Politics & Policy

The Politics of Poverty

From the fiscal to the familial, conservatives have the right answers.

Several years ago, a business meeting took me to the home of an honest-to-God Wall Street billionaire, the first such member of that exotic caste I had ever personally encountered. The home was comfortable and well-appointed, but it was in most ways a domicile with a distinctly middle-class feel to it. The children, who were still quite young, were given chores to do, and they were taken to school by their parents, not by a chauffeur. There was no live-in domestic staff, no Rolls-Royce Phantom, no Donald Trump–style 24-carat-gold fixtures.

Because my curiosity is more powerful than my sense of social propriety, I inquired, as obliquely as I could, about my hosts’ apparently modest sensibilities, and they explained that they were making a determined effort to conceal from their children as long as they could how wealthy they were, in order not to sap their ambition or distort their sense of social place. I thought that this was an admirable plan (and one that would be executed more perfectly if they were to acquire a print of dogs playing poker to replace the Matisse hanging in the living room).

There are many competing definitions of “rich,” and they usually involve a percentage: the top 10 percent, the top 5 percent, the dreaded 1 percent. My own definition is the point at which the marginal utility of an additional dollar for personal consumption and investment is effectively zero. I think that this is a good definition for a couple of reasons: One, because people have different preferences, that point comes at very different wealth and income levels for different people, which is why there are so many people of relatively modest means who dedicate some non-trivial portion of their incomes to charity rather than to their own personal desires. Second, it accounts for the fact that while the value of an additional dollar for personal consumption may be zero, the value of deciding for one’s self how any additional dollars are to be disposed of is not zero. That is why there are so many people who work diligently to minimize their tax bills while giving away millions or billions of dollars to charitable ends. The position is not, contra the protestations of our  progressive friends, an inconsistent one.

The Fitzgeraldian rich — “different from you and me” — are indeed a class apart, though the history of modern capitalism is one of making membership in that rarefied grouping much more democratic than it ever has been. What was within living memory a class in the true sense of that word — aristocrats and heirs and the odd movie star — is today an aggregate that contains relatively few people whose economic talents consist of choosing their parents wisely and a great many more formerly middle-class manufacturers of plumbing fixtures. During my last year in college, I was very excited to be taking my first first-class flight, attending a film junket for Miramax. (There is not very much money in writing movie reviews, which is what I was doing at the time, but the side benefits are occasionally excellent.) The man next to me was very friendly, and as we talked I learned that he was retired, though he seemed very young to be retired, and was traveling from his home in Florida to his other home, in Manhattan. Because (see above) my curiosity is more powerful than my sense of social propriety, I asked him what he had done for a living that allowed him to be sipping champagne in first class at an age when most men still are working, and he answered: “I was a chimney sweep.” What followed was a memorable story about his beginning his career as a chimney sweep in New York City and later launching his own chimney-cleaning company, which grew into a company involved in all manner of fireplace-related commerce. When his interest in his business began to wane, he sold the firm and retired.

Anecdotes are easy to dismiss, but empirical studies are another thing, and the facts about the rich present a picture that is fundamentally different from the cartoon we get from the Left, which presents the so-called 1 percent, which is a statistical abstraction rather than a group of actual human beings, as a hereditary economic peerage, with millionaire families handing down enduring fortunes for generations like a family pew at Appleton Chapel.

Professor Mark R. Rank of Washington University, co-author of Chasing the American Dream: Understanding What Shapes Our Fortunes, tells a different story in a review of his own and others’ research in last Sunday’s New York Times. Far from having the 21st-century equivalent of an Edwardian class system, the United States is characterized by a great deal of variation in income: More than half of all adult Americans will be at or near the poverty line at some point over the course of their lives; 73 percent will also find themselves in the top 20 percent, and 39 percent will make it into the top 5 percent for at least one year. Perhaps most remarkable, 12 percent of Americans will be in the top 1 percent for at least one year of their working lives.

The top 1 percent, as I have noted here before, is such an unstable group that it makes no sense to write, as so many progressives do, about what has happened to its income over the past ten year or twenty years, because it does not contain the same group of people from year to year. Citing tax scholar Robert Carroll’s examination of IRS records, Professor Rank notes that the turnover among the super-rich (the top 400 taxpayers in any given year) is 98 percent over a decade — that is, just 2 percent of that elusive group remain there for ten years in a row. Among those earning more than $1 million a year, most earned that much for only one year of the nine-year period studied, and only 6 percent earned that much for the entire period.

“Ultimately,” Professor Rank writes, “this information casts serious doubt on the notion of a rigid class structure in the United States based upon income. It suggests that the United States is indeed a land of opportunity, that the American dream is still possible — but that it is also a land of widespread poverty.” Data from the Bureau of Labor Statistics finds that among the allegedly privileged 1 percent, inherited wealth accounts for only 15 percent of household holdings, a smaller share than it does among middle-class families.

