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Cover story

America’s invisible poor

By Arthur Jones
NCR Staff

In 1964 the United States government, at the urging of President Lyndon B. Johnson, declared an “unconditional war on poverty.”

Thirty-two years later, in 1996, the Clinton administration and the U.S. Congress — in the eyes of many antipoverty activists — declared war on the poor.

Johnson’s decision to combat poverty and his ability to persuade Congress to go along with him was in major part based on a personal concern for the poor and in minor measure a continuation of the legacy of President John F. Kennedy.

Kennedy’s attitude toward the poor in America had been greatly influenced by social critic Michael Harrington’s 1962 book, The Other America: Poverty in the United States, a landmark work that drew the nation’s attention to the extent of poverty throughout the country.

By contrast, Clinton’s decision to accede to a conservative Congress’ anti-welfare, antipoor initiative was electoral politics, a move to appeal to centrist and right-of-center voters.

If, as the critics put it, a war is being waged against poor people, the weapon Clinton and Congress employ is The Personal Responsibility and Work Opportunity Reconciliation Act of 1996, billed as the means “to end welfare as we know it.”

The description is proving to be correct: Welfare rolls are down, and the number of poor disconnected from any filament of the now-tattered social safety net is beginning to climb. Overall, how fares America?

Spring 1999 figures show the U.S. economy is bounding along as merrily as in 1998. Inflation is low; unemployment is at the lowest level in 29 years; mortgage rates are down, and house sales are up. Some ordinary Americans, who 10 or 15 years ago took a chance and started sticking their money into the right stocks and mutual funds, now are worrying about capital gains and tax offsets. The Dow index has risen past the 10,000 mark and continues to set records almost daily.

The top 1 percent of America is becoming wealthier, and to protect their corporate asset wealth, they pay their retainers highly. The Children’s Defense Fund, in its 1998 State of America’s Children report, found that in 1960 the average CEO — corporate executive officer — made 41 times the average worker’s wage. In 1998, top CEOs averaged $7.8 million annually, 185 times as much as the average worker. In the past decade, states the Children’s Defense Fund, while the nation’s poorest fifth of families have lost $587 each in purchasing power, the richest 5 percent added $29,533.

Adds the defense fund, “Six years of economic expansion with low inflation and a soaring stock market has not filtered down to the 36.5 million poor people.” In addition, the number of extremely poor people, those whose incomes are less than 50 percent of the poverty level, has increased.

Federal Reserve Board chairman Alan Greenspan explains the reality behind the appearances.

Wealth at top

The typical view, said Greenspan in a speech given at Jackson Hole, Wyo., last September, is that the booming market has benefited individuals “further down in the wealth distribution. Certainly, while in the 1990s those households are more likely to own stocks and mutual funds than a decade or two ago, the stock market rise did not lead to a rise in the share of stocks and mutual fund assets owned by the bottom 90 percent but suggests a further increase in the concentration of net worth [at the top].”

How does the rising stock market concentrate assets? Both through wealthy investors rising with the tide and through corporate managers and owner-entrepreneurs cashing in on their stock options.

Financial writer Allan Sloan notes that spring is also proxy statement time when multibillionaires like Michael Dell of Dell Computer (who owns $16.4 billion in Dell stock) and Ted Turner ($7.6 billion in Time Warner stock), can exercise their options. That means they can buy more of their stock very cheaply as a perk for being successful or canny. If they sell some of that cheaply acquired stock while the market is high, they can buy other assets, thus converting paper holdings in their own corporations into concentrated wealth. And those new options, now turned into stock, are bought up by other wealthy investors, mutual funds and the like.

In the Other America — to borrow Harrington’s title — almost 37 million Americans, 15 percent of the population, live below the poverty line. According to a just-released two-year study by Network, the Catholic social justice lobby (see story below), many of the poor, directed toward the welfare-to-work conveyer belt, are not finding jobs and are losing benefits. Consequently, states Network, at least 1 million children “lack basic necessities.”

And while some welfare recipients have received adequate training and found decent jobs, the number of them still employed six and 12 months later is not encouraging. Even welfare recipients who get jobs may not be better off than before. In Michigan, one of the organizations cooperating in the Network study, Groundwork for a Just World, finds severe hardship among those welfare recipients who have “graduated” to work.

“Our findings,” said Groundwork’s Beverly McDonald, “is that people are cycling on and off work, are making less than $7 an hour, with only 25 percent having health coverage on the job and 60 percent with no benefits whatsoever, not even sick time.”

For those who made it to jobs, many, she said, “are working nonstandard hours. They’re leaving their children with friends and relatives and relocating their children in the middle of the night.

“Even where the state provides child care support, it is very hard to get when you work nonstandard, fluctuating hours,” McDonald said, “and there’s a huge lag between when you had to pay for the care and when you got reimbursed for it weeks later.”

States proclaim reduced case loads

All that state governments care about, said Groundwork’s Beverly McDonald, is proclaiming reduced welfare case loads. Few state governments track what happens to those who slip off welfare or the welfare-to-work conveyer belt, she said. How does Greenspan see the jobs situation?

In the speech last September, he said a rising demand for skilled workers who can “effectively harness new technologies” has been outpacing supply and driving up their wages.

He mentioned that “earnings inequality occurs within groups of workers with similar skills,” but made no mention of the gross inequalities between men’s and women’s pay for similar jobs (NCR, March 5).

Greenspan also looked at wealth distribution and consumption distribution. Inequality in household wealth, he said, was higher in 1989 than in 1963 but hasn’t changed much in a decade — “though that masks the apparent rise in the share of wealth held by the wealthiest families. The distribution of wealth,” he said, “more fundamentally than earnings or income, measures the ability of households to consume.”

Writing on Americans in poverty 37 years ago, Harrington, referred to those “maimed in body and spirit, existing at levels beneath those necessary for human decency,” and said that they were becoming “invisible.”

The Personal Responsibility and Work Opportunity Reconciliation Act of 1996, by pretending that lower welfare rolls equate with fewer people in poverty, has provided Americans with an additional curtain to shield from them the sight and condition of the poor.

National Catholic Reporter, April 30, 1999