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Why the U.S. lost the war on poverty

Published: Thursday, Jan. 16 2014 4:00 a.m. MST

President Lyndon B. Johnson delivers his State of the Union address to a joint session of Congress, Jan. 8, 1964. Speaking in the House of Representatives, the chief executive said on eof his aims was "unconditional war on poverty in America." In background from left are: Speaker John McCormack of Massachusetts and Sen. Carl Hayden of Arizona. (AP Photo)

Uncredited, ASSOCIATED PRESS

When Lyndon B. Johnson declared war on poverty in 1964, an estimated 19 percent of Americans were classified as poor. Today, more than 50 years and 20 trillion dollars later, 15 percent of Americans live in poverty. On the left and right, there's agreement among some economists and policymakers that the war on poverty is a failure.

But there's a wide range of opinions explaining why poverty won. Some suggest the government did not do enough, or didn’t do the right things. Others argue that government is inherently incapable of solving the problem, and that the more it tries the more problems it creates. Still, others suggest the war on poverty actually is working, and that out-of-date measures of poverty hide the progress of the last 50 years.

The government didn’t do enough

Johnson’s war on poverty began with certain assumptions about the cause of poverty.

“Very often a lack of jobs and money is not the cause of poverty, but the symptom,” he said. “The cause may lie deeper in our failure to give our fellow citizens a fair chance to develop their own capacities, in a lack of education and training, in a lack of medical care and housing, in a lack of decent communities in which to live and bring up their children.”

Critics say the problem is that Johnson focused too much on education and not enough on creating opportunities to work.

“Poverty is caused by unemployment,” said Stephanie Kelton, a University of Missouri-Kansas City associate professor of economics. “But unemployment is caused by the economic system, not the shortcomings of workers.”

There are seven job seekers for every job according to data from the Bureau of Labour Statistics, Kelton said.

“I don’t care what you do in terms of training, there still aren’t enough jobs for the people who want to work,” she said. "Even if worker skills match the open positions perfectly, six people still walk away without a job. In an economy where jobs are hard to come by, that’s a real problem."

Generating demand for workers

According to Keltin, one of the best ways to generate more work is through new deal-style federal work programs: “We need to take people where they are and give them an opportunity to work,” she said.

These jobs don’t need to be meaningless "make work" projects either, Kelton said.

The American Society of Civil Engineers estimates that it will cost 3.6 trillion dollars to bring the nation’s infrastructure up to date.

“Building roads is incredibly useful work,” she said. “It’s work that needs to be done ... work that improves the productivity of businesses.”

“GDP is the measure of total spending on goods. You can’t cut spending and expect to grow the economy,” she said. “Spending leads to income, income leads to sales and sales lead to jobs.”

If business isn’t willing to spend, the government needs to step up to the plate, she said.

But how should the government pay the wages of these workers? The simplest way is to print more money, according to Kelton.

Simple though it may sound, it’s a highly controversial because of concerns it will lead to inflation. Kelton acknowledges that increasing the supply of money can lead to inflation, but says it isn’t something we need to worry about: “Inflation is caused by too much money chasing too few goods,” she said.

Inflation occurs when the economy is producing to the limit. That’s not the situation in the United States right now, said Kelton

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