Legacies of the War on Poverty, lessons for the future: Keynote addresses

>> I'm Sheldon Danziger the president of the Russell Sage Foundation and until recently the Henry J. Meyer distinguished university professor of public policy at the Gerald R. Ford School of Public Policy at the University of Michigan.  Today's event Legacies of the War on Poverty: Lessons For The Future is sponsored by the Ford School of Public Policy which is celebrating its -- the centennial of its founding this year in which celebrated the centennial of President Ford's birth last year the Russell Sage Foundation and Spotlight On Poverty and Opportunity.  The event is made possible by a generous grant from the Ford Foundation.  Martha Bailey and I began planning for Legacies of the War on Poverty in the summer of 2001.  At the time we realized that the nation's attention would be focused today, the 50th anniversary of the war on poverty, on the issues raised when President Johnson declared, "Unconditional war on poverty in America."  We were obviously successful in part.  The book is here and we're here at this event but what we want to do today is to generate a lively discussion that focuses not just on the lessons of the past 50 years but the implications for the future.  In doing the book, Martha and I reached out to a group of leading scholars.  We asked them to cut through the opinions and outdated studies, many of which have misinterpreted what the war on poverty was, some have even distorted what it sought to do and what it did and did not accomplish.  We asked the authors to review 50 years of social science research and it turns out the timing was good because recent availability of new data and research techniques have lead to studies which have documented sometimes unintended but often unrecognized successes of the war on poverty.  Fifty years ago today President Johnson had a broad vision and that broad vision reshaped our social safety net.  One of the key message of the book is that because of the breadth of the goals, millions of workers, low income families, the elderly and the disabled have benefitted and continue to benefit from the programs and policies that were launched with that speech.  Another important implication, something we teach our students over and over, correlation is not causation.  The fact that today we have billions of dollars in federal spending and high poverty rates does not mean that there's a causal connection.  Indeed the chapters in the book document that many programs have delivered significant benefits.  For the first time federal aid went to preschool children, low income college students and we all can imagine what the world would be like today if we didn't have Medicare and Medicaid.  Another unrecognized aspect of the war on poverty that Martha is going to emphasize in her comments is the link between the assault on discrimination, which President Johnson set out as part of the goals of the war on poverty, and the lengths between the use of poverty spending to further integration.  So why does poverty remain high?  My view, which you'll hear when it's my turn to speak, is that the architects of the war on poverty at the time they were working could not have anticipated that the dramatic changes in the economy that have occurred since the early 1970's would have disrupted the link between economic growth and poverty.  Economic growth is necessary to reduce poverty but growth on its own no longer trickles down to the poor and barely trickles down to the middle class.  So what we hope to do today is to have a broad discussion of these issues both about the past and the future.  I want to first thank those of the staff's of the 3 organizations who made this event possible, David Haproff, Director of Communications for the Russell Sage Foundation, Laura Lee, Director of Communications for the Ford School at the University of Michigan, Sarah Laten, Indi Gupta and others that spotlight on poverty and opportunity which have arranged the details today.  It's now my pleasure to introduce our distinguished moderator Clarence Page.  Clarence is a syndicated columnist and editorial board member with the "Chicago Tribune".  He received the 1989 Pulitzer Prize for Commentary and is a regular contributor on public television and public radio.  Once again thanks for being here both in this room and on the web.
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>> Thank you very much Sheldon.  It is my pleasure to be here this morning and I take the formidable challenge of wrapping up 50 years of history in about an hour or so and delighted to be with you all today.  And I just want to say, I will keep the introductions brief, Sheldon's done terrific work there in Michigan, it's a pleasure to be back with you again.  I last worked with him on a debate program back there in Ann Arbor with Charles Murray who had come out with a terrific book on what the -- two nations...
>> "Coming Apart". 
