How to Help the Poor

Mother Jones’ Kevin Drum laments the Democrats’ worrying trend with working class white voters and traces the discontent to lingering unhappiness with the Democratic tax and spend welfare state model. Drum accurately highlights how liberal obsession with food stamps, unemployment benefits, Medicaid and Obamacare can alienate working class whites as they see more and more assistance going to their marginally less well-off neighbors while they get nothing. Personally I think race has very little to do with what is really an economic and a government problem, but since the left can’t tie their shoes without noting the latent racism involved in shoelace production, they have to identify their middle and working class voter problem as one to do with the “white working class.” Fine. Whatever gets them to any level of introspection is only good news for the debate going forward.

In getting to his conclusion that he has no conclusion for how to solve this electoral dilemma, Drum offers this precious piece of liberal self-congratulation:

“Helping the poor is one of the great causes of liberalism, and we forfeit our souls if we give up on it.”

I wonder if the left will ever understand observable reality and change its mind on what constitutes helping the poor. Everyone with a conscience, left or right, wishes to see the plight of the poor improve, the question is how to achieve improvement. I (kinda, sorta) accept Drum and liberals at their word that their aim is true when they advocate for these government programs for the poor; my problem is with their stubborn refusal to be accountable and admit that the ambitious War on Poverty was a failure, especially if viewed in terms of trajectories – American poverty was steadily declining between 1945 and 1965, only to flatten after the Great Society was introduced. The line has remained flat for a generation.

us poverty graph

It is an insult to basic intelligence to suggest these programs were successful at eradicating American poverty. Possessing noble intentions does not automatically translate into good policy, but seeking well-intended results through government is guaranteed to create bad policy because government is inherently inefficient (and likely inherently stupid too).

Whatever merits progressives assign to the Great Society are dwarfed by the incontrovertible fact that its biggest legacy is likely to be the destruction of the black family in America. And not just the black family, either. One of the more fundamental disagreements between left and right is over the matter of incentives. The left doesn’t bother with incentives because, if I may be so bold, they typically don’t care about how their policies cause people to behave; they just care that a policy they came up with is made binding on others. Or if you want to be more generous: the left doesn’t focus on behavioral incentives in law because they don’t believe such things exist. Since most leftists come from academia, they are used to theoretical models that deal in static data. The real world, however, deals in dynamic data, in that there is no way to account for the variable known as “human behavior” in academic models of society or the economy.

Laws create behavioral incentives because humans are not robots. Just because it makes sense on paper to increase government spending in order to stimulate aggregate demand does not mean such policy will work in practice. In fact, we know it does not work because rudimentary market economics informs us that government intervention into the economy only creates distortions and mis-allocation of resources. The left has never understood this basic premise when it comes to – well, everything – but especially when it comes to helping the poor.

By aggressively inserting itself into the lives of inner city and rural constituencies the federal government has wildly distorted the markets for labor, education, spouse and dignity in America’s poverty-stricken regions. Government intrusions in the form of food stamps, unemployment and Medicaid sound benign at the outset. But consider how these benefits alter incentives for the beneficiary. Is a worker in the inner city more or less likely to ardently search for work when 99 weeks of unemployment are on the table? Is a struggling shop-owner looking to hire two extra workers on the cheap (offering them an opportunity out of poverty, perhaps) going to be more or less likely to do so when the price of labor is arbitrarily raised on him via a minimum-wage increase? Most crucially, are a couple with children more or less likely to stay together when there are no consequences to family dissolution thanks to the ubiquitous welfare state that allows single mothers to collect plenty of money with none of the dignity attached.

The $64,000 question is whether the American left, facing its worst political moment in a century (the 1920’s were the last time the party had so few seats in the U.S. House of Representatives and the state legislatures – they were wiped out the last two midterms), chooses to double down on welfare statism or decides to speak honestly and culpably about the failures of their grand experiment in leveraging the public sector to fix poverty. If Democrats really want to speak to the white working class again, or for that matter, the poor and underclass who they today purport to serve, they need to accept that there is one – and only one – proven tool for lifting masses of people out of dismal economic conditions: capitalism.

So that’s where we are. The left’s future as I see it depends on their developing a non-transparent and believable appreciation for what makes economies grow. The fact that the global poverty rate fell from 26.8% in 1970 to 5.4% in 2006 due primarily to the introduction of free enterprise and free trade to the rest of the world is entirely lost on the inhabitants of America’s faculty lounges. If they are even aware of this remarkable 80% decline they shrug and attribute it to government aid or something (seriously). Empowering individuals through trade and entrepreneurship is not some fashionable dream concocted by libertarians but the cold hard reality of the how wealth and prosperity are made. The middle and working classes in America aren’t eager to join the poor in the ranks of the dependent class. The poor themselves do not wish to be pandered to and showered with candy while no observable improvements are made in their communities. People are ready for something different, above all in the country’s approach to economics, employment and welfare.

The good news is that, for all the lefty hand-wringing (and really, there ought to be more than there is) over losing the white working class, there is no way they are going to suddenly become champions of capitalism and that means the right is well positioned to cast some much needed light on the plight of overlooked and left behind Americans.

world poverty since 1970

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