An unpublished letter to the New York Times

by John Quiggin on October 27, 2012

Gary E. MacDougal (The Wrong Way to Help the Poor, 10/10/12) claims that the Federal government currently spends an average of $87000 a year on the typical family of four living in poverty. MacDougall’s calculation is out by a factor of at least four and probably more.

MacDougal’s source, Michael Tanner of Cato, treats all means-tested programs as anti-poverty programs. This includes the Earned Income Tax Credit, Family Tax credit and other programs for the middle and working classes. As Tanner admits, these programs have at least 100 million recipients, and probably many more. So, the average payment is less than $10 000, not the $20, 610 Tanner estimates.

It gets worse. The number of recipients doesn’t include children or adult dependents, but MacDougal’s calculation does. His family of four would include at most two benefit recipients, and would therefore receive less than the poverty line income of $23 050.



Tim Worstall 10.27.12 at 7:57 am

Oooh, one of my favourite subjects. The Godawful Mess that is the American system of measuring poverty.

The $87,000 is nonsense of course. But there is an important underlying point here. Which is that the US poverty numbers are largely the number who would be in poverty if there were not poverty alleviation efforts. This is not strictly and exactly true: direct cash transfers are included in market incomes before that number of people living in poverty is calculated. But everything else that gets done gets ignored.

Any aid through the tax system (thus out with the effects of the EITC), or any benefits in kind (food stamps, Section 8 housing vouchers, Medicaid if you like) gets ignored.

BTW, this is nothing at all to do with whether the US should do more (or less). It’s just an explanation of the numbers as presented. And as long as everyone knows all of this there’s no problem.

Except, when we start to come to comparisons. For every other country measures poverty after all the things that are done to alleviate it (yes, there is also the difference that it is not a fixed level, rather it’s a percentage of median income). It would, for example, be rather scary to consider what the UK poverty rate would be if we ignored social housing, housing benefit, that portion of benefits which paid for food for the household, and all any any child or working tax credits. But that would be the equivalent to the US number.

There’s more too. As I said when JQ was writing Zombies in public for our delectation. Pre the mid 1960s the US poverty rate included poverty alleviation. Because most poverty alleviation was done by direct cash transfer. Since then there’s been a bipartisan shift (I recently found out it was actually started by LBJ although Ford with the EITC is also involved and huge arguments under Nixon about how to actually do this, Friedman often involved) to delivering poverty alleviation through the tax system and benefits in kind.

So, the poverty measure has moved, over the decades, from one measuring poverty after poverty alleviation efforts to one measuring it before (most) poverty alleviation efforts. Which makes statements comparing the poverty rate over time somewhat difficult.

Why is this important? Well, from one side, it gives Tanner (although maybe he hasn’t actually said it although PJ O’R definitely did) the opportunity to say that we’re spending hundreds of billions on solving poverty but look, we’re not solving poverty. Which isn’t true, a lot opf poverty is alleviated by that spending.

It also leads to election promises like those by John Edwards (pre-blonde troubles). We;; double the EITC, issue a million more Section 8s, expand Medicaid….quite possibly all good ideas which would alleviate a lot of poverty. But which would move the number recorded as living in poverty by not one single person.

There is a real statistical problem here. The $87,000 number is nonsense: although I have a feeling that JQ’s $10,000 is too low (many people will be getting small amounts, meaning that many others will be getting larger than the arithmetical average share) to be representative of what an adult with children gets (the single and childless get pretty much nothing I think).


John Quiggin 10.27.12 at 9:28 am

I was going to use the point you make against Tanner about EITC, but NY Times has tight word limits.


cs 10.27.12 at 12:44 pm

I guess MacDougal wants to claim that the purpose of these programs is to help the poor (even if not all the benefit recipients are poor), so it makes sense to compare the amount of money spent to the number of poor people helped.


Watson Ladd 10.27.12 at 1:07 pm

I actually like the US number better. It means that we are measuring directly how many Americans cannot earn enough to live on, rather then asking how well the dole compensates the unemployed. When 50% of the nation’s children have to be feed by the government, no matter how well the government does the job, we have a problem in capitalism that cannot be resolved except through socialism, because those children are in a real sense not members of society.


tardigrade 10.27.12 at 1:20 pm

Yes, MacDougal is misleading. And inane. Indeed, he reaches Alan Simpson levels of accounting and moral atrociousness.

