But these analyses—which suggest that the federal safety net has been the driving force behind material progress for the poor and middle class—don’t tell the full story because they fail to distinguish between elderly Americans and working-age ones. When I reanalyzed Konczal’s argument, I found that he had likely understated the increase in earnings among middle-class working-age families by a factor of six. That’s because of the size of the growing, non-working elderly population in the middle class. What ends up looking like income from safety net programs for working-age families in Konczal’s data is therefore actually Social Security and Medicare payouts for the non-working elderly. In other words, social insurance programs—which return benefits to retirees who contributed into the system as workers—produced income gains among the elderly. It was rising earnings that accounted for the income gains among those families in still the workforce.
The poverty figures provided by the Columbia researchers can also obscure why poverty fell (all of the discussion below uses the version of the poverty measure in the Columbia report cited by CEA). Among the elderly, Social Security can be credited for driving down poverty, starting in the early 1970s (Medicare is not counted as income in this poverty measure). Among children, however, the federal safety net only starts to drive poverty declines in the 1990s—and since then it has grown steadily more important. What’s happened in that period? Welfare reform. Cash assistance to poor families without a worker became less generous, while programs that supported work—things like the Earned Income Tax Credit—grew more generous. The likely reason federal policies lowered child poverty more in the 1990s than would have occurred is that these reforms encouraged work and thereby allowed the poor to benefit from a growing economy in ways they did not in the past. The lesson is that the War on Poverty-style safety nets that make few demands of recipients become poverty traps in a growing economy, discouraging people from seeking work and denying them higher living standards.
The flip side is that during recessions, a safety net for less-skilled workers is even more important than in the past if we want to continue to promote work and independence during periods of job growth. For instance, since 2007, the traditional safety net—including unemployment benefits and food stamps—has done its job in the face of recession. Poverty did not rise much if at all, demonstrating a crucial role for aid to those who cannot find work.
A number of implications follow from a clearer understanding of poverty trends. First, poverty has declined—a lot. Most significantly, it has declined among the elderly, and in large measure that reflects the availability and increasing generosity of the Social Security and Medicare programs. (Of course, we’ve put the sustainability of these programs in doubt. Even if we make the most modest reforms to Social Security to put it on sound footing, the expenditures will largely crowd out any new spending on, for instance, improved education for poor children.)
Poverty has also declined among working-age families and children, though that may have less to do with Johnson’s War on Poverty (or Roosevelt’s New Deal) than with more modern approaches to antipoverty policy. The 1960s-vintage safety net that conservatives like Charles Murray have criticized did not appreciably reduce child poverty over time, according to the data issued by the Columbia researchers. Indeed, if those policies discouraged work and promoted single parenthood in the ways that Murray and others suspect they did, they may have boosted poverty rather than lowering it. The truth is, poverty fell among working-age families primarily after the early 1990s, when a robust economy, work-promoting reforms of welfare programs, and, yes, federal health benefits lifted the incomes of the poor. I estimate that household income before taking government programs and taxes into account rose at the 20th percentile of non-elderly Americans by 12 percent from 1989 to 2007. After fully accounting for taxes and benefits, the increase was 20 to 25 percent.
But something else is worth noting more for what hasn’t happened than for what has. Despite the impressive fall in poverty, there has been no corresponding increase in intergenerational mobility as we commonly think about it. In America, we like to think that children should end doing better than their parents. And while the vast majority of adults do end up better-off than their parents, it is still rare for someone to rise from the lower ranks in childhood to the upper ranks in adulthood. Today, just 30 percent of adults who started in the bottom fifth of household incomes have made it to the top three-fifths, and the evidence suggests that that fraction has not changed in at least three decades. These facts seem contradictory only if one thinks that the primary barrier to upward mobility is financial. While having more money takes families out of poverty, it’s no guarantee that their children will have more opportunity in adulthood.
Indeed, if mobility depends mostly on parental skills and values, community influences or individual abilities and personality traits, then there is little reason to think that a war on poverty should have promoted upward mobility. Indeed, to the extent that the 1960s-vintage safety net discourages work, marriage and savings, it may have impeded improvement in upward mobility rates.