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By Larry Butler, OpEdNews
Saturday, Jul 11, 2015

What the Right Gets Right, the Left Gets Wrong, and We All Ignore

The Faces of Poverty (image by Library of Congress)

My friends think I'm a raving, left-wing, fire-breathing, socialist liberal. I recently took a poll among my most conservative friends and relatives, asking for their thoughts on economic inequality. Only a few were willing to respond, for various reasons both stated and unstated. The most direct refusal to share thoughts was, "I'm a conservative so let's just leave it at that." Others seemed to confuse economic inequality and poverty. But enough valid responses were received to move the needle of my own personal opinion just a tick -- especially about poverty. Let me share that with you.

What the Right Gets Right
Poverty isn't as bad as you think. The statistics published by the federal government ignore something very important -- public assistance. When you learn that the poorest 1/5 of households earns $16,109 annually, for example, that doesn't include unemployment compensation, health insurance benefits, food stamps, or welfare. So if public assistance hasn't eradicated poverty, it certainly makes it more comfortable -- or at least more survivable.

Safety-net programs can make people lazy. Unemployed people are just like you and me. They unconsciously weigh the costs and benefits of their decisions and usually act rationally. Costs and benefits can be in the form of money, risk, time, or effort -- in any combination. Today's welfare and unemployment benefits, combined with lots of free time, can motivate some people to temper the passion of their search for work. This is an even bigger factor if the available jobs pay so little that it won't get you out of poverty. Trading poverty-level benefits and lots of free time for a poverty-level paycheck and a harried schedule just doesn't make sense.

Anybody can succeed if they try. People can lift themselves out of poverty, and there are plenty of examples to prove it. Perhaps stated more accurately, some people in any social, physical, or economic circumstance can succeed. Self-reliance and ambition serve all kinds of people well, and those who have harnessed these qualities to accumulate wealth are the strongest advocates of public policies that rely on this very principle. But a look at the bigger picture suggests that self-reliance can be suppressed by poor health, inferior educational opportunities, limited physical mobility, and widespread unemployment -- the very factors that often dominate poor communities.

What the Left Gets Wrong
We'll cure poverty by paying poor people. Since the days of Roosevelt's New Deal, poverty has declined. Nearly all of this long-term decline results from one program -- the Social Security retirement benefit. In the early 1930s, the most heart-wrenching poverty was among our elders. Today, extreme poverty among the aged has declined to historic levels. But the face of poverty has changed, remaining stubbornly among other groups. Today, single mothers, unskilled workers, and the chronically unemployed might be saved from starvation by public assistance, but the underlying poverty in which they are mired remains largely untouched.

Everybody ought to have a job. Wrong -- working is for chumps. And that's an attitude that is shared by some of us all the way up and down the socioeconomic scale. Rich people who do not have jobs are called capital investors; poor people who do not have jobs are called deadbeat parasites. Some folks really shouldn't be working -- children, for example. Child labor was restricted long ago. Also, single mothers of young children might better spend their time in nurturing activities. And really old people shouldn't have to work if they don't want to. Besides -- as a practical matter, there just aren't enough jobs to go around anyway!
A living wage fixes everything. Taken in the aggregate, higher wages can lead to greater unemployment. The Congressional Budget Office estimates that an increase in the minimum wage from $7.25 to $10.10 would lead to 500,000 fewer jobs. Although they may have ignored second- and third-order consequences like spending multipliers and aggregate demand, the CBO's conclusions can't be entirely dismissed. The operative principle, after all, is the law of supply and demand -- when the price of a commodity increases, usage declines. So while a living wage fixes poverty in one place, it may pop up someplace else.

What We All Ignore
At least 5% of our workforce will be permanently unemployed. That's right -- we have an economy that taxes the employment of labor and subsidizes the employment of capital, so it's inevitable. Corporations most often use subsidized capital for making their operations more labor-efficient, which means taking the labor out of their products. And because an extra 15% tax (Social Security and Medicare) applies when they are hiring, businesses are double-motivated to cut their use of labor. Some of the resulting unemployed stay that way for a long time, and others find work pretty soon -- the economy doesn't care. But who are we to vilify the unemployed as lazy when we created an unemployed class with our public policies?

Poverty is contagious -- you get it from your parents. The most reliable predictor of your socioeconomic position is that of your parents. Let's distinguish between situational poverty and generational poverty. Situational poverty may result from illness, unemployment, or the death of a loved one. Generational poverty is more stubborn, and is often associated with cultural norms that accept the structural inevitability of poverty itself. Limited income, no wealth, poor healthcare, and substandard educational opportunities can destroy self-reliance. Incarceration rates often typical of poor communities can cut off current income and curtail opportunities for a lifetime and raise the probability of poverty for generations to come.

Upward mobility doesn't go as high as it once did. Economic mobility -- the probability of a person in the bottom quintile to move to a higher quintile -- hasn't changed very much over the past fifty years. But here's the thing: moving from the 5th quintile to the 4th or 3rd quintile doesn't offer quite the boost it once did. As the top 1% have gobbled up most of the income and wealth gains in recent decades, families continue to struggle even if they manage to improve their economic position. That's because America's median income -- even if you can raise yourself out of poverty -- isn't as cushy as it once was.

Poverty and economic inequality are related, but different. America has poverty, but if we can accept perpetual safety-net transfers to the poor, it's probably not our biggest economic problem. The biggest? That would be the continued concentration of income, wealth, and power among corporations and the very rich. Look to the top, rather than the bottom, for the real threat. By all of several metrics [6], America's economic concentration is approaching levels not seen for nearly a century. And it's destructive. Historically, such economic concentration has been arrested only by catastrophic war, financial collapse, or bloody rebellion. Have we already stepped over the brink?

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