As far as the question of what people actually receive in subsidies/services is concerned, I am in no position to suggest a reasonable figure. There are too many “it depends..” in individual cases. To give an example, myself, I am a disabled person living on SSI and receive subsidies of section 8, Medicare/Medicaid, SNAP (food stamps) and transportation. I estimate that if I had to pay the subsidies out of pocket, I would require $15,120 a year beyond my disability cash benefit of approximately $700 a month. While this is not Tim Worstall’s “next to nothing” for a single, childless person, it could hardly be considered average for a number of reasons. 1) I live in a north suburb of Chicago, and my Section 8 subsidy is quite high compared to the country over all, 2) my covered medical expenses (approx. $410/month) are low compared to many disabled and seniors in “poverty programs”, 3) because of a crazy ex-Governor of the state, I qualify for free public transportation. I have not attempted to estimate the public share of case management services, or education expenses as I have only recently begun college.

For what little it is worth, reflecting on my own figures, I would not be surprised if a family of four in New York City received something like $87,000 in combined cash/services/subsidies for a period of time, but this would be an outlier for the country as a whole. I also note that MacDougal’s inane discussion – how would block grants reduce the number of agencies and programs involved? – makes no attempt to distinguish between disabled, elderly and younger non-disabled groups and takes no account of the heavy load of medical benefits for disabled people and senior citizens in his figures.

Beyond this, all I can say is that I am rather sick to see that McDougal is in Chicago, and has been a Republican advisor in the past. We have already had some consolidation of services in the state of Illinois and the City of Chicago. Personally, I have seen no sign that these have been of any value.


Fu Ko 10.27.12 at 2:21 pm

Watson Ladd: “If you receive EITC, you’re not a member of society.”


jonathan hopkin 10.27.12 at 3:29 pm

The OECD Divided We Stand report ( does have a variety of comparative measures not only of poverty and inequality, but also of the effect of various government programmes (in cash payments and services with imputed income values). So if you want to look at how poverty in the US compares with other countries, check it out (and if you don’t fancy it, the story in brief is that the US anti-poverty measures are pretty paltry by comparative standards).


Watson Ladd 10.27.12 at 8:03 pm

Fu Ko: Being a member of bourgeois society means working. The problem with unemployment is deeper then lost wages: even if it was politically possible to guarantee an income to all, the way value is created in the world of work makes this undesirable in some sense. Transfers are not the way to socialism: they only reinforce the distinction between those who can work and those who cannot.


Tim Worstall 10.27.12 at 8:51 pm

“the story in brief is that the US anti-poverty measures are pretty paltry by comparative standards”

Sure. Well understood. Although one slight correction. US anti-inequality measures are pretty paltry. That’s absolutely true. It was the EPI’s “State of Working America” which some years ago pointed out that the actual living standards of the bottom 10% in the US were around and about the same (drawing on Tim Smeeding’s work) as the bottom 10% in Sweden.

Anti-poverty and anti-inequality are really not quite the same thing.


Tim Worstall 10.27.12 at 8:52 pm

“but NY Times has tight word limits.”

As blog comment sections do not. Apologies.


Don Kirk 10.28.12 at 12:55 am

The anarchist scholars at Cato can be relied upon to interpret data on welfare such that they denigrate government policies, just as the socialist scholars in academia can be relied upon to interpret data on welfare such that it denigrates individual responsibility.

As Marx noted, capitalism is the prosperity engine yielding so many “golden eggs,” while Churchill noted that socialism results in equal impoverishment. When do we finally reach the understanding that capitalism is the Golden Goose and socialism should fight over how the eggs are to be spent, not on how to strangle the goose?


phosphorious 10.28.12 at 1:26 am

“When do we finally reach the understanding that capitalism is the Golden Goose and socialism should fight over how the eggs are to be spent, not on how to strangle the goose?”

When someone, ANYONE, to the right of, let’s say,Bill Clinton admits that “spending the eggs” and “strangling the goose” are not the same thing.


