Poverty from the Great Society to the Great Recession
The combination of targeted economic policies and policies that support growth has had a significant impact on poverty.
In Winning the War: Poverty from the Great Society to the Great Recession (NBER Working Paper No. 18718), Bruce Meyer and James Sullivan contradict the belief that efforts to reduce poverty in the United States have met with little success over the last half century. They find that moving from traditional income-based measures of poverty to a consumption-based measure and adjusting for bias in price indexes shows that the poverty rate declined by 26.4 percentage points between 1960 and 2010, with 8.5 percentage points of that decline occurring since 1980.
Examining income measures from the Annual Social and Economic Supplement to the Current Population Survey and consumption data from the Consumer Expenditure Survey, Meyer and Sullivan take into account vehicle ownership, housing, and other expenditures. They also factor in inflation, changes in tax and transfer policies and demographics. They conclude that tax changes, particularly expansions of the earned income tax credit, have noticeably reduced poverty. Increases in Social Security have played a large role since 1960. Other transfers have not been as important, at least in the past three decades. In addition, some of the decline in poverty can be explained by rising educational attainment.
Meyer and Sullivan suggest that figuring out who has benefitted from economic growth or redistributive policies and who would benefit from additional targeted policies depends critically on whether one examines consumption or income. The consumption-based poverty results suggest much greater improvement for single parent families and the aged than do the income-based poverty measures. However, overall changes in consumption- and income-based measures are more similar for married two-parent families.
Despite repeated claims of a failed war on poverty," Meyer and Sullivan write, "our results show that the combination of targeted economic policies and policies that support growth has had a significant impact on poverty...There have been noticeable improvements in the last decade, though they are not as big as the improvements in some prior decades... We may not have won the war on poverty, but we are certainly winning."
--Matt NesviskyThe Digest is not copyrighted and may be reproduced freely with appropriate attribution of source.