Monday, February 24, 2014


This the richest country in the world—yet we seem to be content to leave nearly 50 million fellow Americans live in poverty. That’s not just morally indefensible. It’s financially dumb. Eliminating poverty is cheaper than keeping it.

According to research, a great many of us seem to think that the poor have only themselves to blame. That’s a good excuse for largely ignoring poverty—but it has scant factual basis. It’s essentially an ideological viewpoint—and, as a consequence, uninformed.

I am no fan of ideologies—to put it mildly. Blind belief is responsible for more human misery than just about anything else. Life does require a moral code—but even it needs to be applied with toleration and nuance. Politically, I’m most interested in what works—and in defining the issues. If you ask the right questions, you can normally find answers.

Most poverty is a consequence of circumstances—including the deliberate policies of corporations like Wal-Mart—and our lack of social concern. Bear in mind that poverty—unless eliminated—is a permanent social and financial cost. It is a drain on our resources year in, year out—and has a tendency to increase. It represents pure, undiluted waste in terms of both human potential and financial cost.

What is the financial cost? A report by the Center for American Progress back in 2007 estimates the cost of childhood poverty alone at roughly $500 billion a year. Today the figure would be considerably higher. Add in adult poverty and the total must be somewhere between $1 and 3 trillion (I’ll refine that figure when I have more time).

We also seem to miss that fact that eliminating poverty is actually cheaper than enduring it.

That last sentence is worth re-reading.

But how can that be?

  • Treating the symptoms of poverty—everything from mental illness to medical conditions to homelessness to crime to insurance costs, police, legal system, and the prison system is hugely expensive.
  • We vastly increase the productivity of such people—and thus their earnings which, in turn, means a more affluent, innovative, and competitive economy. It is also safer.

The following is an extract from a truly important piece on poverty in—a publication well worth supporting. It was written by Christian and Calvin F. Exoo.

In 1993, a group of researchers started an eight-year longitudinal study of children in the Great Smoky Mountains, a range of peaks along the North Carolina-Tennessee border. One thousand four hundred twenty children were recruited - 25 percent Native American, 7.5 percent black and the rest white - and given psychiatric exams annually. Unsurprisingly, the children from poor families were found to have problems, about 60 percent more than their middle-class counterparts.

Then something interesting happened. The Eastern Band of Cherokee who live in the region opened a casino and in 1996 - exactly halfway through the study - every member of the tribe started receiving income. It wasn't much - the annual payout increased each year, hitting an apex of $6,000 before taxes in 2001, with children's money going straight to a trust fund - but it made a big difference. The rate of conduct and oppositional defiant disorders in (now formerly) poor children dropped to that of children who had never experienced poverty. Those children were less likely to commit a crime and more likely to graduate high school. And by age 21, they had almost an additional year of schooling - all strong markers of upward economic mobility.

When a single behavioral condition in a child, like ADHD (which is almost twice as likely to appear in poor children as in the general population), is estimated to cost(for treatment, educational adjustments, parents missing work and juvenile justice) $14,576 per child per year, doesn't $6,000 seem like a bargain? A recent New York Times article noted that amphetamines often are given to poor children who don't meet the diagnostic criteria for psychiatric disorder, with almost 20 percent of doctors nationwide not following the guidelines set by the American Academy of Pediatrics. But these children aren't sick - they're merely poor - and are exposed to the side effects of amphetamines - stunted growth and stimulant-induced psychosis - as an unlucky consequence of social position.

But what would raising the minimum wage do for adults? A recent study of Indian sugar cane farmers might suggest the answer. Economist Anandi Mani and her co-authors gave a range of cognitive tests to Indian sugar cane farmers pre- and post-harvest. The crucial distinction comes from a point of sugar cane farming. Just before the harvest, the farmers are largely waiting for their crops to ripen, having little work to do. Thus, while they aren't necessarily working harder, they are much poorer than in the days after the harvest. The scholars found that the cognitive losses produced by pre-harvest poverty were equivalent to 13 IQ points, the same loss as losing a full night of sleep or being a chronic alcoholic.

Two of the co-authors of the piece, Sendhil Mullainathan and Eldar Shafir, have, in their book-length examination of their research, proposed a metaphor for the effect - bandwidth. The human brain has a finite amount of bandwidth. If one is forced to spend that worrying about poverty, it will necessarily have less capacity to spend on other tasks. Indeed, as other studies have shown, the poor often fail to take prescribed medications, fail to use preventative health care less and are less productive workers than their more-comfortable counterparts.

The Fair Minimum Wage Act of 2013, which proposes raising the minimum wage from $7.25 to $10.10 an hour, would leave a full-time minimum-wage worker with (accounting for two weeks vacation a year) an extra $5,700 per annum - almost the exact amount seen in the Great Smoky Mountains study.

The minimum wage raise is expected to affect 27.8 million people. If the bill passes, we can expect to see high-school graduation rates rise and youth crime rates drop, giving us all a safer society and a more productive economy.

But let's think a little larger for moment. There are 49.7 million Americans currently living below the poverty line. Going back to the sugar cane study, we can expect each of them to gain 13 IQ points if the gap between their needs and their means to meet them were somehow bridged. If each of them were to have their situation somehow ameliorated - say, by giving them $4,000 per year - we would collectively gain 646,100,000 IQ points. That's the equivalent of 4,038,125 Einsteins. The Congressional Budget Office recently estimated that the Fair Minimum Wage Act of 2013 will lift 900,000 people above the poverty threshold. If the findings from the sugar cane study hold true, that's a collective gain of 11,700,000 IQ points. What could we do with that much extra brain power? Maybe we could cure cancer; we could make inroads against diabetes. Heck, maybe we could even end poverty.

I’m a great believer in the notion that the answers to most of our problems are out there—but we seem to be singularly disinclined to look. True, some problems are intractable—Syria being a current example—but the solutions to many are known and relatively straightforward to implement. Better yet, many solutions have actually been tried out in some other country so we have case histories to guide us.

I don’t think that cost-effectiveness should be the only determinant for action—the moral dimension is significant in itself—but it certainly doesn’t hurt to know the costs involved.

America is rich enough to eliminate poverty completely. The current situation is akin to a serious, but not life-threatening, self-inflicted wound. We would function much more effectively without it—and be decidedly happier.

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