John Quiggin 10.28.12 at 5:08 am

@Tim Maybe you could point to the EPI report. As a summary of Smeeding’s work your statement is certainly misleading. To quote Smeeding, Rainwater and Burtless (2000) , United States Poverty in a Cross-National Context

The United States ranks second highest among the 11 in per capita income, yet it ranks third highest in the percentage of its population with absolute incomes below the American poverty line. The per capita income of the United States is more than 30 percent higher than it is, on average, in the other ten countries of our survey. Yet the absolute poverty rate in the United States is 13.6 percent, while the average rate in the other 10 countries is just 8.1 percent—5.5 percentage points lower than the United States rate


Watson Ladd 10.28.12 at 5:25 am

Also don’t forget the paucity of public services in the poor areas of the US. Crime, poor schools, neglected parks all have an impact on quality of life that income measures are hard-pressed to account for.


Matt McIrvin 10.28.12 at 6:15 am

In the US, we have to measure poverty before anti-poverty measures, because if we measured it by people’s status after such measures, it would immediately lead to a political outcry to take them away. (Those freeloaders aren’t even poor any more! Why can’t they stand on their own two feet? Give them some tough love!)


Jeff Guinn 10.28.12 at 7:06 am

Gary E. MacDougal (The Wrong Way to Help the Poor, 10/10/12) claims that the Federal government currently spends an average of $87000 a year on the typical family of four living in poverty.

No he didn’t, not even close. From the article:

But for now, let’s use that $1 trillion figure [ to ask a broader question: Are we spending this money in truly the best way to help the poor?]

Consider a thought experiment: Divide $1 trillion by 46 million and you get around $21,700 for each American in poverty, or nearly $87,000 for a family of four.

(Emphasis added.)

His point is clearly that our antipoverty programs are fragmented, overlapping, wasteful , poorly targeted.

Which is why what we are ostensibly spending on those programs does not yield actually yield $87,000 per poor family.

You missed the point by a mile, and along the way slammed him for an assertion he clearly didn’t make.


Tim Worstall 10.28.12 at 12:00 pm

“@Tim Maybe you could point to the EPI report. As a summary of Smeeding’s work your statement is certainly misleading.”

State of Working America 2006. Which seems not to be online any more (at least I couldn’t find it when I tried a few weeks back). I wrote it up for TCS (I know, I know). The interesting chart is no longer on that original piece but it’s reused by Johann Norberg here :

And me here:

Leave the political rhetoric out for a moment (either mine or Norberg’s). The calculation is to use PPP adjusted income (and including all aid and poverty alleviation so it’s really consumption) and reference that to US median income.

No, not the Swedish numbers to Swedish median, Danish to Danish, but all to US median income.

The bottom 10% of Finnish and Swedish households get 38% of US median income. The bottom 10% of US ones 39% of US median income. The EPI drew the numbers from Smeeding’s work on the LIS. Smeeding’s original paper (again, can’t find it online ah, no, sorry, it’s the one you refer to) made the point that yes, the Finnish and Swedes would have access to cheaper/better healthcare. The USians to cheaper (not necessarily better) food. While he didn’t quantify this he did say that he thought such differences were pretty much a wash in terms of measuring absolute living standards (this is point 13 in the paper you refer to).

The finding being that yes, most certainly, the US is a much more unequal country than Sweden or Finland. Yet there’s very little difference in terms of absolute living standards for the bottom 10% of all three.

I particularly like this because it shows up nicely the difference between absolute and relative living standards. Clearly and obviously if relative standards within a country are what concern you then the US system is much worse. If you’re like me and consider absolute standards to be more important then not so much. Either system supplies the same physical standard of living to that bottom 10%.

Sure, this is a reflection of the fact that the US is a richer country overall (or was when these figures were compiled). And please do note, it’s the EPI not me (or TCS or Norberg) who did the calculations from Smeeding’s paper to absolute living standards.

My point being:

“Anti-poverty and anti-inequality are really not quite the same thing.”

A richer overall yet less redistributive society can (no, not will, but can) offer the same absolute standard of living as a poorer but more redistributive one. It’s entirely possible to favour one or the other: but anti-poverty and anti-inequality really are different things. Unless you’re going to pre-empt the argument by insisting on talking about poverty only in relative terms.


MQ 10.28.12 at 6:45 pm

A whole bunch of those programs are just not anti-poverty programs. Medicaid is the big elephant and something like 70 percent of Medicaid goes to the elderly or the severely disabled.


