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May 03, 2012

How Inconveeeeeeeenient!

Has the NY Times been alerted to this? How about the "near poor"?

Our results show evidence of considerable improvement in material well-being for both the middle class and the poor over the past three decades. Median income and consumption both rose by more than 50 percent in real terms between 1980 and 2009. In addition, the middle 20 percent of the income distribution experienced noticeable improvements in housing characteristics: living units became bigger and much more likely to have air conditioning and other features. The quality of the cars these families own also improved considerably. Similarly, we find strong evidence of improvement in the material well-being of poor families. After incorporating taxes and noncash benefits and adjusting for bias in standard price indices, we show that the tenth percentile of the income distribution grew by 44 percent between 1980 and 2009. Even this measure, however, understates improvements at the bottom. The tenth percentile of the consumption distribution grew by 54 percent during this period. In addition, for those in the bottom income quintile, living units became bigger, and the fraction with any air conditioning doubled. The share of households with amenities such as a dishwasher or clothes dryer also rose noticeably.

We consider several possible explanations for these patterns in material well-being. Our analyses indicate that tax and transfer policies have played an important role. Changes in tax policy have raised the resources of both the middle class and the poor. The impact of taxes is particularly noticeable for the poor, a substantial share of whom have been lifted out of poverty by more generous tax credits. Social security also accounts for some of the improvements at the bottom as the real value of benefits has grown. However, noncash transfers such as food stamps or housing and school lunch subsidies can account for only small improvements in well-being for the middle class or the poor over the past three decades. While we find that rising educational attainment accounts for some of the decline in poverty over the past three decades, in general, changing demographics account for only a small fraction of the overall improvement in well-being for the middle class and the poor. Together, this evidence suggests that other factors, perhaps most importantly economic growth, played a critical role in the improved living standards of the middle class and the poor.
Accurate measures of economic well-being are essential for evaluating existing policies and for determining the need for policy changes. The extent of economic progress for both the middle class and the poor is an important factor in the debates over key economic policy issues, including income tax policy, immigration, and globalization. Official poverty is frequently cited by those evaluating the need for and consequences of social programs, which account for a substantial amount of government spending. Programs such as Medicaid, Supplemental Security Income (SSI), and Temporary Assistance for Needy Families (TANF), as well as food stamps, housing benefits, educational grants and loans, energy assistance, and job training, cost more than $522 billion in 2002. In his opening comments in the debate on what became the landmark 1996 welfare reform legislation, former House Ways and Means Committee chairman Bill Archer said, "Government has spent $5.3 trillion on welfare since the war on poverty began, the most expensive war in the history of this country, and the Census Bureau tells us we have lost the war."

When you're in a hole...

Posted by Cassandra at May 3, 2012 08:17 AM

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Those 30 years also were a period (slightly) declining taxes.

Moreover, contributory to the failure of welfare programs is the fact that subsidies inflate the prices of the things being subsidized. Two somewhat orthogonal examples of that:

The food stamp programs and their evolutions are one example. The New Deal price supports for farm produce and labor elevated the cost of food, so the poor couldn't afford to eat properly and they elevated the cost of labor so the unemployed couldn't get jobs with which to start stopping being poor. So the New Dealers invented food stamps to facilitate the (expanding pool of) poor's ability to buy the now more expensive food.

Medicare is another example. Friedman (IIRC) looked at the inflation of hospital beds (as a simulacrum of the cost of health care generally) shortly before the enactment of Medicare legislation, with its mandatory participation--and so its artificial increase in demand for health care services--and again shortly after. He found that the inflation rate of the cost of health care services relative to the general inflation rate doubled as a result of the legislation.

Any third grade pupil of economics could have predicted that outcome [/snark].

None of this ever gets mentioned in the NLMSM, either.

Eric Hines

Posted by: E Hines at May 3, 2012 12:15 PM

Been a while since I posted here. :-D

Mark Perry, over at Carpe Diem, which many are already familiar with, has run a series of articles about this kind of thing showing that the actual things that people have been getting for decades has been cutting back substantially for all that time in terms of how many hours the median household has to work to pay for them.

For example, in terms of basic needs, food cost, in the 1930s, was about a third of income. IIRC (find the article to be sure) that expense is now down to about 10% or less of income. Similarly, clothing has reduced from a high percentage to a single digit expense, and, let's face it, our likely wardrobe has gone up considerably for most (yes, I would ack durability is down, but that's not an issue since we've gotten more style conscious with our affluence... who here is wearing a pair of 30 yo Jordache jeans...? can you still FIT in them?)

He also goes into other basic arenas -- for example contrasting a modern "fridgideezer" to one 40-50 years ago, or a stereo system from the early 70s to a current one. In all cases, the number of hours worked to purchase these things is much, much lower, and, let's face it, for the most part, the function-oriented quality of the thing is far higher.

Posted by: IGotBupkis, Legally Defined Cyberbully in All 57 States at May 3, 2012 04:50 PM