Economists Debate Government Intervention and Poverty (1966)

- I'm going to take the ball for a moment and throw it in the direction of Dr. Striner and ask him again the same question, what method or combination of methods would you prefer to raise the income level of the poor? - I don't object to adding to the annual income of the poor but I'm reminded of an old adage that you feed a starving man a fish and you feed him for a day. You teach him how to fish, how to use the tackle, you feed him for life. I'm afraid that if we were to use the negative income tax as our chief weapon in this arsenal that we have at our command, we might add, for example, to a family of two under 65 in an urban area currently making $2,000 a year, about another $500 to $1,000 by means of these offsets. I doubt that this is what we really have in mind in terms of moving people up over the poverty barrier. I think that we really have a problem that goes beyond the techniques and the concerns we've had in the past.

To begin with, I don't agree with Professor Friedman that these programs we've had in the past have failed. I don't think they've ever had a chance. As a matter of fact, the situation has grown worse in many of our so-called social welfare programs. You take, for example, unemployment insurance. In 1939, the unemployment benefits received by an unemployed individual approximated 45 percent of his wage, his last wage. At the present time, because of the fact that our increases in unemployment benefits have not kept pace with changes in our economy, our society, the same individual, if you were alive now and unemployed, would be getting about 32 percent of his last earned wage. Let me throw one other series of figures out. We think we're big spenders over here, the last of the big spenders. If you total all of the social welfare benefits that we pay out in this country, it takes up about 7 percent of our gross national product. The total of the goods and services our economy is producing. In France and West Germany at the present time, this same ratio is about 22 percent.

Now, there are some differences in programs, of course. But by and large, if we use about the same comparable items, we find that we support about one-third of the types of payments that are paid out in most of the... - Is that because we are doing less or because our economy is so productive that it simply overpowers the cost of the welfare benefit? - No, I think we have a problem in facing up to the fact that if we really want to wage a war against poverty, we have to do more than go out on limited sorties and skirmishes. I don't think that there was ever a real commitment to the sort of war that is necessary to deal with 35 to 40 million people who are in this poverty category. You see, one of the problems of just thinking of money as a means of doing this is that many of the people who are poor and are untrained are also people that we have to work with in terms of psychological, physical, medical problems. Information, many of these people don't read well, aren't too well educated and if we

gave them the money, there'd be some question, of course, as to what they would do with the money. - Now we're talking about education, I take it. - Oh yes, indeed, but I'm talking about something else, if I may, one more moment. We found an interesting program in the South to educate tenant farmers failed completely. The reason at first wasn't very obvious until we actually went down into the country and talked with them and we found that you can't get a tenant farmer to take training because the day he leaves to take training, he's thrown out of his house so that this thing we call education when you're talking about tenant farmers in the South must also include public housing. - I must confess that I regard the remarks of both of these gentlemen as rather demagogic, if I may say so. They are appealing to one's hearts, which is a very good thing to do, but I would like to inject a bit of mind. First, the basic fact is that the American citizen has a far higher standard of life than a citizen of France or the other countries who Mr. Striner was quoting.

This is, it is not an accident that that is the case. It is largely because the American economy for the last 100 years has had the most effective war on poverty and the most effective machine for eliminating poverty that any country has ever had. Indeed, our great claim to fame is that we have taken in, we have imported poor people by the millions from all over Western Europe, from these countries who Mr. Striner is quoting to. And we, I say we, I mean the American economy, the American society through a free enterprise system, through giving them an opportunity to express their own initiative, has enabled them to improve their condition and the conditions of their children steadily over the generations. If we look at the remaining pockets of poverty and problems that we have, we have to ask why. And in large part we have these because of bad government programs. And Mr. Striner and Mr. Keyserling are talking about government undertaking the responsibility for training people and make them employed.

What about assigning government some of the responsibility which it deserves for making people unemployed? Why, why is Appalachia a depressed area? Because the government supported and stimulated John L. Lewis when he raised the wages of coal miners so high that he put most of them out of work. Why do we have a high rate of unemployment among teenage Negroes? Because the government has put on a minimum wage rate, which confusing wage rates with income has said to these youngsters, you may not get a job, you must be unemployed. Again, if we turn to the welfare programs that both these gentlemen have been speaking of, Mr. Striner spoke of 7% of our national income, let me put that in numbers. The federal, state, and local governments are spending over $50 billion a year on a class of programs designed to promote welfare. Now the problem is not that we're not spending enough money, we're spending too much money. The problem is that most of that money is going to people who by no stretch of the imagination can be regarded as poor.