John Quiggin 10.29.12 at 2:45 am

@16 As MQ says, most of these aren’t anti-poverty programs. If you’re going to retreat to “just a thought experiment”, why not the thought experiment of reallocating the defense budget to poor families. It would work at least as well.


Peter T 10.29.12 at 3:11 am


Are you saying that the lived experience of trying to get by on a low income is the same in Stockholm or Copenhagen as Chicago? If so, you really ought to spend more on travel (or perhaps books).


Watson Ladd 10.29.12 at 3:50 am

What about educational quality? Living in Boston and having to send your children to the public schools there is a fate I think most people would want to avoid by any means possible. By contrast Finland doesn’t have places like that.


Nick 10.29.12 at 4:24 am

Tim, you mention health and food and conclude they’re ‘a wash’, but what about housing and utility costs as a comparison?

The Swedish figures as percentage of the US median disposable income include housing and utility benefits paid to low-income households. If I’m skimming Swedish welfare information sites correctly, that represents at least 75% of the total rent and utility costs for 100% of households in its bottom decile.

According to fact sheets, out of the 11.6 million households in the US bottom decile, just 3 million or so receive housing vouchers. What other forms of housing and utility assistance are available to the remaining 75%?

After discounting for those, what percentage of its disposable income would the average US household earning less than 39% of the US median, still be expected to spend on housing and utility costs?


John Quiggin 10.29.12 at 4:34 am

Not exactly what Tim was talking about, but this graph undercuts his case, I think. It’s PPP-converted wages at the 10th percentile

showing the US well below Scandinavian countries (which mostly have higher employment/population ratios). And (the measure is change in relative poverty, but that’s not important since it’s in changes not levels), the US tax-welfare system reduces poverty less than anywhere else


Bruce Wilder 10.29.12 at 5:34 am

Tim Worstall: “A richer overall yet less redistributive society can (no, not will, but can) offer the same absolute standard of living as a poorer but more redistributive one. It’s entirely possible to favour one or the other: but anti-poverty and anti-inequality really are different things. Unless you’re going to pre-empt the argument by insisting on talking about poverty only in relative terms.”

Are we talking redistributing upward or downward?
By government program?
Or, by private business?
For a government program (e.g. EITC) do we estimate incidence, before guesstimating the effect on inequality? before guesstimating the effect on rates of poverty?
For a government program, is it just about means-testing? Do we consider the distributive effects of dedicated taxes? (e.g. Social Security is a highly effective anti-poverty program, financed by a tax, from which the very rich are largely exempt.)

Do we think the U.S. is making itself, on average, richer or poorer, by tolerating a high and increasing level of inequality?

There’s part of me, whose priors say, there is something wrong with the very poor, to make them, poor, and anti-poverty programs should do something about what is wrong with the poor, that makes them poor.

And, there’s another part of me, that looks around — especially at trends — and says, there’s something wrong with the rich and American business, which is making (some) Americans poorer. Large parts of American business are engaged in fleecing the American public, often under the aegis of some government program.

And, that split in my psyche is what comes to my mind, when Worstall insists we distinguish anti-poverty from anti-inequality. The former calls for a social worker, and the latter, a less corrupt policeman or regulator. But, is such a neat separation, realistic?

Is the EITC an aid to the working poor? Or, to corporations, which want subsidies for low-wage, part-time workforces? Is Obamacare about helping the poor and lower middle-class to get access to health care? Or, is it about expanding opportunities for for-profit health insurers to sell crappy insurance? Are student loan programs helping young people get an education? Or, are they financing a huge expansion of proprietary, for-profit (often on-line) diploma fraud, while creating a generation mired in debt peonage?

Gary E. MacDougal’s essay seemed to me to be an exercise in confounding understanding with (over-)simplifications. His cavalier arithmetic was in service to that confounding.

If we are to get clear, I think we don’t need to separate poverty and increasing inequality so much as put them together in the right, reflexive loops: increasing inequality is causing, and exacerbating, poverty.


Harold 10.29.12 at 5:54 am

The NYT has an article about how many retail companies now have workforces composed entirely of part-time workers earning near-minimum wages, with irregular hours so that they cannot get second jobs or go to school — or afford rent or food or medical care.


