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Lesson Not Learned: Government Cannot End Poverty

Brett Davis

Posted on August 10, 2021 23:04

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Senate Democrats’ $3.5 trillion plan to overhaul the nation’s education and healthcare systems ignores history and the reality of human nature.

Senate Democrats, suffering from a case of historical amnesia and denial about the national debt, earlier this week released an outline of a $3.5 trillion plan that, in part, seeks to end poverty via universal pre-kindergarten, two free years of community college and expanded Medicare to cover hearing, dental and vision care.

President Biden and his Democratic allies who control Congress are but the latest crop of politicians who foolishly believe government programs provide the best, and perhaps only, way to cope with economic hardships — many of which, ironically, are caused by government — and the challenges of the poor. This widely embraced narrative may be comforting, even inspiring, but it is also wrong.

Consider President Franklin Roosevelt’s ineffective response to the Great Depression in the form of numerous ambitious government programs that included more than a doubling of federal spending. In 1931, during the administration of Herbert Hoover, the national unemployment rate was 17.4 percent. Seven years later, after more than five years of the Roosevelt administration’s throwing everything, including the kitchen sink, at the Great Depression, the national unemployment rate was 17.4 percent.

The stock market told a similar story. After the crash and the beginning of the Great Depression, the Dow Jones Industrial Average hit 250 under Hoover, after having been at 343 just before the crash. By January 1940 and seven years of the New Deal — including an increase in spending as a percentage of gross domestic product from 2.5 percent in 1929 to 9 percent in 1936 — the market collapsed to 151 and remained in the low 100s through most of Roosevelt’s terms. The stock market didn’t return to its 1929 levels until the 1950s.

The 1960s saw President Lyndon Johnson’s “War on Poverty” achieve a similar disappointing return on investment after spending anywhere between $15 trillion and $22 trillion.

As observed by Phil Gramm and John Early in an October 2018 Wall Street Journal opinion piece: “During the 20 years before the War on Poverty was funded, the portion of the nation living in poverty had dropped to 14.7% from 32.1%. Since 1966, the first year with a significant increase in antipoverty spending, the poverty rate reported by the Census Bureau has been virtually unchanged.”

None of that stopped 2008 presidential candidate Hillary Clinton from proposing a cabinet-level Department of Poverty to end destitution in America, apparently under the delusion the challenge has suffered from a lack of bureaucratic attention.

Today, President Biden and congressional Democrats refuse to see that poverty — a relative status these days — stems, at least in large part, from bad choices and self-destructive behavior often incentivized by government policies that encourage dependency on the state and crowd out more effective private charity.

Rather than cutting government to allow the business cycle to take its course, Biden and company are doubling down on paying out trillions of dollars in a futile quest to alter part of the human condition. It will not be money well spent.

Brett Davis

Posted on August 10, 2021 23:04

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Source: Science mag

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