 Hi, I'm James. And I'm Anthony. And this is Words and Numbers. So this weekend, we're going to talk a little bit about poverty. And I've been thinking about poverty a bit lately. You know, Lyndon Johnson, once upon a time when he was president, declared war on poverty. Reagan came along 20 odd years later and said, we fought a war on poverty. Poverty won. Right. And it gets you to think in a little bit about every time the United States fights a war against a common noun, right? So we've got a war against poverty, a war against drugs, a war against terror. They don't seem to work all that well. But today, we're going to stick with the war on poverty and think through a lot of the issues that surround that effort to eradicate poverty from our midst. Yeah. And this is interesting. The latest numbers, which I believe are from 2015, are that roughly 13 and a half percent of the U.S. population lives in what the Census Bureau defines as poverty. Yeah, but that's not quite it, is it? There's more to it than that. Well, there's a lot more to it. It's necessary to understand what the definition is to understand where we're going. So of course, the definition varies by person, right? So if we were one person, the poverty rate's like $12,000. If you're a married couple with two kids, it's like $24,000 thereabouts. But here's the interesting part. When we talk about poverty statistics, we count money that people earn at their job. We count social security retirement benefits. We count investment income. But what we don't count are things that the government gives to people expressly for the purpose of alleviating poverty. So things like food stamps, the earned income tax credit, housing subsidies, these sorts of things aren't counted. So you kind of have a before and an after view of poverty, what poverty looks like before the government does what it does and then what it looks like after. And we only really think about the before times as these things go, which seems to be deeply counterproductive, right? Because if you're poor and the government gives you a bunch of money or an in-kind donation of some kind, you might not be poor anymore. That's right. You might not be. And these things are hard to measure. But estimates are that if you count the money that the government gives people to help alleviate the poor, you're talking about something like a 2.5 percentage point reduction. So instead of 13.5 percent poverty rate, you're really talking about 11 percent after the government hands out whatever the government hands out. Right. Now I'm guessing there's more to it than that still. Well, it goes even further because here's the interesting part. The poverty definition, and this goes back to Lyndon Johnson, right? The poverty definition looks only at income. It doesn't look at wealth. So for example, if you've got a quarter of a million dollars stuffed underneath your mattress but you don't have a job, you'll be counted as poor. Is there some kind of rational number that we can work with? What percentage of the American population is actually and legitimately living in poverty? Yeah. So again, we're back to trying to estimate these things. And estimates, there are estimates that say if you take away the people who are wealthy in terms of wealth, albeit not in terms of income, that that knocks another 3 percentage points off the poverty rate, which brings us down to about 8. So roughly speaking, you're talking about somewhere in the neighborhood of 8 percent, perhaps on the low end to 10 percent on the high end. That's poverty in the United States. And how many human beings does that equal? Well, roughly you're talking about 41 million. All right. It's a lot of people, regardless of how we do the math and how we slice the categories. It's still in the end going to be quite a large number of human beings. And clearly, we want to say something like, okay, maybe we're overestimating the number of people who actually live in poverty. Nonetheless, we are still looking at in excess of 40 million Americans. Right. And then the obvious question comes, okay. If we've got 40 or so million Americans living in poverty and we're engaging in, I think, profligate spending to aid and assist that group of human beings. So let's stop there for a minute and figure out how much we're actually spending on poverty relief in the United States year over year. Yeah. And there the question gets even more interesting, right? Because if you thought it was hard to figure out how many people live in poverty, try and figure out how much we're spending to alleviate poverty, and you've got an even bigger problem. The numbers range from a low of around $250 billion a year to a high of $1 trillion a year. And the difference in the numbers hinges on what sorts of things you want to include or exclude, right? There is no line item on the federal budget that says welfare spending. It's a whole bunch of programs that some of which arguably maybe really don't apply exclusively to the poor and maybe we shouldn't count them, right? But at the end, you're talking about some number in the range of $250 billion a year to $1 trillion. That's what the government spends trying to alleviate poverty. Well, predictably, we're going to get back to this possibility of a line item on the budget for poverty relief in a minute or two. But are you telling me, I mean, let's really think this one through, are you telling me that we actually can't, and we're a couple of bright guys, we should be able to figure things out, right? We can't actually figure out the amount of money we spend year over year on poverty relief. And as a matter of fact, it's so difficult that the answer could be literally anything between $250 billion and a trillion dollars. Yeah, yeah. I mean, step back and think about it. The margin of error in the number exceeds the economic output of a lot of the countries on the planet. Right? This is a gargantuan uncertainty. Yeah, by a very, very healthy margin as these things go, right? Yeah, but here's the interesting thing. Even if you take the low end number, so let's take the most conservative and say, all right, suppose the government spends $250 billion a year trying to alleviate poverty. With 41 million people living in poverty, and forget about the problems with the definitions of poverty, right? This is the government's definition, 41 million people. If I take that $250 billion and divide it by 41 million, I could cut each poor person in the United States a check every year for $6,000, which doesn't sound like much until you step back and