Tim Worstall 10.29.12 at 9:10 am

“the US tax-welfare system reduces poverty less than anywhere else”

I agree. It does. That’s what makes the EPI calculation so interesting. After less poverty reduction the final absolute (but not in country relative) living standards are the same.

“but what about housing and utility costs as a comparison?”

The figures include all aid, in kind and cash. Thus this is accounted for.


Nick 10.29.12 at 10:39 am

“The figures include all aid, in kind and cash. Thus this is accounted for.”’

Presumedly, yes. That wasn’t my point though. The chart you’re relying on doesn’t make clear in the slightest how much *is not* accounted for — ie. after transfer, how much is still required for a bottom decile household to meet basic costs of living, versus how much of that basic cost of living was taken care of via the transfer process.

You rationalised that health and food cancel each other out. Why stop there?

Prove that average bottom decile US and Swedish households have similar to same costs of living in relation to housing and utilities.


Tim Worstall 10.29.12 at 2:14 pm

“Prove that average bottom decile US and Swedish households have similar to same costs of living in relation to housing and utilities.”

That’s what the PPP is supposed to do. Equalise prices.

“ie. after transfer, how much is still required for a bottom decile household to meet basic costs of living, versus how much of that basic cost of living was taken care of via the transfer process.”

That’s not what this particular calculation is trying to show at all. Don’t forget, it’s not my calculation: this comes from the EPI. What it is showing is that, having (crudely, to be sure) adjusted for different price levels in the three countries, that the bottom 10% of the Finnish, Swedish and US populations all have the same average income.

And that’s all it shows. It doesn’t say anything at all about how much of that comes from transfers (although we know the answer, much less in the US than the other two) nor any relationship at all to how these incomes meet the basic costs of living.

Purely and only that the incomes, price adjusted, and thus the consumption possibilities of that bottom 10% in each of the three countries are around and about the same.


Harold 10.29.12 at 2:27 pm

“thus the consumption possibilities of that bottom 10% in each of the three countries are around and about the same.”

It is not the same if you have to consume things that in other countries are free or heavily subsidized.


MPAVictoria 10.29.12 at 2:56 pm

“It is not the same if you have to consume things that in other countries are free or heavily subsidized.”

So this.


Tim Worstall 10.29.12 at 3:38 pm

“It is not the same if you have to consume things that in other countries are free or heavily subsidized.”

And they’ve done their best to adjust for this. It is after all taxes and benefits.

Smeeding (JQ links to the paper above) talks about health care for example. Sure, it’s free for everyone in the Nordics (although there are small copayments). But similarly most to all of the bottom 10% in the US get Medicaid. Free health care.

Schooling is free in all the countries. It’s after rent subsidies, social housing etc. What else do you want to add in?

Heck, Smeeding even points out that US food is much cheaper than Nordic (much!). They might not have done this perfectly but they really have tried to give a comparison of real absolute living standards.


Harold 10.29.12 at 3:46 pm

Yes, and we have wonderful “free” emergency rooms and ambulances — not.


Harold 10.29.12 at 3:48 pm

Who are you going to believe, a tendentious paper or your own lying eyes?


jonathan hopkin 10.29.12 at 5:12 pm

Tim, I don’t think you have a case here. How can getting treatment at an ER when you’re sick rather than comprehensive (including preventive) healthcare be ‘a wash’? Or access to the best educational system in the world (Finland, according to PISA) on equal terms?

In any case your calculations, even if correct, fail to account for relative deprivation and the importance of status. Above a certain material threshold that most rich countries reached long ago, one’s position compared to everyone else is what matters for well-being. Are you really saying it’s better to be a poor American than a lower middle-class Swede?


Tim Worstall 10.29.12 at 5:20 pm

“In any case your calculations, “

They are NOT my calculations. They come from the EPI, from Dean Baker and Jared Bernstein’s lot. That’s why they’re so fun.

“fail to account for relative deprivation and the importance of status.”

Indeed. I’ve said that up above. This is purely about the physical standard of living available to those at the bottom of the various heaps. It absolutely isn’t about relative poverty (which is what you are talking about).

On the health care education thing. Again, that’s not my calculation. That’s Smeeding’s. And I think JQ would back me up on one thing I’ve said here at least, which is that Smeeding is one of the leading (and most certainly not some right wing yahoo like myself) researchers on the subject.


