The war on poverty is lost

Is it time for a cease-fire in the ‘war on poverty’?

The unemployment numbers came out on Friday. They were worse than expected. Only 74,000 jobs added.

Meanwhile, the “labour force participation rate” has gone from 66% to 62%; a loss of about five million. That’s about 100,000 a month. In December, more people left the job market than entered it. So, the ‘unemployment rate’ went down.

The bad news had little effect on stocks. Investors thought it was good news, but they weren’t quite sure. On the one hand, it seemed to guarantee more EZ money from the Fed. On the other, it looks like the economy really is weaker than commonly thought. Gold shot up $17. Gold may have put in another bottom around the $1,200 level, but we’ll wait to find out for sure.

Meanwhile, the 50th anniversary of the war on poverty came and went last week, without much notice. No flags flying. No speeches. Veterans on both sides took their money and kept quiet.

But that didn’t stop hands from wringing, hearts from bleeding, and bellies from aching.
So, the war goes on. But as in many other of the feds’ wars, we don’t know which side we should be on. We’ve got nothing against poverty. Then, again, we’ve got nothing against wealth either. People should be able to decide for themselves what they want out of life.

But during the Lyndon Johnson administration, the rich got the idea that they should exterminate poverty, or at least gain a political advantage by appearing to try. So it was that on 8 January 1964, LBJ declared war:  “This administration today, here and now, declares unconditional war on poverty in America”.

That was 50 years and $20trn ago.

Jesus Christ warned us that eradicating poverty wouldn’t be easy. “The poor will always be with you”, he said. So far, it looks like he was right. The poor are still with us. About the same number of people, relative to the rest of the population, are poor today as were poor then.

But wait. It depends on how you define ‘poor’. And what we take from the article in the Wall Street Journal, by Robert Rector, is that the ‘poor’ are too rich for their own good.

The feds spend $9,000 a year per poor recipient. That, and other sources of revenue, give the typical poor person a rather rich life.

According to Rector, he “…lives in a house or apartment that is in good repair, equipped with air-conditioning and cable TV. His home is larger than the home of the average non-poor French, German or Englishman. He has a car, multiple color TVs and a DVD player. More than half the poor have computers and a third have wide, flatscreen TVs. The overwhelming majority of poor Americans are not undernourished and did not suffer from hunger for even one day of the previous year.”

Sounds pretty good, right?


Bill Bonner on markets, economics & the madness of crowds

To sign-up to Bill's free daily email just enter your email address below

Because these emails are completely free, we do have to fund them with advertising. Occasionally we will send you promotional emails, however we will never give, sell or rent your email address to any other companies.For more information, please see our Privacy policy.


Yes, but there’s more to life than creature comforts. And in attempting to exterminate material poverty, the feds created a new kind of poverty that is far worse.

In the ’80s and ‘90s, your editor lived in a war zone – a ‘ghetto’ in northwest Baltimore. There, too, there was plenty of money – at least, there was enough to buy gadgets and drugs. Everybody had a TV. And everybody had alcohol and drugs. There was a whooping party whenever the welfare cheques arrived. But it was not a very nice place to live.

When you pay people not to do much, that is what they do. And then, after doing so little for so long, they can do nothing else.

The Druid Hill area of Baltimore, where we lived for about ten years, was the front lines in the war on poverty. Few people had jobs. Instead, they just hung around. Idleness begat disorder. And trouble in personal lives, family lives, and the life of the community.

People slept at all hours and stayed up late at night partying. Children were poorly tended to, often out on the street in the middle of the night. The pavements were strewn with trash, and dangerous. Gunshots were frequent. Violent deaths were not uncommon. The red and blue lights of the gendarmes were never far away.

It had its charms. One of our neighbours had murdered another man in a drug dispute. He seemed like a nice fellow, at least as long as you didn’t get him too mad. He and a few others formed a kind of glee club, singing the Motown hits, until they passed out drunk.

They could get drunk every night, because they didn’t have to get up to go to work in the morning. The work world imposes order. You have to get up in the morning. You have to get along with your co-workers. And you have to get the job done. Mother necessity is a powerful civilising force. Take her out of a community and the place goes to hell.

Marriage, too, comes with civilising requirements. You have to get along with your spouse. You have to learn to live together. You have to take responsibility for other people and co-operate to get the job done.

But there were almost no marriages and no jobs in Druid Hill. Why? The war on poverty made them unnecessary. You didn’t need to have a job to support yourself. And you didn’t need to get married to support your children either. The feds would do it.

And Mr Rector totes the consequences: “In 1963, 6% of American children were born out of wedlock. Today the number stands at 41%. As benefits swelled, welfare increasingly served as a substitute for a bread-winning husband in the home… Children raised by a single parent are three times as likely to end up in jail and 50% more likely to be poor as adults”.

The war on poverty? The poor would be better off without it.

• Don't miss Bill's next Daily Reckoning. To receive the next article straight into your inbox as soon as he's written it, enter your email address below.

Because these emails are completely free, we do have to fund them with advertising. Occasionally we will send you promotional emails, however we will never give, sell or rent your email address to any other companies.For more information, please see our Privacy policy.

[xyz_lbx_custom_shortcode id=5]

• Stay up to date with MoneyWeek: Follow us on TwitterFacebook and Google+

  • Regentsplace

    Bill-please run for president. I know it would probably ruin you too but it would be refreshing just once to listen to someone who could eloquently elaborate the insanity of our system.

MoneyWeek magazine

Latest issue:

Magazine cover
In the balance

How May 2015 could hit your pocket

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 4 FREE Issues

Russell Napier: deflation is coming – hold on to your cash

Financial historian Russell Napier talks to Merryn Somerset Webb about the next deflationary bust – why it's coming, what it means for you, and how you can survive it.


Which investment platform?

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from. They all offer various fee structures to suit individual investing habits.
Find out which one is best for you.


28 November 1660: the Royal Society is founded

After the restoration of the monarchy, members of the 'Invisible College' asked King Charles II to approve their scientific and literary society on this day in 1660.