Is Poverty Really the Result of Bad Luck?

On Thanksgiving eve, a Nicholas Kristof editorial instructed us on how to think about poverty in The New York Times. The main reason there is poverty, he tells us, is bad luck.

We don’t choose our parents, after all. Or the household or neighborhood we are born into. Here are a few of his observations, with my emphasis added:

“As Warren Buffett puts it, our life outcomes often depend on the ‘ovarian lottery.’

[T]he difference between being surrounded by a loving family or being homeless on the street is determined not just by our own level of virtue or self-discipline, but also by an inextricable mix of luck, biography, brain chemistry and genetics.

[S]uccess in life is a reflection not only of enterprise and willpower, but also of random chance and early upbringing.”

So what’s the solution to this problem? It is apparently very simple: All we need is love. (Kristof’s column is actually titled “Where Is the Love?”) And just in case you are not motivated in that way, Kristof draws on the work of Harvard professor John Rawls to give a rational philosophical reason to spend more on welfare programs.

But before getting into that let’s pause for a moment. Is being born really a matter of luck? Doesn’t that take willful activity on the part of two parents? And is the inability of parents to support their children really a matter of luck? Or is it the result of bad habits and undisciplined behavior?

Let’s grant that some people do have bad luck. But bad luck usually strikes randomly. Absent hurricanes and tornados, we don’t expect misfortune to befall entire neighborhoods—to say nothing of entire cities.

Kristof’s particular focus is on Food Stamps, given the debate in Congress over whether to cut spending on the program. So let’s concede that misfortune can cause some people to be hungry. But does that include the entire city of Dallas?

Every single child attending public school in Dallas, Texas is getting a free lunch and a free breakfast. The reason: There are so few children who don’t qualify for free or subsidized food that it made administrative sense just to give free meals to everybody. And as I wrote previously, the trend around the country these days is to add a free supper as well. So the only time kids will need Food Stamps is on weekends.

By the way, Dallas is not like Detroit. The economy is booming. As Texas Governor Rick Perry is fond of pointing out, Texas has created almost half the new jobs in the entire country over the past decade. So why, in the midst of all this growth and prosperity, is every school child in the city living in a home where the parents cannot afford to put food on the table?

At some point you would think that even New York Times editorial writers would come to suspect that the welfare state is not relieving poverty. It is creating it.

We have spent $15 trillion “fighting” poverty since 1965 and we are currently spending $ 1 trillion a year—an amount equal to about $22,000 per poor person or $88,000 for a family of four. Yet our poverty rate today (16%) is higher than when we started (14%)! If there has been a War on Poverty, poverty won.

Is it not obvious that we are subsidizing and enabling a way of life? To put it bluntly, we are paying young women to have children out of wedlock. We are paying them to be unemployed. And we are paying them to remain poor.

Now let’s turn to the rational (non-emotional) argument for the welfare state. Kristof writes:

“John Rawls, the brilliant 20th-century philosopher, argued for a societythat seems fair if we consider it from behind a ‘veil of ignorance’—meaning we don’t know whether we’ll be born to an investment banker or a teenage mom, in a leafy suburb or a gang-ridden inner city, healthy or disabled, smart or struggling, privileged or disadvantaged. That’s a shrewd analytical tool—and who among us would argue for food stamp cuts if we thought we might be among the hungry children?”

Warren Buffett, by the way, makes a similar argument.

And in both cases, it’s a surprise that these two very intelligent men cannot think of any other policy options. Remember, behind the Rawlsian veil of ignorance you don’t have to worry about what is politically practical. You can choose any public policy you like.

So wouldn’t a rational person ask how public policy could be changed so that fewer children are born to alcoholic mothers who don’t read to them or encourage their mental development?

It appears that government doing nothing would have vastly decreased the odds of being born as a child of such mothers. During the Reagan years the Council of Economic Advisors tracked the reduction in Post-World War II poverty as a function of economic growth. The conclusion: if there had never been a War on Poverty, the poverty rate by the mid-80s would have been significantly below where it actually was.

Bringing those estimates forward, if there had never been a welfare state, economic growth alone should have virtually eliminated poverty by now.

Today, Buffet and Kristof standing behind a veil of ignorance—about to be born into the United States—would have a one in two chance of experiencing a birth paid for by Medicaid. Absent the welfare state, their odds of needing charity to be born would have been on the order of two or three out of 100.

Of course now that we have created the welfare state, and the culture that depends on it, it’s virtually impossible to end it and ask everyone on the dole to go cold turkey. But we can do something else. We can privatize it.

More on that in a future editorial.