Nick 10.29.12 at 5:30 pm

“And they’ve done their best to adjust for this. It is after all taxes and benefits.”

Sigh. No they haven’t. They state that absolute poverty in the US is most likely understated precisely because they haven’t adjusted for it, and vice versa, that it’s most likely been overstated in all those dreaded socialist hell-holes precisely because people don’t have to fork out for so much of that stuff from their disposable income. They then note (13) that, while this is the most likely case, there are some counter-arguments that should also be considered and weighed up eg. your food versus healthcare.

They don’t claim for a second that this (13) means that everything has magically balanced up and we should read it as an even ruler-flat PPP playing field across all relevant goods and services across all countries – the kind that would be needed at the very least to support the claim you’re making – just the best they could offer at the time.

They also conclude things like:

“The United States has one of the highest poverty rates of all the countries participating in the LIS, whether poverty is measured using an absolute or a relative standard for determining who is poor. Although the high rate of relative poverty in the United States is no surprise, given the country’s well-known tolerance of wide economic disparities, the lofty rate of absolute poverty is much more troubling.”


Harold 10.29.12 at 5:32 pm

Many people who are eligible for various public assistance in theory do not obtain it because of the fearsome distances they would have to repeatedlly travel on (non-existent) public transportation to get to it. I know this because my cousin did a nationwide study of this for the state of Florida some years ago.


Dr. Hilarius 10.29.12 at 6:07 pm

There might be a family out there somewhere where all four members qualify for assistance but I can’t imagine who they would be. A big part of my legal practice is in representing indigent clients. A typical family would be a single mother with two children. Mom would be eligible for TANF (Temporary Assistance to Needy Families). In Washington State, more generous than many, mom would get $487 a month. She would also most likely get food assistance and medical coupons. Housing is a huge problem. Section 8 vouchers are limited. An applicant can wait months or years to get one. Even with a voucher the recipient still has to pay something toward rent (that is if mom can find someone willing to rent to her at all). Homelessness is a factor in children being removed by Child Protective Services, gateway into another expensive hell.

TANF is now limited to a 60-month lifetime limit. Exceed that and you’re on your own.

Tim, only the poorest are able to access medical coupons through the federal medicaid program. If you have a low-wage job you may exceed the medicaid limits. In that situation you are likely to not have any medical coverage. Due to state budget cuts, Washington has cut 40,000 people from its Basic Health program. Try not to get sick for a couple of years while you wait for applications to open up.

MacDougal is correct about the system being fragmented. Trying to get assistance requires negotiating multiple agencies and application processes. I can’t give any numbers but there is a vast bureaucracy to administer the programs. At the line level these jobs are stressful and pay poorly. Consequently, there is high turnover with new workers unfamiliar with the rules they administer.

If you are able-bodied (or at least don’t qualify as disabled) without dependent children you are pretty much shit out of luck apart from food assistance.

If you have mental health problems you probably qualify for assistance but in a perverse system where attempts to limit costs actually are bankrupting the system. Consider an elderly person with severe dementia. If he/she takes up too much staff time the facility, being private, can dump them into a state’s involuntary commitment system. Here the patient might sit in a $2000/day hospital bed while social workers try to find a new placement. State mental hospitals have been cut back and can no longer serve as nursing homes of last resort. This while the population of demented elderly increases.

Many of the rules are designed to disqualify the undeserving poor. Go to jail and you lose social security, both retirement and disability. You can reapply upon release. Tough if you hit the streets homeless. Make a little too much money and your assistance is reduced or eliminated. Don’t declare the couple hundred dollars you made at a temp job and get charged with a felony.

Programs are torn between expressed goals of helping the needy and making certain that the undeserving are cut off. The private-public patchwork assures waste. But a rational system would require the boogeyman of socialism with an acceptance that some undeserving soul might get benefits.

Sorry to sound bitter and personal. Last week I sat through hours of meetings trying to find assistance for a homeless mother of two so that her children could be returned to her from state care. She doesn’t qualify for TANF, so even if she had a section 8 voucher she still couldn’t pay rent. If she could find a job, she would still need child care. Somehow I don’t see Finland working this way.


Bruce Wilder 10.29.12 at 6:25 pm

I’m really skeptical about this claim that the bottom 10% in the U.S. are at an “absolute” equivalent poverty with the bottom 10% in Scandanavian countries. The valence seems completely out of control.

