American Dream: Poverty - Has Spending on Public Assistance Really Helped? [260*2]

POVERTY LEVEL vs PUBLIC ASSISTANCE SPENDING

CHART 1
CHART 1 | Source

The 1000-Word Chart Doesn't Tell What It Seems to Tell

THE GENESIS OF THIS HUB IS FROM A SERIES OF COMMENTS between Landmark Wealth (on the Right) and My Esoteric (on the Left) in a Hub Entitled “The American Dream: Why is the American Middle Class So Damn Poor? Under discussion was whether the federal government's spending on public assistance (excluding Social Security Insurance and Medicare payments) helps reduce poverty in America. It should be obvious that Landmark Wealth thinks it did not while My Esoteric thinks it did ... and does. In fact, by my calculations, for every 10% increase in public assistance spending (within certain limits), the poverty rate should decline on the order of 3%; that translates to 1.3 million people at today's rate of 14.5%, which, one hopes, will decrease to 14.1%

This round began with a chart (similar to the one to the right) I found in that far-left rag, The Heritage Foundation, the great defender of liberal thought. OK, so I exaggerated a little bit, but its still a good chart. Heritage, of course, was using it to support an argument that public assistance spending 1) doesn't do as advertized and 2) creates mass dependency on a welfare society. And, if you only glance at the chart, that is exactly the opinion you might draw; but, I saw something different.

They come to this conclusion because first, the dramatic drop in poverty rates from 1947 (where their chart started) and 1964, when Johnson first announced The Great Society program, followed by a continuing decline until about 1970. On the other hand, public assistance spending appears to be very low from 1935 - 1964 when it began to ramp up. By 1970, it had increased to about $200B. Spending appears to skyrocket while the poverty rate seemingly remains constant. Heritage, and Landmark Wealth, thinks this tells a devastating story about the value of public assistance spending ... to me, it tells an entirely different story because I am not predisposed to believing public assistance is worthless.

What Spending vs Poverty Rate Looks Like On A Smaller Scale

CHART 2
CHART 2 | Source

What My Esoteric Sees

I MUST SAY THAT I HAVE AN ADVANTAGE OVER MANY OTHERS in that one of my careers was analyzing data just like this. And, one of the things I learned is you can't look at something like this in a vacuum; in other words, without taking other factors into account. First consider the huge drop in the poverty rate from 1947 to 1970.

It occurs to me that prior to 1947, America was coming off of a war-footing. Before the end of WW II, Americans were 1) fully-employed and 2) drawing two incomes, if you were married. That accounts for the drop in the poverty rate from the beginning of WW II to its end in 1945. Then you get the sharp spike from 1945 to 1947 as incomes dropped when women were forced out of work and the soldiers returned home to few jobs. From 1947 on, the economy made the switch from war to peacetime with ever increasing number of jobs available for the men who were once at war. Also going on was an ever increasing amount of federal spending devoted to public assistance.

While many people see a flat spending line between 1947 and 1964, I take into account the scale effect. I also note that spending on public assistance increased almost 300% in those 17 years and Chart 2 shows what it looks like when you focus only on that time period .. it doesn't tell quite the same story, does it? In fact, it now looks like public assistance spending did help bring down the poverty rate.

The Second Half Tells a Different Story

CHART 3
CHART 3 | Source

In the next 15 year period, 1965 - 1980, public assistance increased 300% again, notice that is the same rate as the previous period. Here, while spending increases poverty keeps declining for a few years before leveling out at a little less than 12%. But, why didn't the rate continue declining? Well, if you consider what was happening economically from 1972 - 1980, one might see why. During the 70s, due to the oil embargoes and the Middle East crises, the economy was in great turmoil; this is when President Nixon dropped the gold standard altogether. One might wonder why poverty didn't increase! Could it be the increased spending kept it check?

Now look at the 1980s. What happens besides the 1981 recession with 10% unemployment? We see that 1) spending stopped growing, a President Reagan administration priority and 2) the poverty rate increased 25%, growing from ~12% to ~15%. In terms of people, that puts around 7 million more into poverty. During the boom years in the mid-80s, the rate dropped slightly before bouncing back up during the recession in the early 90s.

In the next 15 years, 1990 - 2004, public spending increased only 100%, although because of scale it looks like it is much more, but looks can be deceiving. In any case, we can see a Decrease in poverty rates back down to a little less than 12%. Then, in 2006, when the bubble burst and the economy started heading into the Great Recession of 2008, spending and poverty rates rapidly increased 37% and 15%, respectively, in 3 years, topping out in 2009. Finally, during the recovery, spending growth stopped and poverty rates began decreasing slightly.

Again, throughout this whole period, I detect a definite correlation between public assistance spending and poverty rates. This, of course, contradicts The Heritage Foundation conclusions. As I said, this is what the charts appear to tell My Esoteric; but appearance must be backed up by statistical analysis.

