2009-11-16

How We Hurt By Helping

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Have you ever heard of the Poverty Trap? Me neither.

Thankfully Greg Mankiw is here to help:




He goes on to conclude, "The Bottom Line: If you are poor, the government is inadvertently ensuring that you have little incentive to try to improve your condition." Of course one could also conclude that "The Bottom Line: If you are poor, the government will ensure that your family will not starve" but that retort only leads us into a means vs. ends conversation that I find extremely boring.

Not to mention the fact that I tend to agree with both assertions.

So instead I'll turn to a new book from the Brookings Institute entitled Creating an Opportunity Society, co-written by a former Bush adviser, that reveals one very sobering fact:
42% of American men with fathers in the bottom income quintile remain there as compared to: Denmark, 25%; Sweden, 26%; Finland, 28%; Norway, 28%; and the United Kingdom, 30%. They present a wealth of new and old research evidence to support the conclusion that if you're born poor in America, you're likely to remain poor.

The book ignores the traditional left-right divide to arrive at a set of policy recommendations that are novel only in the comprehensive and non-partisan way in which they are presented (via Pete Davis):
  • We start out life with advantages and disadvantages which are hard to alter.
  • We underinvest in the disadvantaged.
  • Personal responsibility it very important.
  • Promoting education, work, and family is very important. Convince disadvantaged kids at an early age that they need to go to college, develop a strong work ethic, and get married. Policy incentives aren't enough. Publicity campaigns are needed to change attitudes.
  • Government should do more, but it can't do it all.
  • Slow the growth of benefits for the elderly to fund a $20 billion per year program of specific policy changes, including some spending cuts.

But don't take my word for it, click here for the full summary. My intention here is simply to raise awareness to the fact that there are no easy answers, and that oftentimes it is the unintended consequences that can have the greatest impact. However with half of American kids set to live in households that receive food stamps by the age of 20 , this is a problem we cannot afford to ignore.

Let's hope the administration is paying attention.

1 comments:

Courtney Squillante on 16/11/09 said...

Great post, Mike!

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