>> I'm sorry, "Coming Apart", exactly, [laughter] like I'm coming apart this morning.  But which really did a lot to redeem his earlier book "The Bell Curve" [laughter] in my view and in regard just what we're talking about today, the economic divides that have changed and opened up in new ways over the last 50 years and indicating again that economic inequality is not something that is limited to African Americans and other minorities.  And the family dysfunction is identified with economic inequality has spread now partly as a result of economic changes that Sheldon was talking about.  Martha Bailey also will speak shortly, the professor of economics at University of Michigan and the co-editor of "Legacies of the War on Poverty".  Right next to me to my immediate right, your left is Jocelyn Frye, a now senior fellow at the Center for American Progress, the former deputy assistant to President Obama and director of policy and special projects for the first lady.  To my immediate left, and that doesn't happen too often, is Kevin Hassett [laughter], the senior fellow and director of economic policy studies at American Enterprise Institute and he's been economic advisor to the campaigns of John McCain and George W. Bush and Mitt Romney.  He is a critic of the current ways we measure economic inequality and talk about it.  I'm looking forward to a vigorous discussion on that.  To his immediate left is Jason DeParle, a reporter at the "New York Times" on leave now and a Bernard Schwartz, fellow at the New America Foundation and working on a book on immigration as you mentioned earlier, that I'm looking forward to.  And to my far left, how often is that Michael, Michael Gerson, from the "Washington Post" who is op-ed columnist and a great good op-ed columnist I want to add [laughter], visiting fellow at the Center for Public Justice.  So I am going to once again throw the ball back to Sheldon and Martha to open up our program.
>> So hi, my name is Martha Bailey.  Can you get -- oh there are my slides, fantastic.  We didn't coordinate on this but whoever is doing the slides from the back, is that, so when I -- I would like you to press that icon right there with the sound, thank you.  [Background noises] It's a little quiet, I was hoping for a more dramatic beginning [laughter].  Okay, go back yeah.  So 50 years ago today President, oh [background noises].  Thank you.  So 50 years ago today President Lyndon Johnson declared unconditional war on poverty.  But for many Americans today's 50th Anniversary is little to celebrate.  Can I do this myself, ah, okay.  The 15 trillion spent have lowered the official poverty rate from 19% to 15% today.  And these facts have led critics to decry the war on poverty is a failure and aggressively work to scale back its programs.  
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Critics are right, that the war on poverty has been expensive but wrong to call it a failure, at least to generalize about all of its programs.  Poverty is still with us, that's true, and not every program worked.  But decades of research has taught us that many of the programs were landmark successes and what's more how to make those programs work better.  So what was the war on poverty, and this is a really important question because you may feel differently about it depending on what you think it is.  The war on poverty aimed to increase opportunities for all Americans that was a core part of the war on poverty.  It was aimed to "provide a hand up not a hand out"; Johnson words, to go beyond treating the symptoms of poverty to prevent it.  Its agenda included safety net programs but also anti-discrimination efforts in human capital initiatives and programs to grow the economy.  The war on poverty strategy is outlined in the economic report of the President in 1964 was much broader than many of the programs typically credited the war on poverty is credited with.  It sought to accelerate economic growth and maintain high employment, improve regional economies and rehabilitate urban and rural communities, improve labor markets and increase educational and job opportunities, improve health and assistance the aged and disabled.  This era's ideas of equal opportunity and success are especially relevant today with U.S. income inequality soaring to its highest level in almost a century.  Let me give several examples of the successes we point out in the book.  One success relates to the era's pioneering early childhood programs.  Head Start and food stamps programs begun in the 1960's improved infant health, increased educational attainment and helped poor children lead healthier and more productive lives.  These are findings of a lot of recent research that the volume summarizes.  These investments complimented those in public schools, which increased college readiness.  Improvements in college readiness in turn make investments and increases in financial aid much more productive.  These programs are costly but critics are wrong to think of these only as these only as costs, many of these programs more than pay for themselves over time.  Another victory is the war on poverty's battle against racial discrimination.  Johnson not only secured the passage of the 1964 Civil Rights Act but his administration leveraged the power of the federal purse to enforce it.  He threatened to withhold funding -- this includes things like Medicare funding, public school funding, lots of increases in federal funding -- from organizations across the country that did not comply.  This effectively made Civil Rights a pocketbook issue for organizations and people around the country and it encouraged rapid desegregation.  Research has started to document many of the results.  When infant mortality among African Americans fell dramatically as hospitals desegregated.   When these children grew up improvements in their childhood health translated into better achievement test scores well into the 1980's.  