Free-Market Bashers Aren't Helping the Poor

Is the government better at fighting poverty than the free market? 
Both government and markets are needed to help the poor. Photographer: Joe Raedle/Getty Images)

Republicans in Congress are trying to convince Americans that conservatism offers better answers than liberalism to the problems of poverty.

Larry Bartels , a political scientist at Vanderbilt University, is having none of it. In the Washington Post, he makes a provocative argument: The free market that Republicans laud "has done nothing at all" to help the poor over the past 40 years. Government programs have alleviated poverty, he argues, but our free-enterprise economy has "failed abjectly" at that task.

That's a thoroughly wrongheaded and counterproductive way to think about poverty.

Bartels cites two pieces of evidence for his view. The first is that census data show that the bottom 40 percent of households have experienced no income gains, excluding the effects of government transfer programs and taxes, over the past four decades. It's a point that Scott Winship , who studies these trends for the conservative Manhattan Institute, disputes.

Winship uses a different, and he argues better, measure of inflation over that period than the census does, and also takes account of household size. He finds that with those adjustments the income of the bottom 40 percent increased by 31 percent from 1969 to 2007. (He picks those dates because they're both business-cycle peaks.) Even that number understates the progress we've made because a lot of poor immigrants arrived in the U.S. in that period.

Bartels's second piece of evidence comes from scholars at Columbia University who have concluded that Social Security, the earned income tax credit and other programs are responsible for the entirety of the decline in one measure of poverty over that period.

They use a measure of poverty that counts you as poor if you make less than a household of four at the 33rd percentile of household expenditures spends on basic items such as food, clothing and housing. The White House's Council of Economic Advisers said in a recent report that to the extent poverty is measured in relative terms like this, ending it "may be nearly impossible."

The Columbia researchers attempted to correct for this problem, but their method is also open to challenge, as it depends, once again, on how inflation is measured. A possible danger is that a method of tracking poverty could end up stacking the deck in favor of government and against markets as an anti-poverty tool -- or, more precisely, in favor of redistribution rather than economic growth .

The more poverty is measured in relative rather than absolute terms, the less economic growth will improve it. The baseline would keep moving away from poor people as they approached it. Redistribution will look like a more certain way of fighting poverty, whether or not it is in reality.

There's a more basic flaw in the thesis that markets have done nothing to help the poor while government programs have done a lot: Where does the government get the money to fund these programs? Economic growth is what enables Social Security checks to get fatter over time. Unless you're prepared to argue that the government is responsible for 100 percent of economic growth and markets for none, markets have to get some of the credit for whatever good government does.

Sometimes conservatives make the opposite of Bartels's mistake, and claim that government programs can do nothing to help the poor. Bartels accuses Senator Marco Rubio of making that error, but only by taking him out of context. Rubio said that we needed "innovative and highly targeted solutions," which is something "the federal government is incapable of delivering." That's not the same as saying that the government can't help alleviate poverty, which is how Bartels paraphrases him.

Rubio, in fact, proposes some changes to existing government anti-poverty programs that he believes will help them work better -- notably, reforms to the earned income tax credit, one of the programs Bartels says has helped the poor. That's not the proposal of someone who thinks government can do no good. On this subject, Rubio is offering an undoctrinaire conservatism. It would be a pity if it were met by a doctrinaire liberalism.

Both markets and government are necessary to improve the lot of the poor, and we ought to reform government programs so that they do a better job of helping the poor participate in markets. That's just common sense, and no study or statistic has given us a good reason to reject it.

(Ramesh Ponnuru is a Bloomberg View columnist, a visiting fellow at the American Enterprise Institute and a senior editor at the National Review. Follow him on Twitter at @RameshPonnuru)

Corrects Larry Bartels's affiliation in second paragraph and description of Columbia University study in paragraphs six through nine of a column published March 6.
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