they are “poor.”
Concerning the author’s catalog of consumer goods enjoyed by the “poor,” I really don’t see the point of that. Most consumer electronics are very inexpensive these days. You can buy a brand new DVD player for under $50. Color TVs are also inexpensive, and you can buy them at Goodwill or garage sales. If you want a color TV I have one in my garage that you can have for free.
Other consumer items are “built-in.” Even many low-end apartments come with air conditioning, dishwashers, and basic cable TV service.
The article states that “What do you think distinguishes the high and low poverty populations? The only statistical distinction between both the black and white populations is marriage.”
I have not looked at the data myself, but I assume the author’s analysis is correct, but with one exception. It seems even in the context of the article that the problem is not unmarried status per se, but being unmarried with young children. Thus it seems to me that wise social policy would have to include a strong emphasis on birth control.
But not all single women with children end up that way by choice or bad decisions. One woman I know ended up on welfare with three children after her husband was arrested for sexually abusing his daughter. Welfare paid for her to get a two-year degree, at which point she supported her family, and eventually went on to graduate from college.
The article states that “Poverty is not static for people willing to work. Well, sure. But not just “willing” but also able to work, and able to work at a decent job. I don’t care what the overall unemployment rate is, when the local factory shuts down and people are thrown out of work that’s a local disaster. And anyone who works for a company that does not offer health insurance lives on the edge of the abyss. In rural areas of the country good jobs can be hard to find. In these specific situations I think that governmental programs can be very important. Again, I’m not in favor of confiscating money from the rich and air-dropping it over poor people. But there are many situations in which a redistribution of income is entirely appropriate.
This may damage my liberal credentials, but I agree with conservatives on many economic issues. I just want to make sure that the programs that really do help people in an important way are preserved.
Chris B. writes: “You used the term “biased to the right” effectively the same kind of smear as “right wing”, implying that the data and observations were somehow tainted or biased.”
Having read Dean’s post, I believe he was saying that the article does not address the total situation.
Chris B: “It seems that in your world only role models like Michael Moore and AlGore . . . Your disingenous implication is that the reason Bill Gates and Warren Buffet are rich is because they stole it from the poor and therefore their wealth is the reason so many others are poor.”
Since you became the new moderator here both Dean and I, and hopefully others as well, are trying to write posts that are more focused, more specific and relevant to the posted articles. Please note that Dean invoked neither Moore nor Gore. He did not accuse accuse Gates or Buffet of theft.
Chris B: “Regarding point (4) again, “what does that have to do with the price of eggs in China”?”
Dean’s point is relevant as far as the practicality of saving $250 per month. In other words, to what extent is that a reasonable expectation, today or yesterday? For example, 38 years ago, had one wanted to be a millionaire today, one would have had to start investing $250 per month in 1969. But in 1969 the median income for males was around $6,400 per year. But in 1969 $250 per month would have been almost half of the person’s salary.
http://www.census.gov/hhes/www/income/histinc/p05ar.html
Chris B.: “Translation: 95% of the poor in 1975 were no longer poor just 16 years later! They moved up 3/5 UP the income ladder. Also, 30% of the poorest of the poor rose to the top 20% of the income charts.”
But the income mobility tide flows both ways. In any period of time, some rise from the lower levels to the upper; some fall from the upper to the lower. The latter situation is not addressed by the article.
Jim, Regarding the observation: “Since you became the new moderator here both Dean and I, and hopefully others as well, are trying to write posts that are more focused, more specific and relevant to the posted articles. Please note that Dean invoked neither Moore nor Gore. He did not accuse Gates or Buffet of theft.” That is indeed a valid point. Dean S. did not make those accusations. I took a slight detour and invoked some satirical license with the unspoken underlying presumptions of his personal philosophies. 🙂
So Jim, let me see if I understand this correctly regarding you and Dean S. about this comment: “Dean’s point is relevant as far as the practicality of saving $250 per month. In other words, to what extent is that a reasonable expectation, today or yesterday? For example, 38 years ago, had one wanted to be a millionaire today, one would have had to start investing $250 per month in 1969. But in 1969 the median income for males was around $6,400 per year. But in 1969 $250 per month would have been almost half of the person’s salary.”
We’re suddenly no longer discussing the ability of the poor to move into the middle class, but their ability to become millionaires? I guess 30% of the poor moving into the top 20% income bracket in just 16 years is still not enough.
You have now jumped the fence and you’re running full speed away from the proverbial debate farm! 🙂 Talk about going “off-topic.” 🙂
The point of the mathematical calculations I provided is to show why the phrase “rich getting richer” is like saying the sun will rise tomorrow. It had absolutely nothing to do with how one earns and saves $250/month. Yet again look how far off left field you and Dean S. have dragged the debate.
Chris B. writes: “That is indeed a valid point. Dean S. did not make those accusations. I took a slight detour and invoked some satirical license with the unspoken underlying presumptions of his personal philosophies. :)”
Yes, and to be honest, it was enjoyable to read. Yeah, stick it to Dean, and to me too. We just want to be able to stick back. This is the internet, after all. We’re not writing a Ph.D. thesis or great literature. Digressions, satire, and parody, within reasonable limits, are part of what add spice to the discussions. There is a reason why there have been 800,000 hits on this blog, and it’s certainly not because everyone thinks the same way. I only ask that we throw snowballs at each other, not rocks. I’ve moderated a both an internet discussion list and a blog, and it is truly an adventure. Good luck riding herd over everyone. If you figure out the ultimate way of being a blog moderator, please let me know.
Chris B. writes: “We’re suddenly no longer discussing the ability of the poor to move into the middle class, but their ability to become millionaires?”
Well . . . your post, #7 as I recall, at the end, talked about what it would take to become a millionaire, etc. So I responded to that.
Believe me, I have no problem with people making money through labor, investment, or any other legal way. I’m about to retire at age 55, and I pay my investment manager a lot of money to make that possible. Others are much less fortunate.
Chris B: “I guess 30% of the poor moving into the top 20% income bracket in just 16 years is still not enough.”
Well, it depends on the situation. In any economy some will win and some will lose. That’s a statistical fact. I just want to make sure that those on the lower end don’t fall into the abyss. Many people move up, but i want to make sure that those who don’t, or those who move down, don’t fall off the cliff.
Chris B.: “You have now jumped the fence and you’re running full speed away from the proverbial debate farm! 🙂 Talk about going “off-topic.” :)”
Dude, or more appropriately, Mr. Dude, you brought up the numbers. I only responded. Maybe I ran with the ball farther than you intended.
Chris B.: “The point of the mathematical calculations I provided is to show why the phrase “rich getting richer” is like saying the sun will rise tomorrow.”
Not necessarily. People gain wealth for all sorts of reasons, not just innovation and intelligence and compound interest. But look, I don’t want to punish the rich. i have nothing against the rich. I want to talk about what kind of society we have. I want to live in a society in which people have good medical care. I want to live in a society in which the basic needs of people are cared for, even those who don’t make all the right decisions.