War On Poverty Update

There seems to be a rallying cry of the Left this year to push the class warfare, income inequality memes and they are now claiming a renewed interest in the War on Poverty.

Before we listen to the Elizabeth Warrens of the world tell us how to redistribute the wealth, let’s see how we’ve done fighting this War on Poverty over the last 50 years.

The following graph shows the US annual poverty rate plotted against the combined spending (expressed as a percentage of US GDP) of Welfare and Medicaid.

poverty rate vs welfareDo you think we’re winning this war?

At first you might draw the conclusion that this war has had the direct opposite results – Increased Welfare/Medicaid spending caused an INCREASE in the poverty rate since the slope of the trend line is positive.  But we must be careful with this statement because the correlation factor (R2) on this data is just 12% so that isn’t a sound statistical conclusion.  (Note – For a primer on correlation and R2, go here).

You can, however, draw a sound statistical conclusion that there is absolutely no truth to the meme generated by the Left that states we can lift people out of poverty by handing them more money via Welfare and Medicaid.  If the Left’s theory was right then the trend line would be negative (increased spending would correspond to a drop in poverty rate) but the graph clearly shows that isn’t true.

At best, you can make the claim that the US poverty rate has been stuck on about 11% since we started this war in the mid 1960’s and the massive amount of money we’ve thrown at this problem has had no effect at all.   The following graph illustrates this point.

poverty rate

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This entry was posted in economics, Income Inequality, politics. Bookmark the permalink.

One Response to War On Poverty Update

  1. Pingback: Real Income Inequality Solutions | cosmoscon

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