In the United States, we are generally told that poverty is a deeply complicated problem whose solution requires dozens of reforms on issues as diverse as public schooling, job training, and marriage.
But it’s not true. High rates of poverty can, as a policy matter, be solved with trivial ease. How? By simply giving the poor money.
Last month, the Census reported that 46.5 million Americans, or 15 percent of the population, lived under the poverty line in 2012. While that number sounds disturbingly high, the total amount of money by which they are in poverty is smaller than you’d think. In 2012, those 46.5 million impoverished Americans were, collectively, $175 billion dollars below the poverty line. That figure is equivalent to 1.08 percent of the country’s GDP, one-quarter of the country’s $700 billion military budget, and exactly what we spend on Social Security disability benefits. Finding an optimal way to get $175 billion to these 46.5 million people is all that stands in the way of a country with an official poverty rate of zero.
We already do quite a bit to reduce poverty, both officially and unofficially. On the official side of the ledger, Social Security is the biggest factor, having dramatically reduced the rates of elderly poverty since the benefit levels began shooting up in the 1960s. Beyond Social Security, programs like Supplemental Security Insurance, disability insurance, veteran’s benefits, Temporary Assistance for Needy Families, and unemployment insurance also pump up the incomes of poor people. Without these programs, the official poverty rate would be much higher than 15 percent.
On the unofficial side of the ledger—programs not counted as income for poverty purposes—we have things like SNAP (food stamps), Section 8 housing vouchers, the Earned Income Tax Credit, and the Child Tax Credit, among others. Had it been counted as income, SNAP alone would have reduced the ranks of officially impoverished by 4 million people last year. Although we don’t have the numbers yet for last year, the Earned Income Tax Credit and Child Tax Credit pulled 9.4 million people out of poverty in 2011, according to the Census’ supplemental poverty measurement.
So we know generally how to bring folks out of poverty. We have a long list of successful programs that already do so. The question still before us is can we do more?
How hard would it be, for instance, to cut official poverty in half?
Using the dataset from the latest Census poverty report, I determined that if we cut a $2,920 check to every single American—adults, children, and retirees—we could cut official poverty in half. Economists consider this sort of across-the-board payment a “universal basic income.” You can think of it as Social Security for all, not just the elderly.
The upside of giving everybody about $3,000 is that it’s a very easy policy to run and a surefire way to cut poverty in half. But it's a large program: it would require about $907 billion in 2012, or 5.6 percent of the nation’s GDP. (In a real implementation, we might exclude the more than 45 million Americans receiving OASI Social Security benefits from a basic income, bringing the cost down substantially.)