Analysis Results

IN THE SERIES OF HUBS BEGINNING WITH More Legal Guns ..., I went into great detail about how I develop this type of statistical analysis, and I refer you to that for an in depth discussion of my methodology. So, in this Hub, I will leave most of the math behind and just focus on developing the variables I tried and what the final result is.

The first thing one needs to do is decide an initial set of likely variables which might be involved. Two come to mind immediately are 1) the Poverty Rate (the Dependent variable) and 2) Public Assistance Spending (an Independent variable). The Poverty Rate is the dependent variable (dependent on the values of all the other variables) because that is what we are trying to predict. Public Assistance is the independent variable because our "null hypothesis" is that there is an indirect relationship between the two, i.e., the more money spent on public assistance, the lower the poverty rate. ... the hypothesis which Landmark Wealth and The Heritage Foundation maintain does not exist.

Obviously, however, there are many more possible independent variables which might raise or lower the poverty rate. The following are what came to mind for this iteration of analysis:

  • Population
  • Unemployment Rate
  • Taxing demographics
  • Economic demographics
  • Major world events, like war

Population

POPULATION WAS FACTORED IN TWO WAYS; one as a raw number and the other as spending per capita.

The idea for raw population is that as it increases there are more opportunities for "scale" to influence the poverty rate. For example, as the population grows it may become harder (or easier) to find work simply because the scale may make it that way. Another example is that as population grows, so 'might' raw spending on public assistance and how the growth happens may determine how much public assistance is spent.

Public assistance "per capita" does just the opposite, it factors out population growth and focuses solely on how much is spent per person. This way true growth in spending for public assistance is measured by looking at the change per person.

Both factors 'could' show up as significant, or neither can. In this case, only per capita spending turned out to be significant; we'll get into how it tracks with poverty rates later.

Unemployment

IT WOULD MAKE ALL THE SENSE IN THE WORLD that unemployment and the poverty rate would be tied at the hip. After all, if unemployment goes up, absent anything else, so must the poverty rate since people will be earning less money. One would expect, however, the degree of increase to be mitigated by any government support provided.

Tax Implications

THIS IS ONE OF THE MOST HOTLY CONTESTED FACTORS. Those on the Right would it has either no effect or, if it does, lower the better. The Left, on the other hand, maintains that how people are taxed has a great deal to do with whether people live in poverty or not.

The Lefts theory is that the flatter the income tax, and all other taxes for that matter, are, the more likely people will be forced below the poverty level because the higher taxes they must pay (because the well off pay less as a percent) eat into the minimum amount people need to survive.

For this iteration, I tried out the following tax related variables:

  • Top tax rate
  • Dollar floor of the top tax rate
  • Lowest tax rate
  • Dollar threshold for lowest tax rate
  • Ratio of tax rates
  • Ratio of floor and threshold

The idea for the top rates is that the more the rich are taxed, the more of the income that "trickled up" to wealthy is passed back to the lower class. The lower rates and threshold might be important because the lower one or both are, the more income the poor get to keep. One might also surmise the the ratios of high to low might offer up similar information. In the end, for this trial, only the Floor of the top tax rate came in as significant.

There are more that make sense but I will leave those for different study.

Economic Variables

THERE ARE MANY TO CHOOSE FROM TO SEE if they influence poverty rates. The ones looked at this time around were

  • whether there was a recession or not
  • whether these was a recession one period (year) from now
  • whether there was a recession two periods from now
  • whether there was a recession one period ago
  • whether there was a recession two periods ago

It is common sense that a severe economic downturn will have an impact on the poverty rate. The question is, when does it start showing such an effect? It could be during the recession itself, or people might start falling below the poverty line as the economy heads into a recession or, more unlikely, coming out of one. When I ran the regressions this time, the only significant economy related variable I looked at was two periods prior to the official beginning of a recession.

Major World Events

IT STANDS TO REASON THAT MAJOR WORLD EVENTS may increase or decrease individuals income and wealth. The only one I looked at here, though, was significant war, Iraq or worse. The presence of war did turn out to play a roll.

There are other events, like oil embargos (which might be considered economic), the cold war, etc which should be considered at some point in time.

A Word About Methodology

RARELY IS A SET OF DATA IN SHAPE TO ACCOMPLISH meaningful analysis. The main reason is the string of numbers which represent a variable is not linear in shape; if you plot them, they would looked curved. This is important because most, but certainly not all, regression analyses want an outcome that looks like X = aW + bY + cZ +...; that is the form of a linear relationship (X = a*Y*Z would be one of the non-linear forms).

Consequently, if you are working with non-linear data, you need to do something to straighten it out; this is called transforming the data. Once transformed, you can regress all of the data to obtain a relationship between the dependent variable (X) and any significant independent variables, assuming there are some. That is what I did in this case and once you have your equation, it is a simple matter of reversing the transformation to get an answer in understandable and relevant terms. When you see the equation below, you can tell what the transforms were by looking at anything with a power (^) function. If you want more detail, please refer to my series about gun control.

