Saturday, December 15, 2012

Poverty and Anti-Poverty Programs-Part 2


It is no secret the best anti-poverty program is growth. Which is why the anti-growth policies, particularly of the past 20 years, are poverty inducing programs for our children. But let's not say that out loud because it's only a platitude giving the appearance of being mainstream when we know, we KNOW the only true anti-poverty programs are the programs that incentivize activities like Nicholas Kristof pointed out in his article, the CBO in its report and Casey Mulligan in "The Redistribution Recession." Well at least we can feel good about doing something.

If the economy grows 3% per annum it will double in about a generation, 35 years to double if it grows at 2% and almost 50 years to double if it grows at 1.5% per year. The economy troughed in Q2 2009 and since has grown (adjusted for inflation) at 2.2% per annum. And that's from the trough. Growth rates from the trough are almost always faster than the long-term trend. Obama's recovery is 1/2 the rate of the Reagan recovery. Since 1947 the economy has grown at a 3.2% compound rate, 50% higher than the growth from the trough of this recession. But let's not talk about that and how that is a poverty inducing policy.

Doubling the economy manifests itself sometimes in ways we can only imagine. For our grandparents growth manifested itself in bigger houses, hot and cold running water, microwaves, more leisure time, better health care, more reliable, safer cars. For our generation in better telecommunications bigger houses, more leisure time more reliable, safer cars, a better, cheaper and more varied diet. The growth helps everyone, not just the much vilified 1%. Everyone participates in this growth.

But I have an idea. Let's not talk about policies that hinder growth. Instead, let's talk about marginal tax rates for the rich, because it's unfair that 2% of the taxpayers pay 27% of the income tax and they should pay more. What will it do for the deficit? Little. What will it do for growth? Nothing to worse. But at least it's a consistent ignoring of incentives. Not believing high marginal tax rates lowers the incentive to work at the low-end of the pay scale is matched by the dis-belief marginal tax rates have an impact at the high-end of the pay scale as well.

You complain Paul Ryan mouths platitudes in order to appear mainstream. Is that the mainstream that keeps growth low and dooms generations to a lower standard of living and millions to poverty? Is that the mainstream that keeps inner city teen unemployment at 50%? Is that the mainstream the encourages parents to keep their children ignorant for $600 per week?

I can think of a group that mouths platitudes but really doesn't care about innovative solutions because it  fails to see the incentives its compassion creates and it would much rather go to bed KNOWING it has done the right thing despite the mountain of evidence it has made things worse. But that group isn't the Republicans.


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