Anti-discrimination policies encouraged greater work force and college campus diversity today.  Combined with other policies we have halved the black white poverty gap between the early 1960's and today.  Yet another victory lies in the reduction in elderly poverty.  Medicare and the expansion of social security benefits helped reduce elderly poverty rate by more than half, from 35% in 1959 to 16% in 1973.  In 1964 poverty rates among the elderly were more than two times as high as for other adults.  Today the situation is reversed with the elderly rate only 2/3 as high for non-elderly adults.  An often forgotten benefit of these programs is also the peace of mind brought to American families who have aging parents.  For instance Medicare ensured high quality care for aging parents; it paid their medical bills and protected these families against financial ruin from the staggering costs of caring for their aging parents.  A final benefit is the synergy of these programs.  A lot of research and policy tend to talk about the programs separately, independently as if they're all acting in a completely different sphere.  But the synergies of these programs worked much better than they would have by themselves.  Let me give you several examples of that, hospital and school integration was aided by Medicare dollars and dollars for public schools through the Elementary and Secondary Education Act.  Better infant health and child nutrition made public school dollars more effective and increased the returns of college financial aid and job training.  Medicare's availability by reducing financial burdens on middle class families increased family resources for college tuition.  Now the big question, given these many successes, why are poverty rates in the United States not lower?  The answer and this is something that Sheldon Danziger will discuss in much more length in his comments, is that America's anti-poverty programs have been swimming upstream against powerful poverty increasing currents.  The rise in male incarceration rates has lowered the number of bread winners in low income families, increases in non-marital child bearing and the rise of single parent households mean that more children today are supported on 1 income.  These 2 socio-demographic trends are also interacting with sluggish earnings growth for the lowest skilled workers as economic growth since the 1970's has mainly benefitted higher skilled workers.  All of this means that poverty could have been higher than in 1974 today had the war on poverty never existed.  I'm going to -- I've been told I'm shorter on time than I had anticipated, so I'm going to speed through this.  Consumption based measures of poverty which include the value of non-cash and after tax benefits show a 26 percentage point decline from between 1960 and 2010 with just over 2/3 of this decline occurring before 1980, and the supplemental poverty measure makes the contribution of a lot of the safety nets programs abundantly clear.  For instance the supplemental poverty shows that including social security benefits reduces elderly poverty from over 50% today to 15%.  So on the war on poverty's 50th anniversary I think we should be frank about its failures.  Not every war on poverty program worked as planned.  The biggest failure is perhaps that of the government to foresee that economic growth would stop trickling down to the less skilled workers.  There's good reason to believe that Medicare's design has encouraged the increase in health care costs.  Child poverty rates remain high.  Moreover the costs of war on poverty programs have exceeded all expectations.  But we should also learn from the war on poverty's many successes.  Regardless of our political leanings we can embrace the war on poverty's vision of the equal opportunity for all.  We can agree that many of its programs were landmark successes.  More integrated schools, more integrated hospitals and workforces, peace of mind in financial security for families with aging parents, financial aid for college students and federal support for poor public school districts.  These successes mean that much of the money spent should not just be regarded as costs, that's just bad accounting.  A lot of this money can be regarded as an investment.  And calling expenditures costs alone doesn't account for the tremendous returns on those investments we've seen over the last 50 years.  We can also agree that we've learned a lot about how to make these programs work better.  Johnson didn't know how to fight the war on poverty so his administration tried everything in the arsenal.  There's a lot of scope, I'll agree with a lot of panelists here, to make our federal dollars more effective.  But the punch line here is that it's time to move beyond Reagan's simple assessment that we fought the war on poverty and poverty won.  This is the wrong lesson to learn and it ignores decades of research.  The war on poverty, what the war on poverty has really taught us is how much directed federal policy can accomplish.  Thank you.
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>> Sheldon.
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>> [Laughter] There we go.  
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Many Americans still believe that a rising tide lifts all boats.  They expect it when the economy is growing and unemployment declines wages will grow and family incomes will improve across the board so that the rich, the poor and the middle class will all prosper.  Well I want to read you a short excerpt from "The War On Poverty" a speech that President Johnson gave, because what's remarkable is when he was speaking that's the way the economy had been operating for a long time.  But even then, even in an era when a rising tide was lifting all boats, President Johnson in his speech said, "We cannot and need not wait for the gradual growth of the economy to lift this forgotten 5th of our nation above the poverty line."  
