Study: $15 trillion in welfare spending has had little impact since 1964

Published: Wednesday, July 11 2012 3:04 p.m. MDT

In this Oct. 6, 2009 photo, people shop at the Costco Wholesale Burbank store in Burbank, Calif. Costco began accepting food stamps at its warehouse clubs nationwide in 2009 after testing them at stores in New York.

Associated Press

A policy analysis released by the Cato Institute in April shows that despite nearly $15 trillion in total welfare spending since President Lyndon Johnson began the "war on poverty" in 1964, the poverty rate in the United States has remained relatively constant.

In 1964, the national poverty rate was around 19 percent and falling, while the current poverty rate is expected to be around 15.1 percent and climbing. It is now at the highest level in nearly a decade.

According to the Cato report, the federal government will spend more than $668 billion to fight poverty in 2012. State and local governments will spend an additional $284 billion, amounting to $20,610 for every poor person in America, or $61,830 per poor family of three.

Federal money for fighting poverty is divided amongst 126 separate anti-poverty programs. The programs include 33 housing programs, 21 food or food-purchasing assistance programs, 8 different health care programs and 27 cash or general assistance programs. Seven different cabinet agencies and six independent agencies administer at least one anti-poverty program, the report stated.

The largest federal welfare program is Medicaid, with spending topping $228 billion in 2011, excluding funding for nursing home or long-term care for the elderly. Other programs include the Supplemental Nutrition Assistance Program, the Earned Income Tax Credit, Federal Pell Grants, the National School Lunch Program, Head Start, Work Investment Act Youth Activities, Summer Food Service Program for Children, TRIO Upward Bound, Weatherization Assistance for Low Income Persons, WIC Grants to States, Rural Rental Housing Loans and Supplemental Nutrition Assistance Program Outreach and Participation.

"Of course, no individual is eligible for every program, and many poor people receive nowhere near this amount of funding," the report introduction stated. "And many supposedly anti-poverty programs are poorly targeted, with benefits spilling over to people well above the poverty line. But that is precisely the point — we are spending more than enough money to fight poverty but not spending it in ways that actually reduce poverty."

In constant dollars, federal spending on welfare and anti-poverty programs has risen from $178 billion in 1965 to $668 billion today. Measured as a percentage of GDP, federal spending increased from 0.83 percent of the GDP to 4.4 percent. Federal spending per poor person has risen from $1,625 to $14,848 — growth of more than 900 percent.

"This does not mean that anti-poverty spending has had no impact. Certainly it could be argued that without such spending, poverty levels would be even higher," the report said. "Still, given the level of anti-poverty spending, both in the aggregate and on a per capita basis, this amounts to surprisingly little 'bang for the buck.' ... Clearly we are spending more than enough money to have significantly reduced poverty. Yet we haven't. This should suggest that we are doing something wrong."

The solution, the report goes on the conclude, is to shift anti-poverty efforts away from programs that provide things to people in poverty, and instead to focus on creating the conditions and incentives to make it easier to escape poverty.

During a House Budget Committee markup in May, Rep. Paul Ryan, R-Wis., echoed this point, saying programs like Medicaid can't help patients if doctors won't take new Medicaid patients or if money is misspent through fraud and waste.

"We spend too much of our time in our intellectual effort measuring compassion for those in need by measuring inputs — 'how much money are we spending? How much money are we increasing spending? How many programs are we creating?'" Ryan said. "We're not measuring outcomes — 'are these programs working? Are people getting out of poverty?' And we need to focus on that."

In a discussion Wednesday on Varney & Co., Star Parker, the founder of the Center for Urban Renewal and Education, said much the same thing during a discussion about Massachusetts Gov. Deval Patrick and welfare card restrictions.

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