CHN: The War on Poverty: A Progress Report

November 26, 2013

 Poverty Reduction Lessons

Testimony Submitted to the House Committee on the Budget
Paul Ryan, Chair; Chris Van Hollen, Ranking Member
for its hearing, The War on Poverty:  A Progress Report
July 31, 2013

by Deborah Weinstein, Executive Director, Coalition on Human Needs

In 1966, I was a college student in Binghamton, New York.  I had the opportunity to become a tutor-counselor for disadvantaged high school students in a new summer program on our college campus:  Project Upward Bound.  It was part of the “war on poverty” – one of the initiatives within the Economic Opportunity Act.  I met people only a little younger than myself who were selected by a teacher at their high school as having the potential to succeed in college.  They were bright, but up till then no one in their families had gone to college; it was outside of their experience and expectations.  One of the girls had false teeth – her family had no money for a dentist and did not get the care that would have allowed her teeth to be saved.  Another girl was extremely bright, but her high school could not challenge her and she felt freakish and isolated.  A boy was doing his best to be a tough kid, but wrote poetry in an era when that was just asking for trouble.

Most of the high school students in the program did well in college-level classes, and the program opened up opportunities for them.  It wasn’t magic – when these students went back to their unchallenging high school and to the struggles in their families and communities, some could not stay on the path to college.  But some did.

Upward Bound was a fairly modest effort to open up opportunities for poor kids.  Looking back on it, much of the Economic Opportunity Act was of modest scope, and based on the conservative values of encouraging work and engaging local community decision-making.  There were special initiatives for poor youth (Job Corps, the Neighborhood Youth Corps, VISTA, Upward Bound, and Work-Study) and for the youngest children (Head Start).  Community action began, with the goal of achieving the “maximum feasible participation” of members of poor communities themselves.

The war on poverty included these measures intended to promote jobs, education, and community solutions.  In separate legislation, food stamps, Medicare and Medicaid were created in 1964 and 1965.  Congress recognized that you could not beat poverty if millions of people did not have enough to eat or access to medical care.  Congress did not initially understand the depth of hardship, and required families to purchase food stamps.  It took Marian Wright Edelman, guiding Senator Robert Kennedy around Mississippi in 1967, to demonstrate that people did not have $2 to purchase food stamps, and so remained hungry.  Congress responded by eliminating the purchase requirement.

Then, as now, it was understood that poverty could not be substantially reduced without improved access to jobs and better pay.  The education and training provisions were intended to help poor people qualify for better jobs.  During the 1960s, the minimum wage was increased and expanded to cover more workers.  It rose to $1.25/hour in 1965.

During the 1960s, the reduction in poverty was remarkable.  In 1960, 22.2 percent of Americans were poor.  By 1965, the poverty rate had dropped to 17.3 percent, dropping further to 12.8 percent in 1968 and bottoming out at 11.1 percent in 1973.  Since then, poverty has bumped up and down, although never returning to the high point of 1960. It got down to 11.3 percent by the end of the Clinton years in 2000, peaked at 15.1 percent in 2010 and edged down to 15 percent in 2011.

Did the dramatic reduction in poverty in the 1960s result from the war on poverty initiatives?  Not in large part – the jobs and education programs were too modest, and the food and health care expansions did not directly count in the calculation of poverty income.  But that is not to say that government actions played no role in poverty’s reduction.  As more elderly people accumulated Social Security benefits, poverty among the elderly dropped more than other age groups.  In 1966, 28.5 percent of those 65 and over were poor.  By 1973 their proportion had dropped to 16.3 percent, a 43 percent decline.  Older Americans were well on their way to ending their status as the most disproportionately poor age group.  Social Security did that – a federal cash assistance program created through a social insurance model.

Although poverty did not drop as precipitously among other age groups through 1973, it did decline.  Among children, the poverty rate dropped from 17.6 percent in 1966 to 14.4 percent in 1973, an 18 percent reduction.  Unemployment was below 4 percent for the latter half of the 1960s, and that allowed more parents to work and raise their children out of poverty.

What lessons should we learn from these facts?  Poverty reduction occurs when there is a combination of broadly shared economic growth and government policies to ensure that the lowest income people are not left out.  Those conditions were in effect in the latter half of the 1960s.  While the direct expenditures on the war on poverty programs were not the most significant causes of poverty reduction, other government actions were important.  In addition to Social Security’s help to the elderly, continued investments in the interstate highway system begun in the 1950s and in education were important underpinnings of economic growth.  The private sector was expanding and manufacturing was a strong part of our economy.   Manufacturing jobs paid better and were open to those without a great deal of education.  Manufacturing jobs were to a large extent unionized, with labor laws protecting collective bargaining rights.