And The Answer Is ...

[If you don't care to know what the model actually is, you can skip down to the Sensitivity Analysis or What To Make of It All sections]

YES, VIRGINIA, THERE REALLY IS A CORRELATION BETWEEN PUBLIC ASSISTANCE SPENDING AND THE POVERTY RATE. And the relationship is:

BC-Poverty Rate = 0.9856 + 0.0364*A - 0.5406*B- 0.5233*C - 0.046*D - 0.0173*E

Where:

A = BC-Per Capita Spending (BC stands for the Box-Cox transformation)

B = BC-Adj Btm Tax Threshold

C = Unemployment Rate

D = Major War

E = Minor War

Makes perfect sense, doesn't it. Well, don't try to read too much into this because this is the 'transformed' equation as represented by the "BC" in front of most of the variables. BC stands for Box-Cox which is the transform method I used. What might make a little more sense is the following equation:

[2] 1/(Poverty Rate)^0.25 = 0.9856 + 0.0364*LN(A) - 0.5406*B^0.025 - 0.5233*C - 0.046*D - 0.0173*E

Where:

A = Per Capita Spending

B = Adj Btm Tax Threshold

C = Unemployment Rate

D = Major War

E = Minor War

Where (numbers in parentheses are the rage of data points or "relevant range"):

  • Poverty rates are in percentages (11.3% to 40.2%)
  • Per Capita Spending is in Thousands of 2012 constant dollars ($108 to $3,029)
  • Adjusted Bottom Tax Threshold are in 2012 constant dollars ($4,025 to $67,035)
  • Unemployment Rate (0.012 [during WW II] to 0.104)
  • Major and Minor War are dummy variables which are set to 1 if the event is happening.

Now, I realize the above equation probably doesn't mean much to most of you either for it is quite complex. So let me offer this in the way of explaining what is going on with each variable as it relates to the Poverty Rate:

  • Poverty Rate INCREASES if
  • - Public Assistance Per Capita Spending DECREASES
  • - the Adjusted Bottom Tax Bracket Threshold INCREASES
  • - the Unemployment Rate INCREASES
  • - there is a major war
  • - fhere is a minor war

So, bottom line is if more money (within the "relevant range") is spent on Per Capita Public Assistance Spending, the Poverty Rate 'should' decrease; all else being equal.

This is a very robust model, given the Adjusted R2 is 89% (meaning about 89% of the variation between the actual and predicted Poverty Rates is explained by these six variables. Further, each of these variables is significant to < 1% (meaning highly significant).

Some Sensitivity Analysis

TO GIVE YOU AN IDEA OF HOW MUCH EACH INDEPENDENT VARIABLE contributes to the Poverty Rate, one can run some sensitivity analysis. It works like this - we change the value of an independent variable by a known amount and see what happens to the Poverty Rate. First let's set up the baseline by replicating the 2012 input variables:

  • Per Capita Public Assistance Spending - $3,026
  • Bottom Tax Bracket Threshold - $17,400
  • Unemployment Rate - 0.083
  • Major War - 0
  • Minor War - 1

This results in an estimated Poverty Rate of 13% (the actual for 2012 is 15.0%)

Now let's vary each independent variable, on at a time, by 10% to see what happens to our Poverty Rate.

  • If you increase Per Capita spending to $3,260, the Poverty Rate changes from 13% to 12.7%, a 3% decrease
  • If you increase the Bottom Tax Bracket Threshold to $19,140, the Poverty Rate changes from 13% to 13.2%, a 1% increase
  • If you increase the Unemployment Rate to 0.091 , the Poverty Rate changes from 13% to 13.5%, a 4% increase
  • If there is no major war and no minor war. the Poverty Rate changes from 13% to 16.3%, an 25% increase*
  • If there is a major war and no minor war. the Poverty Rate changes from 13% to 11.5%, a 12% increase*

* These are pretty large changes and deserve more analysis in a later iteration.

Further Enhancement

LANDMARK WEALTH REVIEWED THIS HUB and still takes issue with it. To see what they are, go to the comments section of

http://myesoteric.hubpages.com/hub/The-American-Dream-Why-is-the-American-Middle-Class-So-Damn-Poor#comment-16394279

His view is that the rate of poverty has nothing to do to what is spent on it but instead, the amount of spending as a percent of GDP. I take exception to that because the numerator (public assistance (PA) spending) and the denominator (GDP) don't necessarily have to be correlated, meaning the numerator and denominator could be independent of each other and therefore produce false results.