As Rank hints, what is hereditary in the United States is not wealth but poverty. The Left’s focus on the status of wealthy and high-income Americans is precisely backward — backward if improving the lives and opportunities of those born into poverty is your goal. If your goal is to increase the income and power of the public sector for your own economic and political ends, then of  course it makes more sense to focus on the rich: That’s where the money is, and the perverse reality of the Left is that it cannot fortify its own interests by improving the lives of the poor but can do so by pillaging the rich. Indeed, a generation of transformative economic dynamism for the worst-off Americans would be a political and cultural catastrophe for the Left, whose power has its foundation in those who are to some extent dependent upon government largesse and — much more important — those who make their careers managing that dependency. A lesson that conservatives keep not quite managing to learn is that our long-term problem is not so much those who are receiving checks from the government as it is those who are signing them. Economically rational people who are dependent upon government support can be weaned from it through the relatively simple expedient of a better deal; economically rational people who are in the employ of the welfare bureaucracies at above-market wages are not expecting a better deal, nor should they be.

Capitalism must be denounced afresh for each generation, and this generation’s fashionable anticapitalist is Thomas Piketty of France’s School for the Advanced Study of Social Sciences and author of Capital in the Twenty-First Century, about which a great deal has been written by much more knowledgeable writers than I. Like most anticapitalists, Professor Piketty is taken with the question of inequality rather than with the separate question of poverty, and his focus is most intensely upon those high-earning managers of capital. But as Clive Crook notes in his review of the book, the question of whether income inequality widens in the future “won’t matter as much as whether and how quickly wages and living standards rise.” Which is to say, if the real standard of living for the poor and the middle classes continues to increase — as it has for virtually the entire history of modern capitalism — then it will not matter if the standards of living for the very wealthy increase even more quickly. On the other hand, if living standards decline or stagnate, it will not matter very much to anybody besides political entrepreneurs whether inequality also decreases. Higher standards of living across the board are perfectly compatible with higher levels of income inequality, a pattern that has been seen not only among such alleged practitioners of cowboy capitalism as the United States but also in European welfare states such as Sweden, where income inequality is increasing just as it is in the United States.

The conservative hesitancy to put the issue of poverty at the center of our domestic economic agenda, rather than tax rates or middle-class jobs, is misguided — politically as well as substantively. Any analysis of the so-called War on Poverty, officially at the half-century mark this year, will find that the numbers are very strongly on the side of the conservative critique of the welfare state: We spend a great deal of money, achieve very little in the way of measurable positive good, and inflict a great deal of destruction on families and communities in the process. Addressing poverty in a meaningful and robust way calls for a response from every part of the conservative coalition, because we have a generation’s worth of social-science research documenting that poverty is only partially an economic phenomenon. Poverty is complexly intertwined with marriage and family, with childbearing habits, and with the prevailing norms in local communities. The cause-and-effect relationships here can be complicated, and they operate at the community level as well as the individual level: For example, poor children with married parents experience better long-term economic outcomes than do those with single parents, but the more significant variable, according to a fascinating Harvard study on the subject, is the prevalence of marriage in their communities. It matters whether a poor child has married parents, that is, but it matters even more how many of his friends and classmates have married parents. The free market is part of the solution here, but it is only a part of the solution. But whether the question is the organization of our families, the organization of our tax code, or the organization of our schools, conservatives are well-positioned to step in and do something about the mess the Left has made of things, if only conservative leaders — and, especially, Republican elected officials — were more inclined to do so.

Conservatives’ relative quiet on the issue of poverty cedes too much of the field to those who would use the issue as an excuse to put an ever-larger share of the economy under political discipline, which would leave the country and, not incidentally, the poor substantially worse off.

Professor Rank’s work and the reality of what an optimist might call lifetime income dynamism and a pessimist might call lifetime income instability should have conservatives rethinking their approach to the issue. It is not enough to explain that income inequality does not mean what Paul Krugman wants his readers to think it means, or to keep hammering away at the necessary but not sufficient project of reorienting our welfare programs toward work and the Sisyphean labor of trying to make those programs at least operationally efficient. A deeper appreciation for the lumpy and unpredictable nature of personal income over the course of a working life might help conservatives to deal with the issue of risk aversion, which is a critical factor behind our generally poor record of connecting with women and non-white voters, who lack the economic confidence of traditional conservative constituencies, and not without some reason. Selling an ownership society to people who are terrified of and baffled by the stock market is not a model for success. Perhaps it is the case that Americans in theory should feel differently about long-term investing than they do; the reality is that a great many of them do not, and conservatives must decide whether we want to save the country in theory or in reality.

Envy will remain a powerful social force as long as so many of our 21st-century rich have the manners and tastes of the Kardashians rather than those of Thacher Longstreth, and the Left will forever appeal to our baser natures. But that will only be politically potent so long as we conservatives are not offering a compelling alternative. It is important that we persuade more Americans that they, too, can make the leap from chimney sweep to man of means and arrive at that happy moment in life when they begin to worry about their children growing up spoiled. That article of faith is necessary, but it is more important that it be true, and making it so will require simply everything that conservatives have to offer, from the fiscal to the familial.

— Kevin D. Williamson is roving correspondent for National Review.


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