Do government programs for the poor actually alleviate poverty?

By Dylan ScottPublished September 29, 2013

null — During the State of the Union Address on January 8, 1964, President Lyndon Johnson outlined what would become known as the War on Poverty, proclaiming, "This administration today here and now declares unconditional war on poverty in America. I urge this Congress and all Americans to join me in that effort...." Johnson undertook a noble mission in that address, one that inspired a generation of lifelong activists committed to eliminating poverty through direct assistance programs for the poor. However, fifty years later, there is little evidence to show that this approach has lowered poverty rates at all.

Source: World Bank

One bright spot is that although the rate of poverty in the US has remained constant, the actual state of being poor is better now than fifty years ago. A recurring theme in pundits' talking points is that wages for the middle class and poor have stagnated for decades. However, in a 2011 study, Bruce Meyer and James Sullivan show that many measures of income used to arrive at this conclusion miscalculate individual's economic well-being by underestimating increases in households' ability to consume goods and services. The finding implies that while salaries of the poor and middle class remains constant, the value of goods one can buy with that salary is increasing. The study concludes that increased material well-being among lower income groups is largely the result of sustained GDP growth, with programs such as SNAP and housing assistance playing a minimal role.

The long-term impact of increasing output on poverty rates remains unclear, but there is evidence that adequate growth in output can, at minimum, improve the economic-well being of the poor. Where government programs have failed—at a high cost to taxpayers—sustained GDP growth may provide an answer.