By Cliff Montgomery – Oct. 5th, 2010
The ‘Out of Poverty Caucus’ is a newly formed Congressional organization dedicated “to raising awarenessabout the millions of Americans who live without adequate food, shelter, clothing and health care and toproviding the means to help…[these Americans] out of poverty,” according to the official website of U.S. Housemember Joe Baca (D-CA).
Baca serves as co-chair of the caucus.
John Schmitt, Senior Economist at The Center for Economic and Policy Research (CEPR), on September30th provided a statement before an Out of Poverty Caucus Hearing on “An Emergency Response to theCrisis of Poverty in America.”
CEPR is a think-tank which presents “the most important economic and social issues…in an accurate andunderstandable manner, so that the public is better prepared to choose among the various policy options,”according to the Center’s mission statement.
The American Spark provides Schmitt’s entire statement below:
“Thank you very much for the opportunity to speak today to the Congressional Out of Poverty Caucus on thepoverty crisis facing America.
“In 2009, the national poverty rate hit 14.3 percent, its highest level in 15 years and one of the highest rates inthe last five decades. Even in the midst of the worst recession since the Great Depression, however, theUnited States remains a fantastically wealthy country and to have one-in-seven Americans living in poverty isnothing short of shameful.
“Why is poverty so high? The most immediate cause of the high poverty rate is the economic downturn. Theeconomy has almost eight million fewer jobs today than it did when the recession began at the end of 2007.Currently, almost 15 million workers are unemployed. About 11 million more are under-employed, including alarge number who are working part-time hours because no full-time work is available.
“As a result, since the Great Recession started in 2007, the inflation-adjusted income of the typical Americanhousehold has fallen continuously and the poverty rate has risen by almost two percentage points, addingmore than six million people to the poverty rolls.
“But, even before the Great Recession, the poverty rate was high by historical standards. Between 1979 and2007, two business cycle peaks, which allows for the most sensible comparisons over time, the GrossDomestic Product per person grew almost 70 percent after adjusting for inflation. Despite this enormousincrease in national income, the share of the US population living in poverty was higher in 2007 (12.5 percent)than it was in 1979 (11.7 percent).
“This point is worth a deeper look. Remember that the poverty measure is based on an absolute threshold. Wedon’t declare someone poor relative to what a middle-income person or a high-income person makes in anygiven year. Instead, we use a measure that asks whether a person today has an income today that provides astandard of living that exceeds what we considered to be poor more than 50 years ago when we establishedthe national poverty line that we still use today.
“Even at the peak of the last business cycle in 2007, one in eight people in this country had an income that wewould have considered to be poor a half a century ago. Over the last thirty years, even as the economy grew byalmost 70 percent per person, the share of the population that we judge to be poor has actually increased.
“What can we do to lower poverty? In the short term, the most effective anti-poverty program is to get thecountry back to work. Lower unemployment and lower under-employment translate directly into higherincomes, especially for families at the bottom and the middle.
“Lower unemployment and lower under-employment also work indirectly to raise incomes of all workers, bygiving them the leverage they need to negotiate higher wages and better benefits. (We saw the tremendousbenefits of sustained low unemployment at the end of the 1990s, when wages and incomes at the bottom didbetter than at any time since the 1970s.)
“But even if we could restore – overnight – the economy to where it was in 2007, poverty would still beunacceptably high.
“Fortunately, we already know how to lower poverty dramatically. In the 1960s, in less than a decade, we cutpoverty by almost half. The keys were economic institutions that linked workers wages and benefits to overalleconomic growth, and the expansion of the social safety net.
“This is also the same basic formula used by the rest of the world’s rich economies to produce poverty ratesthat are consistently lower than ours, despite our higher GDP per capita.
“The obstacles to cutting poverty today are not economic, but political. For thirty years, we have weakened anddismantled the institutions that connected workers’ incomes to overall growth.
“The share of private-sector workers in unions has plummeted. The inflation-adjusted value of the minimumwage is lower in 2010 than it was in the 1960s. Deregulation has cut labor standards in airlines, trucking,telecommunications, and other traditionally well paying industries. Privatization of state and local governmentjobs, from school bus drivers to cafeteria workers to benefits administrators, have undermined workers’ wagesand benefits with few clear benefits to tax payers.
“Trade deals shaped by corporate rather than community needs have done tremendous damage to ournational manufacturing base. A dysfunctional immigration system often pits immigrants with no legal rightsagainst US-born workers with few options. And our social safety net is in tatters.
“We have an unemployment insurance system that is by international standards stingy and that must now relyon an increasingly hostile Congress to continue even the current level of benefits. We ended welfare as weknew it, but replaced it with a system that was not up to the task of the ‘jobless recovery’ of the mid-2000s, letalone the serious challenges posed by the Great Recession.
“In both the short- and the long-run, fighting poverty means committing our country’s resources to that fight.The first step is a large-scale stimulus program to breathe life back into a dying labor market.
“The most obvious options include: extending unemployment benefits, including assistance with COBRApayments, bailing out our recession-wracked state and local governments (the TARP offered three quarters ofa trillion dollars to Wall Street–our nation’s teachers, police, and fire fighters don’t deserve anything less), anddirect job-creation programs in communities that have been hardest hit by the downturn.
“Economic analysts from the White House, to the non-partisan Congressional Budget Office, to former JohnMcCain adviser Mark Zandi all tell us that the February 2009 stimulus package has created millions of jobs.Without those measures, poverty would have increased even more than it did in 2009.
“But, we now know that the stimulus program put forth in early 2009 was just not big enough. The single mostimportant step we could take to combat poverty in 2011 is to implement a large -scale stimulus and jobsprogram today.
“Once the labor market is generating jobs fast enough to lower the unemployment rate, the next challenge willbe to restructure the labor market so that it once again channels the benefits of growth to workers and theirfamilies.”