So economic growth abetted by government policies contributed in cutting the poverty rate in half from 1960 to 1973.  The government policies included infrastructure investments, cash and in-kind income, minimum wage increases and labor laws, and education/training.  Health care expansions were very significant in improving life and living standards, especially for the elderly, but did not count in official poverty estimates.

The combined effect of government policies led to more jobs, many of which could be filled by people with little education.  Private sector manufacturing jobs were key, but so too were construction jobs, jobs in Head Start and community action, and in the health care sector.  The more closely connected to government funding or regulation, the jobs tended to be more open to minorities, thereby lessening the hugely disproportionate poverty among African Americans and Latinos.

The originators of the war on poverty were correct in several of their opening premises.  In order to reduce poverty in the short and long terms, children’s needs had to be met.  Children need proper nutrition, health care, and education.  Their parents had to have enough money to provide necessities and maintain a stable home environment.   The best way to provide for children was for their parents to be employed, but when that was not possible or when wages were too intermittent and low, a range of supports was crucial for children’s development.

These assumptions remain true, but our investments have not been adequate to achieve our anti-poverty goals.

More recent anti-poverty effects.  Since 1973, economic growth has not been as broadly shared, and inequality has risen.  The programs initiated in the war on poverty in early childhood education, community action, job training for youth and adults, and nutrition aid had some positive impacts, but their funding and scope was not large enough to offset larger economic forces that combined to reduce the value of men’s wages.  Aid to Families with Dependent Children originated in the earlier New Deal, not the 1960s, but its expanded use reduced the number of children living below half the poverty line (in 1995, AFDC lifted 2.4 million children out of such deep poverty).  Its benefits were too low to lift people above the poverty line.

A new recognition of the importance of combining work and income supports.  Over time, anti-poverty policies have evolved in ways that have improved outcomes.  The original war on poverty policies did not anticipate the need for “income packaging” – combining income from earnings with public supports.  As a consequence, many parents were forced either to subsist on inadequate cash assistance and food stamps or to combine low-paid work in the underground economy with public assistance.  Starting in the 1990s, increasing emphasis on work led to expansion of the Earned Income Tax Credit, more ability for parents to combine earnings with TANF income legally, and improved access to food stamps for working families.  In addition, expansion of Medicaid and the Children’s Health Insurance Program helped families with earnings to get health care for their children.

The Center on Budget and Policy Priorities has analyzed the anti-poverty effectiveness of public supports that can be combined with earnings.  While the official poverty surveys do not count food stamps (now called SNAP) or tax credits, the Center utilized the Supplemental Poverty Measure, an alternative analysis produced by the Census Bureau which does take these supports into account.  In 2011, 40 million people were lifted out of poverty by the Earned Income Tax Credit, Child Tax Credit, SNAP, and Social Security.  Social Security (which is counted in the official poverty measure) lifted 26 million people out of poverty; the tax credits raised 9.4 million out of poverty; and SNAP lifted 4.7 million above the poverty line.

Improvements in SNAP and the tax credits have allowed these public benefits to replace losses in the value of the minimum wage for some families.  As the Center on Budget points out, a full-time minimum wage worker in 1983 earned 66 percent of the poverty line for a family of four; after taking into account payroll taxes and the value of the EITC then, combined income edged up only to 67 percent of the poverty line.  The current minimum wage with full-time hours only covers 61 percent of the poverty line, but the larger benefits of the EITC and the Child Tax Credit combined with the earnings add up to 87 percent of the poverty line.

SNAP also provides more help to working families than it used to.  About 30 percent of recipients are working (and more than 40 percent of recipients live in households where someone is working) at one point in time (in 2011).  Most of the remaining recipients are elderly, disabled, or children.  Thirty years ago, fewer than one-quarter of households with children receiving food stamps included a worker; now that proportion has doubled.  Looking at multi-year work histories, the Center on Budget and Policy Priorities found that 87 percent of households with children receiving SNAP include an adult who either worked in the prior year or who will work in the following year.

SNAP’s greater use among working families is not an accident.  There was bipartisan recognition that working families faced many roadblocks in applying for and renewing eligibility for food stamps.  The George W. Bush Administration was effective in streamlining these procedures, and their lead has been followed by the current Administration.

