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Have we stopped investing in poor people?


Angela Rachidi

Poverty Studies, Society and Culture

President Obama spoke last week as part of a panel about poverty and opportunity at the Catholic-Evangelical Leadership Summit on Overcoming Poverty. He was joined by Robert Putnam, author of “Our Kids,” and AEI President Arthur Brooks. The president spoke at length about his belief that, as a country, we need to invest in those who have not had opportunities. He said (emphasis mine):

A free market is perfectly compatible with us making investment in good public schools, public universities; investments in public parks; investments in a whole bunch — public infrastructure that grows our economy and spreads it around. But that’s, in part, what’s been under attack for the last 30 years. And so, in some ways, rather than soften the edges of the market, we’ve turbocharged it. And we have not been willing, I think, to make some of those common investments so that everybody can play a part in getting opportunity.

Later, the president went further in suggesting that our country’s investments in poor people have declined:

And right now, they [poor kids] don’t have those things [mentors, social networks, decent books and computers and so forth], and those things have been stripped away. You look at state budgets, you look at city budgets, and you look at federal budgets, and we don’t make those same common investments that we used to. And it’s had an impact. And we shouldn’t pretend that somehow we have been making those same investments. We haven’t been. And there’s been a very specific ideological push not to make those investments. That’s where the argument comes in.

It’s difficult to find the areas of disinvestment that the president is referring to. A 2014 report by the Cato Institute analyzed education spending trends by state and found that spending per student for K-12 education increased almost 200% from 1970-2010, in constant dollars.

Spending on poor families has also increased dramatically over the past few decades. The figure above shows spending in constant dollars on the four largest means-tested programs (excluding public health insurance programs). Food and nutrition assistance alone increased 78% since FY2005. And Medicaid spending far overshadows other means-tested programs at $276 billion in FY2014, an increase of 40% since FY2005. As a percent of GDP, federal spending on means-tested programs was 3.5% in FY 2014. It was 2.7% in FY2005 and 2.4% in FY2001, the last recession.

In response to President Obama’s comments, Arthur Brooks, President of AEI, talked about declaring peace on the social safety net and tackling middle-class entitlements, but appropriately argued for limits. He said:

So if you join me in believing the safety net is a fundamental, moral right, and it’s a privilege of our society to provide, you must avoid austerity and you must avoid insolvency. And the only way that you can do that is with smart policies.

And I’m 100 percent sure the president agrees with me about smart macro-economic public policies, so I’m not caricaturing his views either.

Since we believe that there should be public goods, then we’re really talking about the system that provides them and provides them efficiently.

Given what the data show on the substantial public investments that already exist, it seems appropriate to have a conversation on efficiently targeting them rather than discussing how to increase them even more.

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