A Debt to Ourselves
One devastating hurricane--with another in its train--has catapulted poverty and race to the top of our national agenda. The reaction of the Bush administration, reflecting America's shame at the slow response of government at all levels, has yielded the polar opposite. We now have a swift commitment to relief and reconstruction that might cost an unprecedented $200 billion. This raises many questions.
Here are some. What should the role of the federal government be in rebuilding the Gulf Coast? Should we be spending such a fortune on an area that will continue to be prone to natural disasters? How should we pay--through increased taxes, increasing the deficit, or cutting other federal programs? Is the Bush administration, in part compensating for its perceived failure, setting a precedent for Washington to pick up the tab for every natural disaster? Are the taxpayers being committed to bailing out every single victim of every major fire, flood, hurricane, and earthquake, whether the victim is landlord, homeowner, business, or tenant? For example, do we, as taxpayers, compensate the 20 destroyed casinos on the Gulf that were built in full knowledge of the risks there? As for Hurricane Katrina, do we not need a nonpartisan commission to examine the government foul-ups or a nationally respected reconstruction czar? Without informed scrutiny, too much money will dribble away for the benefit of special interests, politicians, and lobbyists. Then, instead of simply emoting about poverty, we must ask some serious questions. Barack Obama, the only African-American in the U.S. Senate, has said that the government's "ineptitude was colorblind." But what the wall-to-wall TV coverage showed us was a pitiable human face that was mainly black in its isolation and sense of abandonment.
Defining poor. President Bush has pledged billions to meet the "duty to confront this poverty" and "inequality." But just what is the scale of poverty in America today? The number of Americans living below the poverty line increased by more than a million last year, to roughly 37 million--up from 31.1 million in 2000. For a family of four, the official poverty rate is $19,300; and at this level, it is up from its recent low of 11.3 percent in 2000 to 12.7 percent last year. Yet the latter number is virtually the same as it was in 1970. Six years before that, in 1964, the overall poverty rate was 19 percent. Poverty among African-Americans, meanwhile, has declined sharply, from 55 percent in 1959 to just under 25 percent last year. Poverty among the elderly has also dropped sharply, to an all-time low of nearly 10 percent last year, primarily as a result of improving the real benefits from Social Security.
In fact, new and improved government programs such as food stamps, Medicaid, housing subsidies, and the earned income tax credit have dramatically cut the numbers of poor in America and reduced the severity of poverty for those who remain poor. We are spending about $200 billion on four major programs: food stamps, the eitc, Medicaid, and Supplemental Security Income. Since 1990, the number of Medicaid beneficiaries has risen from 20 million to over 50 million, while eitc recipients have expanded from 12.5 million to over 19 million.
What also helped reduce poverty was the economic boom of the 1990s and the 1996 welfare-reform act. By imposing tougher work requirements, the new welfare law raised the proportion of single-mother recipients with jobs from 46 percent in 1994 to 66 percent in 2002. It also cut the number of families receiving traditional welfare from 5 million in 1994 to 2 million in 2003.
So why haven't overall poverty rates declined further? In a word, immigration. Many of those who come to the United States are not only poor but unskilled. Hispanics account for much of the increase in poverty--no surprise, since 25 percent of poor people are Hispanic. Since 1989, Hispanics represent nearly three quarters of the increase in the overall poverty population. Immigration has also helped keep the median income for the country basically flat for five straight years, the longest stretch of income stagnation on record.
Another major contributor to poverty in America is low wages--a reflection of a federal minimum wage that has remained unchanged for eight straight years. Today, the minimum wage is roughly two thirds less than the wages of all private-sector, nonsupervisory workers. That's a 56-year low, down significantly from the 1950s and 1960s, when the minimum wage was between 50 and 60 percent of private-sector levels.
Raising the minimum wage should surely be considered by this Congress. Hurricane Katrina has refocused old issues and created new ones. How humanely--and sensibly--we address them will say much about the nature of our country in the next decade and determine how we are perceived by the rest of the world.
This story appears in the October 3, 2005 print edition of U.S. News & World Report.