Earlier, I responded to Scott Sumner’s rather strange armchair attempt to act like my standard form of poverty statistical analysis was off. It wasn’t and still isn’t. After posting my response, Sumner has another really bizarre post about the topic, which I will address here.
Like the first post, this new post utilizes what I am going to call the Grandpa Sumner style. It took me a while to figure out how to describe the way he argues, but it finally hit me that it’s the way a low-information grandpa talks about things.
For instance, instead of saying “since 1967, the poverty rate has not declined, as you can see from this linked data,” he says stuff like “isn’t the blogosphere full of progressives complaining that the poverty rate is just as high as in 1967?” Instead of saying “if we cut transfer programs, the poor would bring down so much more market income that there would be no difference in poverty as you can see from this link,” he says “don’t the progressives always tell us that in the bad old days the rich aristocrats did little work, and the poor worked extremely long hours, because they had to do so to survive?”
You wouldn’t expect this out of a competent economist who theoretically can look up stuff to see if it’s the case, but Sumner becomes Grandpa Sumner on everything that isn’t NGDP targeting. It’s a little difficult to know how to respond when someone isn’t actually making arguments that they substantiate, but I’ll do my best here.
War On Poverty Backtrack
You’ll recall Grandpa Sumner’s initial argument for why transfers don’t net reduce poverty went like this:
- Since the War On Poverty started, poverty hasn’t fallen at all. I know this because aint that what them dat gum progressive bloggers say?
- Because poverty hasn’t declined, then that means anti-poverty transfer incomes only crowd out market incomes. Else, you would have seen poverty decline.
- Therefore transfers don’t reduce poverty.
Then I said, actually Grandpa Sumner, since 1967, disposable income poverty has fallen by 38%. Your premise (1) is just wrong. You would know this if you cared enough to do your due diligence on this subject, but of course you don’t. This is a clear losing argument for Sumner. He cannot rehabilitate it because it is premised upon the wrong claim that poverty hasn’t declined.
In response to his defeat, Sumner scrambles to say something entirely different:
What happened to the well-being of the poor in the 45 years before the highly successful “War on Poverty?” Obviously the data Bruenig cites don’t have much persuasive power unless the poor made much less progress before the War on Poverty. After all, if the War on Poverty were a “smashing success,” then you’d expect the lives of the poor to improve more rapidly than the general improvement you see in any growing economy. But here’s my problem. For years the progressives have been bombarding me with exactly the opposite argument, that poverty fell very rapidly from 1922 to 1967, but that the gains of lower income people slowed sharply after the 1960s. So which is it? How do we know that poverty didn’t fall just as rapidly before the war on poverty, say from 36% to 26%? No data is given for the previous 45 years.
It would be manifestly bizarre for progressives to have ever bombarded Grandpa Sumner with the argument that poverty fell rapidly from 1922 to 1967 because Mollie Orshanksy didn’t come up with the U.S. poverty metric until 1964, and the Current Population Survey’s good poverty data doesn’t stretch back further than 1967. There is a reason that magic year keeps coming up. In his senility (or motivated desire to manufacture nonsense), Sumner appears to be mixing up claims people make about middle-class incomes and claims people make about poverty. But who knows.
Because his initial argument that poverty hasn’t fallen failed dramatically, Sumner has walked into the darkness of non-falsifiability. We don’t have poverty data running that far back. We can’t rerun the tape of history with different institutions. But what we saw here and what we’ve seen in cross-country comparisons is that an increase in transfer incomes corresponds with a reduction in disposable income poverty.
Does Sumner Know What Welfare Is?
Throughout his piece, Sumner seems to be deeply confused about the nature of transfer programs in this country. When I read him, I feel like its the 1980s again, which is plausibly the last time Sumner had any clue on this stuff. To be clear, “welfare” — aka Aid for Families with Dependent Children — has not existed for nearly two decades. There is a sort of continuer zombie program called Temporary Assistance for Needy Families, but it might as well not exist at this point. It doesn’t respond to cyclical events and it is cut by the rate of inflation every year and it is block granted to states who often spend it on non-transfer stupid shit like marriage promotion that doesn’t work.
When we are talking about transfers these days, we are talking primarily about Social Security (Old Age and Disability) as well as Supplemental Security Income. Then, way down the list in money terms, we’ve also got the Earned Income Tax Credit, the Child Tax Credit, food stamps (which are very modest income-based food vouchers), and a smattering of lesser programs with very little uptake (there is also Medicaid, but health care is not included in poverty metrics, fun fact you may not know).
I pointed this out in my prior post by indicating that 20 million of the 27 million people kept out of poverty by transfer programs in this country are disabled or elderly people (i.e. getting SS, SSDI, or SSI). And that figure doesn’t even include their family members, which probably add another couple million. These are populations that he specifically said transfers can pull out of poverty. They alone make my point and validate my market poverty rate figures. He has no response to this point. Instead he gestures on vaguely about “welfare” without giving any notion that he knows what he even means by that.
In my post, I point out that I am well aware of dynamic effects. Grandpa Sumner’s brain is not actually wired better than mine (his initial claim). The reason why comparativists use market and disposable income poverty is because they provide the most helpful way to measure the impact of transfers and because, like I said in the last post, market poverty in high-transfer countries is not consistently or significantly higher than market poverty in low-transfer countries. Sumner’s response on this point is that this could be because the countries for whom high transfers don’t translate into higher market poverty are the kinds of countries willing to do them. This is a separate causal theory I suppose, but it’s a bit exotic.
One point I didn’t raise in my prior post for space-related reasons is that Sumner seems confused about what dynamic effects include. Transfers (and government welfare more generally) can dynamically decrease and increase market poverty. Better food, better housing, better health, less stress, better developmental environments for children, and so on all push in the direction of less market poverty because they can translate into higher productivity. That’s not even to mention the dynamic effects on market poverty that the welfare program we call public education has. I am not saying these positive dynamic effects outweigh the negative ones (if this could even be figured out), but a proper accounting of overall dynamic effects must include these things.
What’s funny about the dynamic effects stuff is that I only reluctantly engage in the market/disposable income stuff. Market income is a broadly meaningless concept because there is no or extremely little market income without government institutions. The economy is a government program. Property law, contract law, corporate law, securities law, commercial law, and so on create the economic system that then goes on to create something we sort of hilariously imagine as “government-free” income.
Cleaving off some distribution and calling it “market” or “pre-tax” is just conceptually incoherent. As Murphy and Nagel say, pre-tax income is a myth. But it does happen to track useful indicators and so I do it. But you don’t have to. There are ways to get at the effect of transfer and social programs more generally that don’t rely upon the spread between market income poverty and disposable income poverty. For instance, you can stick with disposable incomes and do a comparative analysis where you regress it against something like social expenditures. It looks like this:
As a closing bell, Sumner tries to pretend he hasn’t been peddling this bullshit about how wealth inequality is really about life-cycle effects. He has though over and over. He has never thought to age-control wealth data and he also has no idea how they work. For instance, here he is in another of his Grandpa moments:
I am pretty sure that a lot of the wealth inequality data is incomplete. I recall reading that it often ignores structures (which is much of the wealth for average homeowners and shopkeepers.)
As convincing as this random musing is, it’s not the case. There are three major wealth surveys in the country, SIPP, PSID, and SCF. None of them ignore structures. I could go on.