think about that family, two parents, two kids. That's four people in a poor household, which by the government definition is $24,000 income. If they received $6,000 per person, they would double their income to $48,000, which is now coming up on the median household income. So now stop me when I become too cheerfully optimistic here. I know it's not the kind of thing we usually say out loud that I've become cheerfully optimistic, but I may be wrong. But haven't we just eradicated poverty in the United States for exactly the low end estimate of what we're already paying anyway? Yeah, that's the odd thing. Even at the low end estimate, if you got rid of all of the alphabet soup of agencies that we have that deal with poverty and just cut every poor person a check and be done with it, you could spend the same amount of money and quite literally eliminate poverty overnight. Of course, we would run into the related problem of unemployed bureaucrats, which would probably cause a bit of a problem here. Well, they can now go do something productive, like actually produce some goods, right? Well, I mean, if they're bureaucrats by profession, they're probably unfamiliar with the notion of productivity. But here's something else that's going on in the background. The way we try to do poverty, and this has evolved over time because as we see problems, we create new agencies to try and help with these problems. And what's happened is it's very, it's analogous to a person who's sick and the doctor prescribes a medicine and some other doctor prescribes another medicine and a third doctor prescribes another medicine. Before you know it, you've got these medicines interacting with themselves in ways that nobody anticipated. And that's what we have with our current alphabet soup of handling welfare. So you put all these programs together, and what happens is they start to interact in ways we never anticipated and never intended. I'll give you an example. There's an economics professor, Clifford Thies, who's done an analysis of this, and he asked the question, let's take a family, two parents, two kids living in poverty. And let's ask what happens as they start to earn more money? Thies looks not only at how much additional taxes they will owe, but as they earn more money, he also looks at the plethora of government welfare benefits that they cease to get. And what he finds is horrifying. For the family who earns about $24,000, as they start to earn more money, they actually become worse off. Not only are they being taxed more, but they start to lose benefits so that when all the dust settles, they're actually better off staying poor than trying to get richer unless they can immediately jump to $40,000. So we've created inadvertently this poverty gap. If you can't go from $24,000 immediately to $40,000, you're better off staying at $24,000. But of course, if we did exactly what you said earlier and just start cutting checks and dismantle the welfare industry really as it really exists, we could get beyond that problem. Oh, yeah. That problem completely goes away. And the other problem that goes away, which is probably endemic to any welfare system, is the massive problem of inefficiency, right? Because in order to get money from taxpayers to other taxpayers, you have to set up this massive bulwark of government in the middle. And that's where all the inefficiencies are introduced. So wouldn't it be better just to have money in and money out? I'm not saying that this is the thing that we would advise in the end. It might or it might not be. But as we sit now, this is a far better approach down the same road. Yeah. And in a real way, it's more respectful of the people who are receiving the benefits because under the current system, we have government bureaucrats dictating how much people should spend on food, how much they should spend on housing, how much they should spend on health care. And the government will dole out these benefits in the magnitude that the government bureaucrat thinks is best. But if you give the person a check, you say, look, I don't understand your circumstances, but here's enough money that can buy the things you need to buy. You go figure out for yourself what it is you need. It's much more respectful of the person. No. And it's typically where we, you and I end up falling on matters such as this, right, regardless of the approach we take to get there. The common answer seems always to be, live your life as you see best, and we'll just stay out of it to whatever extent we possibly can. You know, like I said, I'm not sure this is the right answer, but it's clearly a better answer. I think it's a better answer. But one of the things we have to be careful of is that this can be used because it starts to sound a lot like this thing people talk about the universal basic income. Yeah, universal basic income. And here's the danger where UBI is concerned. It's great if it replaces the current welfare system. That's a better solution than what we have now. But a worse solution than what we have now is if it sits on top of the current welfare system, because then you preserve all of the inefficiencies you talk about, plus we have an additional expense on top of everything else. Right. What we typically end up with every time we tinker with the system is an overlay on top of an inefficient system that's theoretically designed to fix the inefficiencies within the system. But of course, it just adds more. Right. Exactly. Including thought ant. Got anything wise and wonderful to say to us as we leave this week? Well, I think one thing that we should keep in mind and absolutely we should be concerned about the poor, no question, but also to put things in perspective that life in the United States, even for the poor, is remarkably good. So we talk about for a single person, the poverty line is $12,000 annual income. If you look at the world as a whole and adjust for differences in cost of living, that's almost the median household income. So what we consider poor in this country, the rest of the world actually considers middle class. Yeah. And that's really not a bad place to start if that's where we're going to start. So that's all we've got time for today. Thanks for watching this episode. We'll be back next Wednesday at about noon with another one. In the meantime, feel free to click on that subscribe button down there and check out everything on fee.org and at fee online on social media for all kinds of great content. We'll see you next week. See you next week. Have a good one. See you next week, James.