America's Poor.

The Poverty Problem Has No Quick Fix, but Politicians Keep Trying

POVERTY in America is back on the political agenda. The debate encapsulates issues -- minimum wage, health care, welfare reform and childcare -- that are as polarizing as any other among the American electorate. Addressing the issue, both Democratic presidential candidates, Al Gore and Bill Bradley, have announced programs to help those less fortunate should they be elected president.

Bradley's plan is to eliminate child poverty by offering a $9.8 billion "wholesale rescue effort" for the poor. Gore has responded with a similar plan to fight poverty -- calling for increasing the minimum wage and expanding tax credits and child-care subsidies. The issue has even found Republican front-runner George W. Bush attacking his own party in Congress for trying to "balance the budget on the backs of the poor."

The timing seems a bit odd. Why, in this booming economy, is poverty an issue? Has not a rising tide lifted all boats? Why has the issue gained political steam when the poverty rate for last month was at the lowest level in a decade?

Robert Greenstein, executive director of the Center for Budget and Policy Priorities, says something more fundamental is going on behind recent political posturing. Poverty is "an issue that resonates," he says.

Why does it resonate now? "Three reasons come to mind," Greenstein says. "This is the first time in a long while that politicians have had budget surpluses. It's natural for them to think more about spending initiatives." Secondly, he says, "the economy has been so good for so long that the middle class does not feel the usual squeeze which creates the resentment for taking their tax dollars."

A third aspect, he adds, is the combination of economic forces and the welfare system. "We've seen unprecedented decline in the welfare rolls, and people naturally don't mind helping working families rather than welfare families," he says.

Another war on poverty?

It has been 30 years since President Lyndon Johnson declared war on poverty -- a war that most people say the United States lost. According to the Heritage Foundation, the United States has spent nearly $7 trillion in programs that provide cash, food, housing, and medical and social services to poor and low-income Americans. Yet poverty still remains. A repeat of such a war is unlikely, but that does not mean poverty is not an issue.

Some argue that the stark numbers do not do justice to the scope of the problem. Bobbi Wolfe, director of the Institute for Research on Poverty at the University of Wisconsin-Madison, says the current poverty formula does not take into account the value of food stamps and other tax credits, instead relying solely on cash income.

"It doesn't give you a sense of who's poor and who's not," she says. "So at the same time it doesn't give you a sense of what policies are working."

But there is another side to the story. Sure, a large number of families are living below the poverty line, but evidence shows that many of those who are not doing well economically still are managing to maintain a decent standard of living.

Michael Cox, senior vice president and chief economist at the Federal Reserve Bank of Dallas and co-author of "Myths of the Rich and Poor: Why We're Better Off Than We Think," says studies measuring consumption rather than income are better determinants of poverty.

In his book, he cites the research by Dan Slesnick, professor at University of Texas, that suggests that one's welfare in a single period is more accurately gauged by his or her level of consumption. Over one's lifetime, consumption is a better indicator of "permanent income" than is current income.

"Consumption matters because it tells us what an hour's worth of work get you," Cox says. "In 1971, a color television went for more than $600 and one would have had to work 174 hours to purchase it. Today, a better 19-inch color television costs about $199, which requires 14 or 15 hours of work." Cox is arguing that the poor in America might not have more income than in the past, but they are living better.

Walter Williams, the George Mason University economics professor and syndicated columnist, says the tide is lifting all Americans, and dismisses accounting that labels a bottom tier "poor" even though their income continues to rise.

"Poverty, in the United States, is a relative thing," Williams says. "By historical and global standards, no one in the U.S. is poor. if you were an unborn spirit and God said he was going to condemn you to a life of poverty, but let you choose the country -- you should choose the United States."

James Patterson, Brown University professor and author of "America's Struggle Against Poverty 1900-1994," suggests exploring absolute and relative poverty.

"The poor today have unimaginably more goods and comforts than the 'poor' had in the past. On the other hand, their sense today of a relative deprivation -- owing to the heightened sense in our culture today of what are basic needs -- is more acute," Patterson says.

Is there a solution?

While the debate over whether the poor are getting poorer -- and whether the poverty problem is worsening -- rages, there is no doubt that there is class of left-behinds that are not getting by. The bottom line is, people still fall well below the poverty line -- and everyone agrees that something needs to be done to help them. There is no consensus, however, just what that solution should be.

Should it be done through the federal government or through local governments? Should it be done by expanding the government safety net or by letting the markets work the problem out? Are faith-based charities the answer or does it take effort by all Americans? The answer is probably somewhere in the middle -- but it is clear that these are the questions that need to be asked.

The U.S. Constitution promises that Americans should "promote the general welfare" of their fellow citizens. It is less specific on just how that should be done.

Andrew Olivastro is senior writer for IntellectualCapital.com.