First of all, in the U.S., the bottom 10% are consuming more than their income. Half of the bottom 10% — the bottom 5% — don’t have any appreciable income, even from government transfer and aid programs. Are we sure the statistical bottom 10% even includes the actual bottom 5%? Are we even measuring the real bottom, which extends beyond the ragged edge of social service spending, where measurement is taking place?

Sometimes, we think we’re measuring people in chronic, extreme poverty and what our statistics are picking up, are people, say, in college or at home caring for a dying parent, or some other transient condition heavily impacting income, but not living standard or life expectations.

Is PPP, with all its awkward, linear conventions, aimed at mythical median, urban marketbaskets, at all appropriate for the case? Shouldn’t we be cross-checking with basic welfare indicators? What’s life expectancy? What’s social mobility? What are environmental conditions (e.g. pollution levels where the chronically poor must live)? (As Watson Ladd has pointed out), what are the quality of public and private services, where the chronically and extremely poor are segregated? Are the extremely poor segregated? I don’t think there’s any equivalent anywhere in Western Europe to the poverty extreme of the Yazoo Delta.


GiT 10.29.12 at 6:55 pm

This sort of macro data might be ok for figuring out which people are nominally similary situated in Europe v. the USA. But figuring out whether they’re really similarly situated seems like it would be much better done by on the ground, anthropological comparisons. As JQ suggested, the anecdata there doesn’t lean towards actual equivalence, despite all the jiggering around of government transfers, purchasing power parity, public good provision, and whatever else.


Watson Ladd 10.30.12 at 1:20 am

@Bruce: PPP isn’t a priori the correct measure. You would probably want to weight the basket towards basic consumption goods, but then certain forms of service provision would raise questions as the baskets would be different. However, this is likely a small effect, judging by the Big Mac index compared to other PPP measures.

Fundamentally, comparing different baskets of goods across regions is hard. But I do think it is worth noting that the social exclusion and dispair of South Side Chicago is replicated in the outskirts of Paris and the East End estates of London. The actually existing European welfare-state has accomplished far less then widely presumed.


Peter Whiteford 10.30.12 at 2:27 am

The basic problem with the MacDougal article is that the author doesn’t seem to know much about the basic concepts in poverty research. You assess the impact of welfare programs by comparing poverty before people receive benefits and after they receive benefits, and it is also better to look at poverty gaps – how far people are below the poverty line, rather than poverty rates or how many people are below the poverty line.


mpowell 10.30.12 at 5:41 pm

Even if the PPP adjustment were actually reliable, as others have mentioned the fragmentation of the American wellfare system imposes additional costs on its beneficiaries. You have to spend lots of time negotiating the system, you have to expend a lot of energy making sure you follow the rules and you will inevitably spend a lot of time worrying about your healthcare. None of these costs are going to be factored in when you just look at income and the flow of benefits in PPP adjusted dollars.

My guess is that the structure of the European labor economy does very little to enable upward mobility of the adult poor (as opposed to their children), but it does make life a lot more tolerable in comparison to the US, even with the same adjusted income. Reliability in health care and housing is worth quite a lot, even if you end up having to budget on food.


Jeff Guinn 10.31.12 at 1:28 am

It is not the same if you have to consume things that in other countries are free …

Regardless of anything else on this thread, there is no such thing as free.

Corrected: “… things that in other countries are completely subsidized …”


Fu Ko 11.01.12 at 7:41 am

Watson Ladd: you have to have a job to get EITC. Please get your facts straight.

You’re also apparently living in the 50s, where (supposedly) people had stable jobs that provided them with identity and community and purpose. Get real. A McJob at Wal-Mart does not make you a member of society in any more substantial way than an unemployment check.


Peter T 11.01.12 at 10:04 am


Define “completely [or even incompletely] subsidised”, without reference to some fantasy where all costs should be attributable to individuals in proportion to their use of what is produced.

Is, for instance, an urban transit system funded by taxes on the increased property values that accrue from it a subsidy?


Dennis in MI 11.01.12 at 6:51 pm

There is no limit to the effort that is put forth to make sure that a brown person in amurika won’t get something for nothing.
I have heard that the spending for Tarp QE1 2 infinity was more than the prior 50 yrs of so called social welfare spending. True?

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