Tuesday, September 20, 2011

Ignoring Poverty Makes it Go Away

So suggests Jonah Goldberg:
Charles Murray, my colleague at the American Enterprise Institute, notes that the most remarkable drop in the poverty rate didn't come after President Lyndon B. Johnson declared war on poverty but when President Eisenhower ignored it. Over a mere 12 years, from 1949 to 1961, the poverty rate was cut in half.
Well, I tried to do a little fact-checking by going to Charles Murray's blog where he actually makes this claim.  He cites the US Census Bureau, but I couldn't find the data online to corroborate his claim.  But let's say it's true, that poverty rates dropped from 41 percent to 21 percent during that time.  What was going on in the nation during this time?  GDP increased an average of 3.67% from the start of Truman's second term to the start of Kennedy's term.  That would explain things somewhat.  Decent GDP growth means more money flowing through the system, probably more people working.  Unemployment rates dropped during Truman's second term to 2.9% from 4.3%, but during Eisenhower's two terms, unemployment actually rose all the way to 6.6%!  That's an unemployment increase of 128%. (Incidentally, the rate during Obama's first three years, on the tail end of the worst recession in US history, rose from 7.8% to 9.1%, an increase of 17%.).  On top of this, there were three recessions during the Eisenhower administration, lasting a total 28 months, during which unemployment rose to over 7.5%.  So, while Eisenhower ignored the poor, as Murray states, more people were out of work.  Think about how the economy might have fared had steps been taken to put the unemployed to work or to support the poor by helping them have more money to spend.

So then I took a look at the Johnson administration, from December 1963 to January 1969.  During this time, the poverty rate started at about 17% and ended at about 12.5%.  Not a 50% reduction, as during the Einsenhower administration, but still respectable. Let's look at some underlying data here.  The growth rate of GDP averaged over 5.1% during that time, which is phenomenal.  There were no recessions, and unemployment dropped from 5.5% to 3.4%.  So, in a stronger economy, did Johnson make all that much of a difference spending billions on fighting poverty, if during the 1950s povery levels fell dramatically during worse economic times?  The answer might be in the rate of inflation during these respective times.  During the 12 years Murray cites, inflation rose at an average of 2% per year.  During the Kennedy years leading up to Johnson, inflation rose only During the five years of the Johnson administration, it rose 3% per year, an increase of 50%.  I'm not an economist but it seems to me that a higher rate of inflation means prices rising faster.  That would make it more difficult for people to keep up with rising prices, which would have an effect on poverty.

Bottom line, however, I kinda disagree that Eisenhower ignored the poor.  It was Einsenhower who continued all major New Deal programs, especially Social Security.  It was Eisenhower who rolled Social Security into a newly-created cabinet level agency, the Department of Health, Education and Welfare, while extending benefits to 10 million more workers.  It's that last part that suggests to me that the plight of America's poor was not absent from his mind.


USS Constitution said...

Military Industrial Complex.

That is what you are missing, along with the Vietnam war. Government spending is included in the GDP, thus the bump you cite and so called "miracle" was really nothing more than defict spending and debt(however the taxes were much higher then, so it didn't increase the running totals).

In the case of Truman, the top bracker was taxed in the 90% range. Yes you read that right 90% of the top bracket income was taxed. Even the lowest bracket was above 20%. Thus in these years, the debt amount didn't increase much.

During LBJ, it's a different story. LBJ actually lowered the tax on the top 20%, and also lowered the lowest bracket 4-5%. As such, LBJ actually occured more on the national debt. Which btw causes inflation and is a huge tax on the poor. It got to the point where they had to leave the gold standard just to be able to inflate more. If you are unfamiliar with the silent inflation tax, which is extremely harsh on the poor, check it out. I would recommend google: "I want the earth plus 5%".

Eisenhower became president in 1953, the same year the Korean War was over. Truman of course started the Korean war as a "police action" - his words.

America's basic industry was destroyed on purpose during the Great Depression and rebuilt as the MIC via WWII. Meaning, our economy after WWII has been in large part about supporting the military.

As such it's not a coincidence that the numbers you see also reflect times of war.

And isn't it kind of telling that the 5 star general between them was the one who didn't go to wars? Because the military men don't like to fight wars for no reason, but these others have no problem with them drawing in profits for the MIC.

