Throwing money at poverty doesn’t work
It is difficult to read arguments for or against policies when the premises are not aligned with the facts or the measures. In a recent piece published by our friends at NC Policy Watch, author Susan Demas, editor-in-chief of the Michigan Advance, attempts to persuade readers to adopt the belief that poverty can be eliminated if only the federal government throws money at the problem. This, of course, is not true.
To support her argument, she points to the impact COVID-19 relief payments had on poverty measures. She claims, “the COVID-19 pandemic showed us, once and for all, that we can eradicate poverty.” She is effectively contending that COVID-19 stimulus checks help to mitigate financial hardship for Americans, which was caused by economic shutdowns to help slow the spread of COVID-19, so why not apply the same logic to eradicate poverty.
Indeed, COVID-19 relief payments did have an impact on poverty measurements for 2020-21. As Demas alluded to when she referenced a University of Michigan poverty study, it had a real impact on American households by allowing Americans facing material hardship to meet their immediate needs. According to the study, millions of households spent COVID-19 relief checks on food, rent, paying down debt, and other household expenses. The result was that “material hardship in U.S. households fell sharply following the passage of the COVID-19 relief bill in late December 2020, and the American Rescue Plan Act (ARPA) in March 2021.”
So, Demas has some basis for thinking that aggressive federal government relief payments can help individuals facing material hardship. Still, her argument that it is a model for a federal government anti-poverty program is unfounded upon inspection. A deeper examination into her opinion unearths the fact that COVID-19 only impacted material hardship. In contrast, poverty viewed holistically is the consequence of the mental inability to cope with hardship. This aspect of poverty, unfortunately, cannot be solved with money.
Material hardship is a subjective and finite condition in the context of COVID-19. The University of Michigan uses the term “material hardship” to denote one’s inability to pay for basic household needs. However, this definition can vary from person to person. For example, a family of four will have different material hardships than a single person. Additionally, material hardship can change with time.
On the other hand, chronic poverty, which we can think of as the mental inability to cope with hardship for the purpose of this comparison, has more to do with one’s state of mind rather than their lack of material possessions.
Indeed, there is a material component to poverty. Lacking basic things like food, housing, healthcare, etc., are part of the equation. Fortunately, we already have generous welfare programs that help individuals down on their luck with housing, food assistance, healthcare, unemployment, and childcare until they get back on their feet. In this sense, yes, poverty can be thought of as material hardship; however, that is not the case for chronic poverty.
We know that mental health problems are directly related to poverty, and no amount of money you throw at it will eradicate poverty brought on by the mind. Hence, we can’t conclude that policies designed to solve material hardships are adequate to solve problems of the mind. Therefore, Demas’ argument is rejected because it is predicated on a false equivalency that conflates material hardship with the mental inability to cope with hardship.
In response to my rejection of her claim, Demas may cite studies that show data points demonstrating the consequence COVID-19 stimulus payments had on poverty measures, which appears to be favorable. However, this interpretation of the information is unintelligible.
In the article, Demas cites poverty projections determined by Urban Institute and Columbia University research teams and a trend analysis prepared by The University of Chicago (she does this indirectly via a Vox article that references the aforementioned studies).
The Urban Institute claims the “federal stimulus checks have a larger antipoverty impact than any of the other programs.” Using a Supplemental Poverty Measure (SPM), the Urban Institute claims the annual poverty rate projection for 2021 will be 7.7%. SPM is a poverty threshold that reflects actual spending on food, clothing, shelter, utilities, and other small spending amounts. Likewise, the Center on Poverty and Social Policy at Columbia University estimated, with the American Rescue Plan in place, 2021, poverty levels will be 8.5%. However, as of September 2021, the University of Chicago estimated that the poverty percentage below the federal poverty line was 11.5%.
The Urban Institute makes the same mistake as Demas in assuming that federal stimulus checks, like those for COVID-19 relief, are antipoverty measures. They are not. Another interesting observation is that the Urban Institute and Columbia University projections are similar; however, the University of Chicago’s analysis suggests that the poverty rate is increasing. Their analysis shows that the poverty rate has increased by about 7% from January 2020. This is due to the studies making different assumptions, but this divergence in the estimates’ directional behavior should invoke a desire for further understanding of why that is the case. But no further consideration is given by Demas despite the disconfirming evidence.
Another issue that does not get parsed out by the information Demas cites is the pre-COVID-19 decline in poverty. Per the St. Louis Federal Reserve Economic Data (FRED), the estimated percentage of people of all ages in poverty for the U.S. is 12.3% in 2019. This is a decrease of 23% from 2012. Accordingly, poverty rates have been declining since the Great Recession; and this has not been the result of any grandiose antipoverty initiative by the federal government. Thus, it seems there are socioeconomic forces at play that has been reducing poverty before the COVID-19 relief payments.
Lastly, Demas’ argument assumes the poverty measures in use are appropriate despite the structural difference of material hardship brought on by COVID-19 and poverty more broadly. The finitude of material hardship relating to COVID-19 should be obvious: COVID-19 will pass. Consequently, none of the analyses cited by Demas controlled for the difference in chronic poverty and the finite nature of COVID-19’s material hardship. Thus, the poverty measures mentioned are inadequate indicators if one is interested in addressing poverty as a whole.
Demas claims that “we now have empirical proof that the government can help people, especially during their darkest times of need.” This is incorrect. The studies cited to support her argument are hardly empirical. They are projections and assumptions based on specific policies applied to a definable, measurable problem.
Thus, the conventional wisdom on the matter still holds insofar as I can tell: throwing money at poverty will not eradicate it
Joshua Peters is a philosopher and social critic from Raleigh, NC. His academic background is in western philosophy, STEM, and financial analysis. Joshua studied at North Carolina State University (BS) and UNC Charlotte (MS). He is a graduate of the E.A. Morris Fellowship for Emerging Leaders.