So, I tested the idea (as well as spending as a % of GDP per capita) and found the following from the set of data I used:

  1. The poverty rate is poorly correlated to GDP and/or GDP per capita alone and in combination with other variables.
  2. The amount of per capita PA spending is marginally (R2 > .75) correlated with both GDP and GDP per capita
  3. The amount of per capita PA spending is moderately (R2 ~ .85) correlated with both GDP OR GDP per capita
  4. The poverty rate is correlated with PA Spending as a % of either GDP or GDP per capita
  5. Substituting either or both of the above for straight per capita PA spending produces a poorer model.
  6. The amount of PA spending per capita is highly correlated (R2 = 0.97)with ratio of PA spending to GDP per capita. This is extremely important as we shall see in a moment and goes to disprove Landmark Wealth's hypothesis.
  7. HOWEVER, adding PA spending as a % of GDP per capita did produce a potentially better model

As a consequence, the new model is, with an Adjusted R2 of 0.93, compared to 0.89 for the previous model:

[3] - 1/(Poverty Rate)^0.25 = 0.4557 - .0571*A^0.51 + 0.0923*LN(B) -0.3144*C^0.025 - 0.3825*D - 0.0331*E

Where:

A = GDP % spending per capita

B = Per Capita Public Assistance Spending

C = Adj Btm Tax Threshold

D = Unemployment Rate

E = Major War

None of the signs changed so are sensitivity analysis for the new variable is:

  • A 10% increase in the % of GDP per capita rate (either by increasing PA spending or decreasing GDP or some combination of the two) will drive a 9.8% increase in the Poverty Rate!

Well, this is a counter-intuitive result ... the result says more PA spending per GPD dollar per person, the HIGHER the poverty rate, not lower as theory (but not Landmark).would have it.

The reason we get this odd result is the first two independent variables are highly correlated with each other, as pointed out in bullet #7 above (this is called multicollinearity), and if present, can cause very strange outcome, as in our model's counter-intuitive result. So, what does one do with one of the offending variables? Toss it out.

The next question is, which of the two variables to keep. The answer to that is you use the one which gives the better model. And that would be our original model using just the amount of PA spending per person.

Getting Even Better

AS YOU CAN SEE, THIS KIND OF ANALYSIS IS AN ITERATIVE process as new information or ideas appear. In the last case, those new ideas didn't lead to any improvement in our model. After further discussions with Landmark Wealth, I hit upon a few more variables which, in the end, gave a much better model. That model is:


[4] - 1/(Poverty Rate)^0.1 = 0.4694 + 0.0311*LN(A) - 0.1544*B^0.025 - 0.3217*C - 0.0188*D + 0.1220*(1/E) - 0.0103*F^0.16 + 0.02280*(1/G^4.5)

Where:

A = Per Capita Spending

B = Adj Btm Tax Threshold

C = Unemployment Rate

D = Major War

E = Gini Index

F = Ratio of the Top Tax bracket Floor to the Bottom Tax bracket Threshold

G = % difference between this period's GDP and last period's GDP

Those last two new variables add a couple of more dimensions to the model to account for other factors that weigh on the Poverty Rate. The first is something called the Gini Index (published in the Census data). This index, in this case, measure the degree of income inequality in our society; the higher the number, the more inequality there is.

The second factor brings in recessions by looking for negative changes in annual GDP. If it is negative in a given year, that would generally mean the economy is in recession. When the dust settles, I end up with a very strong model whose Adjusted R2 is 0.96!

Table 1 below displays how an increase in each variable changes the Poverty rate. Table 2 gives the results from running a few trials on data ranges in which Landmark was interested.

Effect on the Poverty Rate With a Change in a Given Variable

VARIABLE
CHANGE
RESULTING CHANGE
Public Assistance Spending
Increase
Decrease
Bottom Tax Rate Threshold
Increase
Increase*
Unemployment Rate
Increase
Increase
Major War
Yes
Increase
Gini Index
Increase
Increase
Tax Floor to Threshold Ratio
Increase
Increase*
Change in GDP
Increase
Increase
TABLE 1 - *To me, these are counterintuitive results and needs further research. I would welcome comments.

Results of Trial Runs

DATE
MODEL RESULT
ACTUAL POVERTY RATE
% Difference
MODEL CHANGE
ACTUAL CHANGE
1978
11.5
11.3
1.77
 
 
1983
15.3
15.2
0.66
3.8
3.9
 
 
 
 
 
 
1984
14.1
14.4
-2.08
 
 
1992
14
14.8
-5.41
-0.1
0.4
 
 
 
 
 
 
1993
15.4
15.2
1.30
 
 
2001
13.4
11.7
14.53
-2
-3.5
 
 
 
 
 
 
2002
12.2
12.1
0.83
 
 
2006
13.2
12.3
7.32
1
0.2
 
 
 
 
 
 
2007
12.2
12.4
-1.61
 
 
2014
13.4
14.4
-6.94
1.2
2
TABLE 2

All-in-all, I am pleased with the results. Obviously, I need to understand what is going on with 2001, but the result is the result. I would like to have had all of the differences less than 5%, and I suspect with more tweaking of the transformations, a more accurate model can be produced. I am also pleased that, except for 1984 - 1992 tracking changes between years was relatively close and in the same direction. Even the one ending up with opposite changes, the changes are close.

