The US is taxing wealth as it subsidized poverty

By Kevin Price

The party and President “for the poor” seems committed to make sure there are more people in poverty. The Census Bureau is about to release its figures for 2009 and demographers and other policy experts are expecting some very grim numbers. In fact, the poverty levels are expected to hit levels we have not seen since the 1960s. The 1960s brought on the “War on Poverty” — the government’s effort to help the poor through government subsidies (AFDC, food stamps, etc.).

According to the Census Bureau, in 1964, when the Office of Economic Opportunity was created, the number of people below poverty level was approximately 27 million. After decades of subsidizing poverty, levels reached around 40 million by the early 1990s or 15 percent of the population, which were the highest levels since the government programs on poverty began. This led to then President Bill Clinton to announce in 1995 that he intended to “end welfare as we know it.” With the help of a Republican Congress, Clinton passed sweeping legislation that reduced the amount of time people could be on many government programs. Within five years poverty plummeted from the recent high of 40 million below poverty level to slightly above 30 million.

After the elections of 2008, the Obama Administration made it clear that it was committed to returning to an approach to poverty that we had not seen since before the welfare reform of the 1990s. The massive bailouts of 2009 required the states to increase welfare levels in both dollars and length of time individuals would be allowed to be on such programs, if they were to receive federal dollars. Now, many Americans have been on unemployment benefits for 99 weeks. As a result, the subsidy of poverty (therefore its encouragement) is at an all time high, while the US is about to face the largest tax increase in US history on January 1, 2011. This is creating a perfect storm of massive subsidies on poverty and huge tax increases on job creation.

The Associated Press reports that the new Census Bureau study will show “the number of people in the U.S. who are in poverty is on track for a record increase on President Barack Obama’s watch, with the ranks of working-age poor approaching 1960s levels.” It goes on to note that “It’s unfortunate timing for Obama and his party just seven weeks before important elections when control of Congress is at stake. The anticipated poverty rate increase — from 13.2 percent to about 15 percent — would be another blow to Democrats struggling to persuade voters to keep them in power.” These numbers join the highest unemployment numbers in three decades.

The 1994 elections became a referendum on Bill Clinton’s economic policies and led to sweeping welfare reform. It will be interesting to see what kind of impact the 2010 elections will have on Barack Obama’s approach to governing.


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