What else is needed.  Clearly, the economy is not producing enough jobs, and especially not enough for workers without much education.  This has been reported on and analyzed at great length.  We point to the evidence that even in the second half of the 1960s, when manufacturing and overall economic growth was strong, government played a significant role in bolstering that growth, both through infrastructure development,  and by income supports like Social Security that increased purchasing power.  Now, when the private sector is not creating jobs in sufficient numbers on its own, it is even more important for the public sector to take steps that will bring more jobs to low-income people and communities and to raise pay.  Among the steps the federal government should take:

  • Fund Pathways Back to Work:  Legislation introduced by Rep. Miller (H.R. 2721) would provide $12.5 billion for subsidized jobs targeted to low-income people, as well as training and summer and year-round jobs for youth.  This is a proven approach well-targeted to help people without much work experience or training.
  • Raise the minimum wage:  Proposals to increase the minimum wage to $10.10/hour should be adopted.  As noted above, full time work at the current minimum wage, even with the refundable tax credits, is not enough to lift a family of four out of poverty.
  • Adopt job creation initiatives similar to the President’s proposals:  The President has proposed investing in infrastructure improvements, green jobs, and other initiatives.  We support seeking revenue from closing corporate tax loopholes as one option to pay for such work initiatives, but believe that the President gives away far too much revenue to permanent corporate income tax reductions to make this a fair bargain.
  • Invest in care-giving occupations:  The Affordable Care Act will require more health care personnel to meet the demand from newly insured people.  These jobs will be important opportunities for low-income individuals, and we should maximize opportunities through training and development of career ladders in the health care sector.  Similarly, home care and home health workers are a growth area, and training and career ladders should help more workers get decent pay and benefits.  The Administration should issue regulations it is now considering to improve wages for home care workers.  Further, the President’s early childhood initiative can provide more good jobs that low-income people can be helped to qualify for.
  • Government should be a model employer:  Government employees and workers hired through government-paid contractors should receive decent pay and benefits.  Government should not contract with private firms in order to ratchet down pay and benefits.
  • Sequestration should end:  We should be investing in Head Start, education, training, youth services, affordable housing, public health programs, and much more.  We should be protecting low-income people through WIC and meals for seniors.  Instead, we are cutting these programs.  This threatens low-income people’s ability to rise out of poverty and reduces the number of jobs.  Further, sequestration should not be replaced by slashing SNAP, Medicaid, refundable tax credits, unemployment benefits, or other mandatory programs that are vital parts of the safety net.
  • Return to the early focus on community-building:  The war on poverty created community action agencies to bring together community residents, municipal governments, educators, labor, and business to promote rebuilding, jobs, and opportunities for children and youth.  That community focus was correct then, and should be built upon now.  Slashing the Community Development Block Grant or the Community Services Block Grant is exactly the wrong approach.  Funding Promise Neighborhoods is a good idea.  These programs should be augmented by funding for public jobs specially targeted for low-income communities.
  • Increase revenues from fair sources:  Upper-income individuals and profitable corporations can afford to pay a greater share towards creating jobs and reducing poverty.  The Senate budget resolution’s proposed $975 billion in new revenues over 10 years is a reasonable proposal that should be supported by both House and Senate.

What is not needed:  The House budget resolution is based on the premise that economic growth will occur most strongly through less government spending, either for the safety net or for job creation investments.  The budget proposes giant additional tax cuts almost exclusively targeted to upper-income individuals and corporations.  There is no evidence that these proposals will produce shared economic growth.  We now have effective tax rates at historically low levels for individuals and corporations.  We also see record corporate profits.  Virtually all the economic growth since the recession has flowed to the highest-income individuals and profitable corporations.  Poverty has risen and the middle class has lost ground.  More largesse to those at the top will further widen the gap between the rich and everyone else, and will make it harder to alleviate poverty.

Further, further cuts to SNAP, Medicaid, refundable tax credits, housing, unemployment insurance, public health, education, child care, and so many other domestic programs will increase poverty, and cause harms to children that will make it harder for them to overcome poverty in the decades to come.  As our population ages, we more than ever need to benefit from the talents of every young person; we can ill afford to close off their opportunities to contribute.

The Coalition on Human Needs:  CHN is made up of groups representing service providers, communities of faith, labor, civil rights, and other advocates and policy experts concerned with meeting the needs of low-income and vulnerable people through effective federal investments.  CHN convenes the SAVE for All campaign (Strengthening America’s Values and Economy for All), which has brought together close to 2,000 organizations nationwide in calling for protecting low-income and vulnerable people in budget and deficit reduction plans, incorporating job creation in such plans, more revenues from fair sources in order to make the investments we need responsibly, and responsible savings, such as in Pentagon spending.