Conclusion - The Poverty Rate Is Changed by Public Assistance (Welfare) Spending

WITHIN THE RELEVANT RANGE (and that is key) one can conclude that 1) the Poverty Rate and Public Assistance Spending ARE related and 2) their relationship is an Inverse one; when spending goes up, the poverty rate comes down. Besides emphasizing the spending must not exceed the relevant range boundaries ($108 to $3,029 per person, in this case) it must also be caveated that the above analysis does not prove a CAUSAL relationship; which means public assistance spending is the Cause of changes in the Poverty rate. It only means that it is Likely, because of the strong correlation between the two; strong enough to use in a predictive manner.

Also important is the Bottom Tax Bracket Threshold or that point of Adjusted Gross Income passed which the second lowest tax rate applies. Further, the equation indicates that the higher the threshold, the higher the poverty rate. Let me say that this result is, to me, counterintuitive, but. in this model, the Bottom Tax Bracket Threshold varies directly with the Poverty Rate. What this says is as the threshold increases, so does the Poverty Rate. It would seem to me the correct response is that as the threshold goes up, more and more people would be paying at the lower tax rate leaving more money to spend which should Lower the Poverty Rate, not increase it. The same idea holds with the ration of the Floor to the Threshold. On the other hand, one might posit that as the lower threshold is raised, other, related actions are taking place at the same time which tends to increase the total number of people paying taxes. That could explain what is happening as well; but in any event more analysis is needed.

I highlight these three variables, PA spending and tax related, because of the eight, these three can be directly manipulated by governmental fiscal policy. The rest cannot be directly legislated. And this gets to the heart of all of this work, in addition to establishing a relationship in the first place. Policy makers can use tools such as this, more sophisticated than I can create sitting on a couch watching TV of course, to determine either the potential impact certain policies may have or to determine starting numbers for the policy itself.

For example, suppose Senator so-and-so thought it good too raise spending on public assistance by increase the amount spent to $4,000 a person (it is currently at around $3,000 in 2012$). What could he or she expect to happen? Well, if my model is correct, they could surmise that the poverty rate would fall about 10.8% from 14.4% today to 13% in the future, everything else being equal.

Similarly, what if someone proposes to raise the top tax rate to 50% (a move I would support) without changing the ratio between tax floor and tax threshold, what could one expect? I developed another model that says doing that potentially could reduce the Gini Index (lower income inequality) by 2% from 0.468 to .459. Again, everything else being equal, one might see a surprising 6.4% drop in the poverty rate. That kind of outcome, if true, makes a powerful argument to raise the top tax rates more.

To conclude, the reason this Hub was written was to establish what kind of relationship, if any, exists between spending on poverty and poverty itself ... and we succeeded in doing just that. Those who deny this relationship need to either 1) find something wrong in my methodology or 2) do similar analysis showing a different outcome.

OPINIONS MATTER!

Do you think that spending by State and Federal governments on Public Assistance helps reduce the Poverty Rate?

  • If You Mostly Lean to the Left - Yes
  • If You Mostly Lean to the Left - No
  • If You Mostly Lean to the Left - Not Sure
  • If You Mostly Lean to the Right - Yes
  • If You Mostly Lean to the Right - No
  • If You Mostly Lean to the Right - Not Sure
  • If You Mostly Sometimes Lean Left and Sometimes Lean Right - Yes
  • If You Mostly Sometimes Lean Left and Sometimes Lean Right - No
  • If You Mostly Sometimes Lean Left and Sometimes Lean Right - Not Sure
See results without voting

DEMOGRAPHIC SURVEY

Are You

  • Male?
  • Female?
See results without voting

AMAZON ON PUBLIC ASSISTANCE

© 2015 My Esoteric

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21 comments

Larry Rankin profile image

Larry Rankin 17 months ago from Oklahoma

As always, My Esoteric, very thought provoking.

Financial assistance does help. No, not every program is effective, and there is such thing as too much help, but in general, it works very well.

Some factors that hurt assistance programs, certain entities throwing every wrench they can into the works to undermine their efficacy. And still they work.

Great read.


My Esoteric profile image

My Esoteric 17 months ago from Keystone Heights, FL Author

Thanks for the read and comment Larry, I appreciate it.


jackclee lm profile image

jackclee lm 16 months ago from Yorktown NY

The war on poverty has failed. Not because we didn't spend enough. The problem is as with all government programs. They mean well but it is ripe with abuse and fraud. The money would have been better spent on private charities which does help the poor.


My Esoteric profile image

My Esoteric 16 months ago from Keystone Heights, FL Author

How do you figure the war on poverty has failed? The data clearly shows it succeeded in its main purpose. Where is comparable analysis to the above to show that it failed?

