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Wednesday, January 21, 2015

One more thing on poverty in America

If The US Spends $550 Billion On Poverty How Can There Still Be Poverty In The US? by Tim Worstall from a couple of years back. Mr. Worstall notes that if we simply gave each poor person in the U.S. $11,000 annually we could eliminate poverty by boosting each such person above the poverty threshold. Total cost? About $550 billion.
Here’s what Census says is the number of people in poverty in the most recent, just released, figures.

The nation’s official poverty rate in 2011 was 15.0 percent, with 46.2 million people in poverty. After three consecutive years of increases, neither the poverty rate nor the number of people in poverty were statistically different from the 2010 estimates.

We could certainly argue that that’s way too high a figure for a rich country like the United States. In fact, many people do so argue. But we do have something of a problem with this figure. We could lift all of these people up out of what is defined as poverty at a cost of around $550 billion. That’s in the 3 or 4% of GDP range*.
But wait, there's more:
What I want to point out is that to an acceptable level of accuracy this is already done. $550 billion is indeed spent on the poor so therefore there shouldn’t be any poverty. The reason there still is, by the way we measure it, because we don’t count that $550 billion as reducing poverty. Which is a very strange way of doing things when you come to think about it.

Medicaid is largely health care for the poor. This costs, in 2010 at least it did, some $400 billion. SNAP, the renamed food stamps, cost some $70 billion in the same year. The EITC handed out $55 billion. Add those sums up and we’ve got $525 billion being spent on the alleviation of poverty. Which is close enough, given the level of accuracy being used here, to have entirely abolished poverty in the United States. If we’d simply given the cash to poor people then there would no longer be any poor people.

So, how come there are still these near 50 million poor even after we’ve spent enough money to have no poor people? Simple, we just don’t count the money we’ve spent on the poor as reducing poverty. I know, I know, it’s unbelievable, isn’t it, but here’s Census saying exactly that:

The poverty estimates released today compare the official poverty thresholds to money income before taxes, not including the value of noncash benefits.
Umm. So, poverty in the U.S. is misrepresented? Oh, hell yes.

You know, the Fair Tax has a component that deals with this, the "prebate":
The FairTax provides a progressive program called a prebate. This gives every legal resident household an “advance refund” at the beginning of each month so that purchases made up to the poverty level are tax-free. The prebate prevents an unfair burden on low-income families.
See also here.

Of course, if you make it simple, a large number of bureaucrats will lose their jobs . . .

1 comment:

  1. Do you know, Capt. T. what Washington D.C.'s administrative burden -- the total costs (including payroll costs, training, travel, pensions, etc.) of the welfare dispensing bureaucracies is in the $550 billions? Somehow I am guessing bureaucracy absorbs an alarming chunk (25% of the total). And, let us remember that federal benefits exceed average private sector benefits, while federal efficiencies suffer pitiably in comparison. Lois Lerner's supervisory acumen and e-mail backup come to mind.

    Just saying...

    Cheers, Vigilis