RALEIGH – I’ve gotten used to a dizzying variety of accusations over the years. They often appear to be mutually exclusive, though the real problem could well be my lack of perspicacious self-reflection. Perhaps I will eventually come to terms with the fact that I am a libertarian traditionalist, a naïve cynic, a curmudgeonly sycophant, and a doom-and-gloom Pollyanna.
On that last point, some readers of a recent column wrote or called me to complain that I had been confusingly optimistic and pessimistic in reaction to new Census data showing rising poverty and declining rates of health insurance in North Carolina.
To this charge, I plead not guilty.
The data on jobs, poverty, incomes, and health insurance do clearly demonstrate that North Carolina posted one of the worst economic performances in the nation since 2000. This relative bad news is important for the public policy debate, given that politicians are either claiming credit or affixing blame for policies they say caused or exacerbated the trend. Gov. Mike Easley, for example, blames federal trade policy. His Republican challenger (and now state-employee champion) Patrick Ballantine in part blames Easley’s three years of tax increases.
But more generally, it is critical that we not overstate what these statistics actually tell us about living standards. Our economy can and should be healthier. There ought to be greater opportunities to find good jobs, create new businesses, and purchase the goods they value at the lowest-possible price. In the main, however, the condition of the economy is far from bleak.
Let’s break down those poverty statistics. When it is reported that North Carolina’s poverty rate has risen above 14 percent, that does not mean that 14 percent of our state’s households are full of destitute, starving people trapped in the underclass. First, only pre-tax cash income reported to the government is used to estimate poverty. If a household receives free health care, free child care, free food, and free housing, this will obviously boost its standard of living significantly without showing up in income data.
Off-the-books income is also an important fact of life for many, as are support from relatives, the ability to tap savings, and the ownership of homes, cars, and other assets. Given that some expendituresurveys show living standards for “poor” families to be at about 40 percent more than their reported income, it should not be surprising that more accurate measurements find poverty rates far lower than officially reported.
Moreover, these poverty rates are snapshots in time. Most spells of poverty are relatively brief, a few months in length. There is a core group of households considered “chronically poor,” but the rate is in the neighborhood of 2 percent.
Another consideration is that poverty isn’t a disease you catch or the product of exploitation by the capitalist class. It is strongly associated with a failure to build human capital, often due to unfortunate choices made by young people who aren’t thinking clearly about their future. Even using the flawed Census data, the U.S. poverty rate is only about 4 percent for two-parent families with children in which at least one parent works full-time, about 3 percent if the other parent works part-time, and lower still if both parents are high-school graduates. It is at least conceivable – if hard to accomplish through public policy – for fewer youths to drop out of school, have children out-of-wedlock, and fail to develop work skills and experience. Thus, it is conceivable to reduce poverty markedly.
To optimism, I plead guilty.
Hood is president of the John Locke Foundation and publisher of Carolina Journal.