Having said and asked that, was it done in effiecntly? Yes Was it done with a lot of wasteful spending? Yes. Was it poorly managed? Yes to all of those things and more. But the fact is, Americans are in much better shape today than if the programs from the 1960s on hadn't succeeded.


jackclee lm profile image

jackclee lm 16 months ago from Yorktown NY

The poverty rate has remained about the same since the 1960s inspite of record spending on entitlement programs. In fact, just over the last 7 years, food stamps, disability and welfare have increased to records levels. If that is your answer to winning the war on poverty, I'm sorry, I don't buy it. The best way to reduce poverty is jobs. Unfortunately, worker participation rate is at almost all time low. Why is that?


My Esoteric profile image

My Esoteric 16 months ago from Keystone Heights, FL Author

And I would change your first sentence to read - "The poverty rate has remained about the same since the 1960s BECAUSE of record spending on entitlement programs." That is what the data actually tells us when you factor in all of the other variables which determine the final poverty rate.

Simply seeing a flat line on a graph tells you 'absolutely nothing', especially if what it is implying is counterintuitive. What it does suggest is if further investigation is needed; which in this case it did.


jackclee lm profile image

jackclee lm 16 months ago from Yorktown NY

You mean to tell me that the poverty level will rise higher if we reduce entitlements? Your analysis must be faulty. You are missing a basic economic factor. Government taxes takes away funding from private sector which can invest and create jobs. The government has a terribly record with bureaucracy - the IRS, Veteran Administration, AMTRAK, the Post Office and ACA (Obamacare) are just to name a few. In fact, I challenge you to name one Federal program that has done so well that you would want it to do more. I can't think of any. The stats are clear, you can look it up. Disability rolls have increased much higher recently as well as EBT. Ask your self this question, has the workplace been more dangerous over previous years to cause more people with disability? I think not. By the government's GAO own admission, waste and fraud is found in every government program. I rest my case.


My Esoteric profile image

My Esoteric 16 months ago from Keystone Heights, FL Author

No, the data doesn't suggest that at all. What it says is that within the relevant range for each variable of the dataset I used in the regressions, if more money is spent on public assistance then poverty rates will tend to fall, everything else being equal.

By the way, "entitlements" is much too broad a term as it includes social security, medicare, veteran benefits, federal and military retirements just to name a few. Public assistance, the term and data used in this study, is limited to things like Medicaid, food stamps, actual public assistance payments to the needy, housing subsidies, etc.

As to faulty analysis, you start out with a misconception - that "taxes takes away funding from private sector which can invest and create jobs." The appropriate maxim is "that the government taketh away, the government giveth back". It goes like this, in its most simplistic scenario: Every dollar in taxes that was collected from the wealthy, some portion of that dollar would have been spent oversees or in other ways that does not help the American economy. When the government returns that dollar in the form of public assistance, infrastructure projects, gov't and military salaries, and a host of other things, a much larger percentage of that dollar goes back into the American economy.

The same case can be made for corporate taxes, especially on international corporations who would have spent a significant amount of the money that was taxed on things and salaries that benefit countries other than America.

In other words, what you believe to be true is simply false propaganda put out by ideologues whose agenda is to make the wealthy wealthier and not to benefit America.

Another myth is that the wealthy actually invest any significant amount of money in creating new jobs; they simply don't and it isn't reasonable to think they do. Why?

Because to create new jobs, businesses have to be created or expanded (or grow government, which may or may not be a good thing, depending on the circumstances). That is the ONLY way I can think of that would create substantial job growth. How is this done?

By expending money and resources directly into businesses "that is used effectively and efficiently". There are various ways to do that of course. One is venture capitalists (a small segment of your wealthy people). Another is buy bonds issued by companies. A third is buying stock issued as an IPO or other method buying "original" ownership of a business. Those directly impact job growth if they invested in the 20 out of 100 companies that make it, if new, or the growth plans actually turn a profit (not that many do). The final way the wealthy can affect job creation is buy 'massively' spending their disposable dollars directly into the purchase of American goods and services.

So, what you have to ask yourself is just how much of each 40 cents on each dollar "earned" above $400,000 goes to one those purposes, while keeping in mind that the ratio of earned dollars to unearned dollars (e.g., capital gains) is very low for the wealthy. Then compare that to the tax dollar spent on public assistance, 100% of which goes right back into the American economy.

As to "terrible records", what do you have to say about the 80 of 100 new start-up companies that fail? Or how about:

1. All of those financial institutions, starting with Lehman Bros, which either failed, were bailed out, and/or ripped the public off for multi-billions of dollars.

2. General Motors and Chrysler

3. Enron

4. Worldcom

5. Delta Airlines, Pan Am, American, United, US Air, and a whole host of others

6. Lyondell Chemical

7. Global Crossing

8. Refco

9. Pacific Gas and Electric

10. Conseco Insurance

just to give you a list of 10 out of tens of thousands in the last couple of decades. It just amazes me how people, seriously and in good conscience, can deride an organization charged with the toughest job in the world doing it successfully for the last 230 or so years; longer, I might add, than any American company in business today.

