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November 24, 2004

Poverty and Government Aid: Facts and 90's Trends

I was wondering what had happened to welfare spending over time. The adjacent table from the 2003 Statistical Abstract shows changes in income-tested government transfers during the 1990's. Compare 1990 and 2000, in constant dollars. Federal and state medical benefits rose from 69 to 225 billion dollars per year. Cash payments went from 61 to 91, peaking at 109 in 1995. Food went from 29 to 34, peaking at 49 in 1994. Housing went from 21 to 34 billion, peaking at 36 in 1996.

AFDC, a cash benefits program, was reformed in 1996-- the well- known "welfare reform"-- but other programs were not. As a Heritage Foundation report says,

Only one federal welfare program--AFDC--was reformed in 1996. The other 69 major means-tested programs, including food stamps, housing, and Medicaid, were left largely unchanged with no requirements to be engaged in constructive activity, such as work or education, as a condition for receiving aid.

The rate of caseload decline varies enormously among the 50 states, which shows that welfare policies were the key factors behind falling dependence, not economic conditions. If economic conditions were the main factor driving down caseloads, the variation in state reduction rates would be linked to variation in state economic conditions. But the relative vigor of state economies had no statistically significant effect on caseload decline....

Another Heritage report, on poverty and inequality, has evidence on the peculiarity of the official definition of poverty:
Forty-six percent of all poor households actually own their own homes. The average home owned by persons classified as poor by the Census Bureau is a three-bedroom house with one-and-a-half baths, a garage, and a porch or patio....

According to the Census Bureau and other various government reports, nearly three-quarters of poor households own a car; 30 percent own two or more cars...

Today, the typical American defined as poor by the government not only has a refrigerator, a stove, and a washing machine, but also has a car, air conditioning in his home, a microwave, a color TV, a VCR, and a stereo. His home is in good repair and is not over-crowded. He is able to obtain medical care. By his own report, his family is not hungry, and in the past year, he had sufficient funds to meet his essential needs.

While this individual's life is not opulent, it is equally far from the popular images of poverty conveyed by politicians, the press, and activists. Most of America's "poor" live in material conditions that would be judged as comfortable or well-off just a few generations ago. Today, the expenditures per person of the lowest-income one-fifth (or quintile) of households equal those of the median American household in the early 1970s, after adjusting for inflation.

Posted by erasmuse at November 24, 2004 11:36 AM

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