You are labeling all unemployment as bad. This is wrong as a blanket statement. I mean if you kept numbers, Lincoln probably caused a high amount of unemployment, since you know slaves were freed. Of course this would eventually be nothing more than a transition period economically and the unemployment rates would have been good.

In the case of Eisenhower it is because the economy was based on the military and no military action = less money coming in. During which time, our economy would be in a mode of shift, as business and factories change from MIC based, to more of a public capacity. As such, some unemployment increase in such an environment would be good as the economy transitioned. And because of the transition, which I'm sure increased in terms of mom and pop small businesses, the poverty and prosperity level would also increase at the same time.

The situation was much different than today's unemployment, which was created due to inflation of money of which as mentioned is the worse kind of tax on the poor and pure greed. IE: We aren't in a transition period, we are just in a horrible state of inflation at the top via deflation at the bottom.


So, how does "ignoring poverty" make it go away? I'll make another post on that part, as this one is long already.

USS Constitution said...

So, "ignoring" poverty to make it go away.

Because the government has nothing, and as such it can't give to anyone either. The government has to take in order to give. And when it takes, it actually takes from the people it's supposed to be helping.

Quick simple economic demonstration of inflation.

Lets say that in the entire world $100 exists. And you own $10 of it. Small world obviously and the market consists of 10 apples to buy.

You own 10% of the wealth. Each apple has a basic value of $10 each. You have enough purchasing power to buy 1 apple basically.

Now, enter corporation ACME and the Federal Reserve bank.

The Federal Reserve decides to loan ACME company $100 @ 5% interest. What has happened?

Now, $200 exists in the world. You once owned 10% of the wealth, now you only own 5% of the wealth. Half your purchasing power was just taken from you, and your wallet was never touched. Where it shows up now is in the price of the apples. As each apple now has a value of $20. And you can only afford half an apple. You will blame the store for price gouging, you will blame the apple supplier and so on, because you have no idea that your purchasing power was robbed.

Meanwhile, ACME corporation there just recieved $100. Now they can go and buy 5 apples. Because they received the purchasing power that was taken.

And that money is due back to the fed @ interest. Notice that interest money was never created? So Acme company needs to pay the $5 from the original $100. And the bank is basically all the while eating and taking the purchasing power.

Even worse, when the government does it and gives the money directly to ACME company for "services", the American people are STILL expected to pay it back. The same ones that the purchasing power was taken from in the first place.

This hurts the poor because they don't have much money. They go to the grocery store and they just see increased prices. Wall St is doing just fine because they get the newly created money(bailouts, secret loans and so on). Yet the poor people and those on fixed income, or those who planned a retirement are just stuck with higher prices. Their budget no longer works, they just come home with half the apple rather than the full apple they had planned for or had gotten in the future.

In fact, I could have went directly to you in the first example, took $5 of your $10 and did the exact same thing(aka direct taxes). You could only afford half an apple, ACME corporation could buy 5 apples, and so on.

And that is what is really going on with these so called safety nets. But nobody realizes because the real tax is done silently without touching peoples actual dollar amounts.

But if you could visually see what is actually going on, you would be appalled at what really goes on. You are really going around and taking $20 from each person and then giving them back $5, claiming to be helping them financially.

People would revolt at all these systems and scams if they could really see the truth of what is going on.

But this is why the rich get richer and the poor get poorer in this country. This is why big corporations have all the power - they are the constant recipients of the newly created money, the government contracts, and it's all at the cost of the people.

The purchasing power and true wealth of this country is in constant transfer from the poor to the rich silently, and the very system people think are helping them are actually enslaving them.

USS Constitution said...

And this is why I support Ron Paul. And it's why you don't see all the big corporations supporting him, because they know Ron Paul will put an end to it. Read his book - "End the Fed".

Of course it's an easy sell to make people believe they are helping. Because they only show you the hand that gives. But just like a good magician, while your attention is focused on the one hand, the other hand works behind the focus and takes your wallet.

By stopping spending, you are turning off the above faucet. Allowing Americans to retain their wealth and purchasing power, which will help the poor and middle class. All the other candidates, Obama included, are simply pawns of the corporations and bankers. This is why Ron Paul is marginalized by the media, look at who owns them.

I'll leave with that. Hopefully atleast it gives you some things to consider. Ron Paul will help the poor the most. Not to mention his civil rights positions and desire to stop things that treat minorities harshly such as social crimes like the drug laws and the huge amounts of spending that is.

Have a nice day. :)