To your question about gov't programs, here are a few:

1. Medicare

2. Social Security

3. FAA, FRA, FTA, PHMSA, Coast Guard (I'm not sure FMCSA is run that well)

4. National Parks

5. the interstate freeway project

6. food stamps (helps a lot of military folks, by the way)

7. the U.S. armed force

8. Research and Development programs (responsible for most of the recent basic research advances since WW II)

9. NIH

10. FEMA (overall, but not under Bush)

Waste, fraud, and abuse is even more prevalent in large corporations than in government. (see list of BK companies above for starters)

Your case has not been made.


jackclee lm profile image

jackclee lm 16 months ago from Yorktown NY

I do not consider Medicare an entitlement since we all pay into the system. Medicaid is also not an entitlement because it is the safety net that some of us need and we are a compassionate society. Other than that, all other federal programs are not efficient; it is social engineering at its worst. Socialism has been tried in many parts of the world and it has failed. It was Margaret Thatcher who said "socialism works well until you run out of other people's money." Look, we have basically a different world view on government. I do not believe government is the solution from cradle to the grave. Many things can and should be done at the local level and with help of churches and extended family. That was the way it use to be and it lead to a more cohesive family structure. I believe the biggest problem we have today is the breakdown of the family unit and it started with the "war of poverty" programs. It pays single mothers to have babies they cannot support and it forces the father out of the equation. This and the poor public education system in the inner cities have contributed a whole underclass citizens that expect the government to provide housing, food and medical care... There is no incentive to achieve. Capitalism is the best economic system for prosperity. It is not perfect but it provides the right incentives for all to reach the American dream. What happened recently with some large corporations is a perversion of free enterprise system. It is called crony capitalism, where some corp. buy influence from our elected officials. The bailout bill is one such example which I opposed. The way it supposed to work is that companies take risks and sometimes they succeed and sometimes they fail. The government have no business interfering and picking winners and losers. It was Einstein that said "insanity is doing the same thing over and over again and expecting a different outcome." That seems to be what our government is doing now. Tax and spend seems to be the norm, never mind that we can't afford it. Just print more money using the Federal Reserve. If you want to learn more about basic economics, I recommend two books - Atlas Shrugged - by Ayn Rand and Freedom to Choose by Milton Friedman. Best to you.


My Esoteric profile image

My Esoteric 16 months ago from Keystone Heights, FL Author

Before we go further, please define "socialism" for me and name your source. I suspect we have two entirely definitions at play here.

Mine corresponds to these:

Merriam-Webster: - "a way of organizing a society in which major industries are owned and controlled by the government rather than by individual people and companies" and "any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods"

Wikipedia (4 separate citations are provided) - "Socialism is a social and economic system characterised by social ownership of the means of production and co-operative management of the economy, as well as a political theory and movement that aims at the establishment of such a system"

All other definitions that I am aware of are variations of the same theme as those above.


jackclee lm profile image

jackclee lm 16 months ago from Yorktown NY

Fair enough. The socialism I'm referring to is the social democratic model of most western European countries including Greece. The current Democratic Party calling themselves Progressives are trying to push America in the same direction. Look up Progressives and you will see what they are about. The claim of income inequality is part of that thinking. They believe in equality of outcome over equality of opportunity. I hope you see the difference. BTW, US Senator Bernie Sanders, a self described socialist, running for President says "Progressives" is just another word for "socialist."


My Esoteric profile image

My Esoteric 16 months ago from Keystone Heights, FL Author

Sanders can say what he wants, but there are few (besides his constituents) Democrats who go that far. (Just a historical note, the first Progressives were Conservatives, the Burke-Kirk definition, who felt that even slaves should be treated properly, although they nevertheless supported the institution. Another improvement from this group are public schools.)

Its progressivism that has been responsible for every societal move forward from public schools, to abolishing slavery, finally allowing women to vote, and getting rid of the conservative blockade to blacks right to vote. Adams (both), Franklin, Lincoln are examples of famous historical progressives.

There are actually four flavors of welfare capitalism; one practiced by the Nordic countries, one by England and middle Europe, a third practiced by what you referred to, Southern Europe, and finally the American version. Each has their pluses and minuses but after listening to lectures on each, it seems to me a mix between the American and middle European would, with a weighting toward American, seems best to me.

I doubt there are any truly socialist countries left in the world today with the collapse of the Soviet Union. But, the Nordic type is closest to what you are describing as what Democrats and Sanders wants for it is the most "liberal". The fact is, that is not what anyone that has power or influence is interested in or has ever proposed; probably even Sanders.

The most employee friendly, much to the detriment of their economy, are the countries of Southern Europe. By far the most anti-employee and draconian is the American welfare capitalist system. Throughout our history, save for the 60s and 70s, America, as a matter of policy, ignored the welfare of its citizens.

