The Hopeless War on Poverty

One of the core arguments for government expansion is that there is no other way to reliably help the poor to a better life. This false notion has very deep roots, all the way back to the days when the first elements of the welfare state emerged on European soil. Back then, radical liberals convinced social conservatives that collectivized compassion was the way to go.

For the longest time the growth of the welfare state in the United States lagged Europe. It still has not reached the excesses of the Old World, but that is not for lack of trying. For the past 50 years, government expansionists have been waging a "War on Poverty" that, according to a new report from the Cato Institute, has cost American taxpayers a good $19 trillion over the years.

By comparison, over the past half century we have spent a total of $17.7 trillion on national defense and $14 trillion on building homes.

With so much money going into eradicating poverty, it would be fair to expect some sort of success, right? Well, as the authors of the Cato report, Michael Tanner and Charles Hughes, explain, we really should not get our hopes up:

[Even] if the War on Poverty achieved some initial success, the programs it spawned have long since reached a point of diminishing returns. In recent years we have spent more and more money on more and more programs, while realizing few, if any, additional gains. More important, the War on Poverty has failed to make those living in poverty independent or increase economic mobility among the poor and children. We may have made the lives of the poor less uncomfortable, but we have failed to truly lift people out of poverty.

There is one particularly compelling point in the report. Since 1973 – the earliest year with reliable data – total welfare spending has increased almost every year in constant prices, yet the best you can say about the poverty rate is that it has not changed.

It is easy to draw the conclusion that government-provided welfare is not just non-productive in achieving its alleged goal, but that it is in fact counter-productive. A quick look at the poverty situation in Wyoming reinforces that conclusion. If the "War on Poverty" were successful it would provide its beneficiaries with the instruments to become self sufficient.

The more jobs an economy creates, the better the opportunities are for people to exit dependency on welfare and start providing for themselves. Job creation usually correlates with GDP growth, meaning that if the "War on Poverty" worked the poverty rate would drop when GDP growth is high.

Figure 1 displays the relation between real GDP growth and the poverty rate in Wyoming. Evidently, there is no correlation whatsoever.

Clearly, the "War on Poverty" has not come anywhere near achieving its alleged goal. This means one of two things: either taxpayers have wasted $19 trillion – or the purpose of the "War on Poverty" has never been to eradicate poverty.