Why the disconnect between recovery and poverty?

On March 28, the Wall Street Journal ran a long story headlined, “Use of Food Stamps Swells Even as Economy Improves.” The Journal reported that a record 47.8 million people are enrolled in what is officially called the Supplemental Nutrition Assistance Program, or SNAP, despite what the headline writer saw as a brighter economic picture. 

One cause of the jump (from about a million fewer the previous year) is that President Barack Obama’s administration has loosened eligibility requirements for food stamps. But that’s hardly the whole story, analysts say. The simpler explanation is that record numbers of Americans are poor. 

During the economy recovery, the official poverty rate has remained stuck at around 15 percent (the poverty line is $23,021 for a family of four). That’s pretty much the same as the percentage of Americans getting food stamps. 

At the same time, the stock market is roaring. This juxtaposition — market up, people down — should not surprise anyone, said Charles M. A. Clark, senior fellow of the Vincentian Center for Church and Society at St. John’s University in New York. 

“There’s never been a connection between the stock market and poverty rates, or even the stock market and the economy,” he told Our Sunday Visitor in a telephone interview.

No trickling down

Even economic growth doesn’t benefit the poor like it used to, according to Clark, who teaches economics at St. John’s. He noted that for decades after World War II, rising tides lifted all boats. Incomes at the economy’s lower rungs grew even faster than those at the top. But that trend was upended in the 1980s. Now, Clark said: “The trickle-down effect has clearly stopped.” 

The reasons most often cited for the shift are globalization (which weakened the bargaining power of U.S. workers) and technology (which put a premium on high-skilled labor). But Clark also faults government policies that he says widened gaps between rich and poor. 

He points to tax policy. In recent decades the wealthy have been taxed less as a percentage of their rising incomes, and corporate taxes are noticeably lower than they once were, as a percentage of the overall economy, Clark said. Financial deregulation also has allowed Wall Street to drastically up its share of national wealth. 

As the U.S. Catholic bishops often have said, the basic moral test of an economy is how well the poor and vulnerable are faring. By that standard, the American economy isn’t doing well and hasn’t been for quite some time, as Clark sees it.

‘High inequality’

The problem, in his analysis, is that public policy is tilted toward the fortunate few. He cites the 2008 financial collapse. “We bailed out and made whole the very rich and the very industries that caused the problem in the first place, but we haven’t bailed out the people affected by it,” Clark said, referring to millions of homeowners whose mortgages are still greater than what their houses are worth. 

To tackle poverty, “we have to address high inequality, which no one wants to deal with,” Clark told OSV. Topping his agenda would be an all-out effort to expand access to higher education, which creates opportunities, and health care, which too many lack. And that would require government action, he said. 

From a Catholic perspective, education and health care are social goods, but they’re not ends in themselves. They’re examples of what people need to become full participants in society. “In Catholic social thought, it’s the participation that’s important,” Clark said. But that doesn’t happen, he added, when people are excluded from higher education because they can’t pay tuition or when they can’t get the health care they need. (He feels the jury is out on whether the Affordable Care Act, otherwise known as “Obamacare,” will do much to solve the latter problem).

Aiding business growth

What complicates this outlook is that many people simply don’t agree. 

Samuel Gregg, research director at the Acton Institute for the Study of Religion and Liberty, called for an altogether different agenda. Poverty is unlikely to ease, he said, unless Americans finally decide to rein in the national debt and support low-tax-and-regulation policies aimed at promoting growth through entrepreneurship. 

“Business and market-driven growth is what gets people out of poverty on a sustainable basis. Not government,” he said. “Just ask the millions of Chinese and Indians who have escaped poverty over the past 20 years” by way of rapid growth. 

As to what could be done now to tamp down poverty, Gregg added, “Unfortunately, there are no quick fixes.” 

Other analysts are relatively optimistic, predicting the economy will expand and jobs will begin flowing a year from now. Clark acknowledged that economic growth would help. But it takes a long time to reach people at the bottom, he noted. 

“Don’t expect it to happen in the next few years,” he said. 

William Bole writes from Massachusetts.