Until the 1930s, the government rarely lifted a finger to help tens of millions of its citizens who were destitute each time the economy collapsed (about 19 times in 115 years) from a manic high. It just let them suffer in misery, up to seven years on occasions. Why don't conservatives care about that?


jackclee lm profile image

jackclee lm 16 months ago from Yorktown NY

Conservatives care about the Constitution. It is not the roll of government to help all the poor. It leads to a dependent class and destroys their spirit. "It is better to teach a person how to fish instead of giving that person fish." As I said before, government bureaucracy is not the answer. Once a program is started, even with the best of intentions, it never stops and only gets bigger. A Bureaucrat in Washington cannot solve the problems at the local level. A case in point, after the natural disaster of hurricane Katrina in New Orleans, FEMA was late to respond and recovery of the city took years... Compare that to Galveston 1900, there were no FEMA then and the city rebuild and recovered much quicker. How do you explain that?

President Reagan has a quote - "The most terrifying words in the English language are: I'm from the government and I'm here to help."


jackclee lm profile image

jackclee lm 16 months ago from Yorktown NY

What do you think a "Conservative" believe? Just curious if you have a good understand of Conservatism, not what's been portrayed by the biased media but as practiced by modern conservatives. It is good to establish a common ground before proceeding further with constructive debate.


My Esoteric profile image

My Esoteric 16 months ago from Keystone Heights, FL Author

Yes, that is the view of Conservatives and Minimal-state Liberals who ignore the Preamble to the Constitution. Active-state Liberals, who care just as much about the Constitution, take a different view based on a reasonable interpretation of the Preamble (as well as Madison's notes on the Constitutional Convention).

Please provide empirical (not philosophical) evidence that "It leads to a dependent class and destroys their spirit. " is actually true in any significant way (meaning, yes, that does happen to a small percentage of people).

I can't think of anybody, including your most adamant socialist, that disagrees with ""It is better to teach a person how to fish instead of giving that person fish." But, the world actually is hugely complicated and the best taught fisherman can't find a job for extended period of time. Just ask many of 10 million people who lost their jobs from the Great Recession of 2008 (or 1837, 1857, 1897, 1929) who actually TRIED for years to get ANY job, and failed.

I would offer that American history is full of examples (i.e, every significant recession since 1784). Galveston, I don't think, is an apt example; the people had no choice but to do it on their own (in reading the story, I see the State didn't help either), it was not the policy of the federal government at that time to help any of the citizens responsible for its existence. Galveston was the deadliest, but not the most destructive. It cost about $700 million to fix, in today's dollars, where it cost between $21 and $60 billion for Katrina (and that is just what the insurance industry paid out.) There is no comparison. Further, given today's politics, I doubt the people of Galveston today would stand to have their taxes raised enough to pay for what was paid for in 1900.

What put's a lie to Reagan's quote is that Katrina (or Sandy Hook) would have been orders of magnitudes worse if not for the federal weather tracking system that has been built up over time; systems I gather you would have preferred the local and state officials to handle since nobody on your side of the aisle appears to want the feds help.


My Esoteric profile image

My Esoteric 16 months ago from Keystone Heights, FL Author

As to what I think Conservatives believe ... I go into quite a bit of detail about in my American History series. You might start with http://hubpages.com/politics/Do-You-Know-Who-You-R...

then go to http://myesoteric.hubpages.com/hub/American-Histor... In another one, I discuss Russell Kirk's conservative principals.


jackclee lm profile image

jackclee lm 16 months ago from Yorktown NY

Check out this for the destruction of the Black family -

https://www.lifesitenews.com/opinion/slavery-did-n...


jackclee lm profile image

jackclee lm 16 months ago from Yorktown NY

Political labels are for expediency but does not truly represent a philosophy - I prefer the following-

http://www.kirkcenter.org/index.php/detail/ten-con...


jackclee lm profile image

jackclee lm 16 months ago from Yorktown NY

In response to some of your comments, I created a new hub here -

http://hubpages.com/politics/Conservative-Principl...

Hope you had a chance to check it out.


My Esoteric profile image

My Esoteric 15 months ago from Keystone Heights, FL Author

To the Lifesitenews article - I was giving it serious thought until the author laid the blame on labor unions (which is apparently worse than welfare, reading between the lines). There were several statistical problems in the way the author concatenated and/or conflated certain pieces of information, plus, the author barely mentions welfare at all other than pointing out he didn't know when welfare actually kicked in, the late 1960s. The author presents no comparable data about white families; what the author did present was an overview.


My Esoteric profile image

My Esoteric 15 months ago from Keystone Heights, FL Author

I have read and written about Kirk's big 10. I frequently refer to them and, in fact, do so in a book I was supposed to publish two years ago.

It is very hard to convince people on either side of the aisle of your comment on political labels.

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