Wishful Thinking About Poverty in America

It is always intriguing to see an eminent conservative thinker get so hung up in his own empire of thoughts that he can’t see how he ends up undermining his own case.

A recent example is George F. Will’s “The Welfare State Mushrooms.” At the beginning of an all-Republican majority U.S. Congress, it is worth examining his argument, since it is designed to provide the sheet music from which all Republicans are meant to sing.

Mr. Will starts out his reflection with the ominous assertion that “America’s national character will have to be changed if progressives are going to implement their agenda.”

For a hyper-traditionalist and history buff like Mr. Will, this is a very quick way to run counter to the historical facts, in pursuit of claiming conservative thought as the one true American ideology of old.

Memo to columnist: The United States previously underwent a “Progressive” era. It lasted roughly from the 1890s to the 1920s and is associated with venerable Presidents such as Teddy Roosevelt, Woodrow Wilson and Howard Taft.

Given that prior episode of a clearly delineated historical period, America’s national character won’t have to be changed, just revert to where it once went before.

A rising tide of welfare?

Echoing a recent analysis by Nicolas Eberstadt, “American Exceptionalism and the Entitlement State,” Mr. Will also laments that “America today does not look exceptional at all.” The proof he sees in the data pudding is the rise in needs-based transfer payments throughout the land.

George Will’s lament brings to mind an old adage of John Maynard Keynes: “When my information changes, I alter my conclusions. What do you do, sir?”

The after-effects of the recent recession are certainly not felt in Mr. Will’s socio-economic circles, not least thanks to the Federal Reserve’s QE program, which boosted the stock market wealth of those happy few Americans with such assets in bulk.

The struggle down below

But even as the 2008 recession hit, the top 1% of Americans had already captured 23% of the national income, up from just 9% in 1976. Meanwhile, the average household’s annual income growth has been slowing with each recovery. For much of the 1980s, it was 1.7% a year, then 1.4% a year in the 1990s and then 0.2% from 2002 to 2007.

By the time the most recent recession arrived, median income growth had flattened for ordinary Americans so much in the “good” times leading up to it that they emerged on the other side in 2012 making 10% less money each year than they had made a full decade earlier.

No question, for those who have made it, America still looks and feels like the Promised Land. But there is a vast flipside to all that glory – those who are truly struggling. Supporting those in need is certainly something that a wealthy society like the United States can afford, especially considering the high moral self-perception the rich have of themselves in this land.

Bismarck’s concession

Mr. Will also helpfully explains that Europe’s social democracy advanced since the late 19th century in large part because of rigid class structures blocking upward social mobility. True.

But if even an arch-conservative militarist such as Germany’s Otto von Bismarck at the time saw the need to give workers health care, accident insurance and health insurance, one must wonder about one question: Why are 21st century Republicans in the United States still trying to prevent all Americans from having similar coverage?

That’s a thought worth pondering at some length, especially since German health care delivery, as it happens, is quite cost-efficient to this day – in sharp contrast to the U.S. case (wholly independent of Obamacare).

The United States, as Mr. Will continues to believe, relies completely on “upward mobility based on merit.” But that is exactly the factor that has changed.

A loss of economic mobility

Americans might be confused hearing this. But according to all relevant socio-economic indicators developed by the OECD – where the U.S. government has always played a strong hand in economic data management – there cannot be any doubt that U.S. excellence in terms of social mobility is a thing of the past.

If anything, the United States now excels on such 19th century, rigid European factors such as the self-replication of economic elites.

Of the OECD economies with income data similar to that of the United States, U.S. social mobility ranks near the bottom. There is a relatively high correlation (0.47) between the earnings of U.S. parents now and the subsequent earnings of their children as adults.

Neighboring Canada, for example, has a much lower correlation (0.19), indicating that poorer children are much more likely to become wealthy adults there than in the United States. It is as if the “American Dream” has migrated up north, to become a “Canadian Dream.” In the United States, in contrast, the rich kids stay rich and the poor kids stay poor.

Even the more famous (and more literal) form of U.S. mobility – moving freely about the land in search of better economic opportunities elsewhere – has almost come to a standstill.

Many Americans, unable to sell their homes owing to the continuing vagaries of the real estate market or fearful of leaving their employer-tied health plans without another job already lined up, are stuck where they are. They cannot simply set out across the plains to start a new life.

To avoid any misunderstanding: None of what has been said above means that truly talented people, including immigrants, cannot use the U.S. education and entrepreneurship system to strike it rich as the American Dream promised.

But the existence of that birth-advantage escalator for some individuals means that being wealthy is by no means just a question of talent and will power.

The welfare state fantasyland

Any highly developed society with vast pockets of wealth has its polar opposite – really poor people. And while Mr. Will and Co. don’t tire of beating the old dead “welfare state” horse yet again, they never mention that the abuses that once existed – and which they may well have been right to castigate a quarter century ago – were addressed.

That rightsizing of the welfare state, after all, was done by none other than Bill Clinton, a Democrat, from a humble background.

If there is a resurgence of the level of transfer payments to welfare recipients now, that is not due to any relaxation of the standards under which people qualify for welfare. (Indeed, the bar to obtain and keep benefits remains quite high.)

Nor is it the result of some sweeping cultural degradation foisted upon the good and hard-working American people by “progressives,” as Will ultimately insists. There is little to suggest struggling Americans have become newly enthusiastic about being compelled to seek help – including from the government – to make ends meet.

Rather, a re-growth of transfer payments is a pure function of some obvious and adverse economic developments.

It takes real will and determination not to see the facts for what they are.

Sadly, like Mr. Will, the new Republican Congressional majorities are more likely to operate on poverty theories grounded in such avoidances than to confront the challenges with real solutions.