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Today as in the past higher employment and speedier growth are the cornerstones of a concerted attack on poverty.  But general prosperity and growth leave untouched many of the roots of human poverty.  So even at a time when the economy was 1 in which a rising tide lifted all boats and 1 in which workers in that era from the end of World War II to the early 1970's were more likely to have pensions and more likely to have employer provided coverage than they are today and a period in which the minimum wage was raised to keep up with inflation, President Johnson noted that we needed more than the economic growth to reduce poverty.  In retrospect this was our golden age of economic growth.  We had falling poverty and rising earnings.  We had a period of shared prosperity.  But since the 1970's economic growth has no longer lifted all boats except briefly at the end of the 1990's when unemployment rates were very low.  The rich have gotten fabulously richer while the middle class has struggled and more people have fallen into poverty.  We now are in a gilded age of inequality.  The typical annual earnings of men working full time full year adjusted for inflation are no better and indeed are slightly lower than they were in the early 70's.   And the situation is much worse for those with a high school degree or less.  Why did this golden age of rising tides turn into our new gilded age?  The basic answer I think that most economists agree is that GDP per capita today is roughly double what it was back then but a combination of labor saving technological change, globalization of labor markets, erosion of the minimum wage, de-regulation and other policies have contributed to rising inequality.  The sharp break in the past is shown in this slide, which is census bureau data.  You don't really need to look at the numbers, they may be hard to see but the blue line shows men working full time full year.  These are obviously adjusted for inflation and you see rapid growth from 1960 to 1973.  In fact real wages of males grew 42% in that 13-year period.  Since then we have 40 years with no growth, okay.  Economists working in the Johnson administration would have been modest if they forecast oh, over the next 40 years the real earnings of the median full time full year worked would grow 1/4 as much.  That is it would grow 40% in the next 40 years instead of 40 percent in 13 years.  And if they had done that they'd have said oh, the median earnings of full time full year men today would be about $70,000.  My point is simply if the median earnings of men were $70,000 today there would be a lot less poverty and a lot less inequality. So it is the failure of economic growth to trickle down to the median male worker who is not a welfare recipient, or a food stamp recipient, or an unemployment insurance recipient.  Another way to see this difference between the era in which a rising tide lifts all boats is by just looking at the left and the right of this slide.  To the left you see all the bars are high and growth and living standards was rapid and shared.  All the numbers are around 90% and indeed the lowest bar is the top 5%.  That's what we mean when we say a rising tide lifts all boats.  To the right nice ladder, it's easier to see the colors, but on the left the bottom 20% have almost no growth, modest growth for everybody on this chart.  So the point I want to make is the counter factual that the Johnson administration would have been working with would have been to set in place the safety net that's evolved today but in a context in which median earnings would be much higher than they are and in that economy we would have a lot less poverty.  Instead the current economic climate is getting better but is still not very good.  The unemployment rate is falling but is high enough that one would in normal economic times, say we were in a recession certainly if you had talked to the economic advisors 50 years ago and said, what's the situation when the labor force participation rate is 3 or 4 percentage points below what is was 5, 6 years ago? They would have said with unemployment rates this high we were in a recession.  Real wage growth is unlikely for the less educated.  We haven't had any wage growth for the less educated since the early 1970's except for that short period in the 1990's.  Income inequality and wealth inequality are at high levels.  States are still cutting social programs and public sector jobs and what I refer as deficit mania; austerity threatens the safety net as we know it.  To launch us in a discussion that I think the rest of the panelists will focus on, the kinds of things we could do would be to look back to the stimulus bill, higher food stamp benefits and unemployment insurance.  Many long-term unemployed are looking for work but many employers don't want to hire the long-term unemployed.  If we're really concerned about a work base safety net then we need to provide subsidized jobs of last resort.  As we did with the TANIF of emergency fund and the stimulus so that those who are willing to work but can't find an employer to hire them will have an opportunity to work and earn a wage.  We've done a great job with the EITC for families with children but not childless low wage workers.  And obviously the minimum wage has eroded and is lower than it was after Johnson's administration raised the minimum wage as part of the war on poverty.  Finally a response to the safety net's critics, I've obviously made the point that labor market changes not the failure to take available jobs are the primary reason poverty and unemployment are high.  Our book in great detail makes the case that safety net programs reduce poverty without large distortion in work and family choices, and one only has to look at the number of people who work full time full year for large employers and qualify for food stamps, Medicaid and the earned income tax credit.  And finally modest tax increases to fund safety net expansion can reduce poverty and inequality without disrupting the economy.  Thank you.
>> [Applause] Thank you Sheldon.