The War on Poverty at 50

By Cal Thomas

In his State of the Union address on Jan. 8, 1964, President Lyndon Johnson declared a “war on poverty.” Today, with roughly the same number of people below the poverty level as in 1964 and with many addicted to government “benefits,” robbing them of a work ethic, it is clear that the poor have mostly lost the war.

In 1964, the poverty rate was about 19 percent. Census data from 2010 indicates that 15.1 percent are in poverty within a much larger population.

The lack of government programs did not cause poverty, and spending vast sums of money has not eliminated it.

A policy analysis by the Cato Institute found that federal and state anti-poverty programs have cost $15 trillion over the last five decades but have had little effect on the number of people living in poverty. That amounts to $20,610 per poor person in America, or $61,830 per poor family of three. If the government had sent them a check they might have been better off.

As Robert Rector and Jennifer Marshall have written for The Heritage Foundation, “President Johnson’s goal was not to create a massive system of ever-increasing welfare benefits for an ever-larger number of beneficiaries. Instead, he sought to increase self-sufficiency, enabling recipients to lift themselves up beyond the need for public assistance.”

Johnson sounded conservative when he said, “(We) want to offer the forgotten fifth of our people opportunity and not doles.”

Unfortunately, the war on poverty neglected a key component: human nature. Substantial numbers of people came to rely on government benefits and thus lost any sense of personal responsibility. Teenage girls knew they could get a check from the government if they had babies and so they had them, often more than one. The law discouraged fathers from living with, much less marrying, the mothers of their children and so legions of “single mothers” became the norm, and the lack of male leadership in the home contributed to additional cycles of poverty, addicting new generations to government.

When President Clinton signed the welfare reform bill in 1996, liberals screamed that people would starve in the streets. They didn’t. Many got jobs when they knew the checks would cease.

Over time, government enacted rules to prevent churches and faith-based groups from sharing their faith if they wanted to receive federal grants, thus removing the reason for their success. These groups, which once were at the center of fighting poverty by offering a transformed life and consequently a change in attitude, retreated to the sidelines.

In public schools, values that once were taught were removed because of lawsuits and the fear of lawsuits, creating a “naked public square” devoid of concepts such as right and wrong, with everyone left to figure it out on their own.

There are two ways to measure poverty. One is the way theCensus Bureau does, by counting income earned by individuals and families without including government benefits. The other is not measurable in a statistical sense. It is a poverty of spirit. People need to be inspired and told they don’t have to settle for whatever circumstances they are in. This used to be the role of faith-based institutions, and it can be again if they refuse government grants and again reach out to the poor.

One condition for maintaining tax-exempt status should be for these faith-based institutions to help people get off government assistance and find jobs, becoming self-sufficient. If people need transitional money for daycare or transportation, it can be provided, either temporarily by government or by the thousands of churches, synagogues and other faith-based groups.

There is no undiscovered truth about the cure for most poverty: Stay in school; get married before having children and stay married; work hard, save and invest.

The “war on poverty” can be won, but it must be fought with different weapons, not the ones that have failed for the last half-century.

How To Control Congress

Let’s assume that each of our 535 congressmen cares about the destructive impact of deficits and debt on the future of our country. Regardless of party, congressmen face enormous lobbying pressures and awards to spend more and little or no pressure and awards to spend less. The nation’s founders would be horrified by today’s congressional spending that consumes 25 percent of our GDP. Contrast that to the years 1787 to the 1920s when federal government spending never exceeded 4 percent of our GDP except in wartime. Today, federal, state and local government consumes 43 percent of what Americans produce each year. The Washington, D.C.-based Tax Foundation computes that the average taxpayer is forced to work from Jan. 1 to mid-April to pay federal, state and local taxes. If he were taxed enough to pay the $1.5 trillion federal deficit, he’d be forced to work until mid-May.

Tax revenue is not the problem. The federal government has collected just about 20 percent of the nation’s GDP almost every year since 1960. Federal spending has exceeded revenue for most of that period and has taken an unprecedented leap since 2008 to produce today’s massive deficit. Since federal spending is the problem, that’s where our focus should be.

Cutting spending is politically challenging. Every spending constituency sees its handout as vital, whether it’s Social Security, Medicare and Medicaid recipients or farmers, poor people, educators or the military. It’s easy for congressmen to say yes to these spending constituencies because whether it’s Democrats or Republicans in control, they face no hard and fast bottom line.

The bottom line that Americans need is a constitutional amendment limiting congressional spending to some fraction, say 20 percent, of the GDP. That limit could be exceeded only if the president declared a state of emergency along with a two-thirds vote of approval in both houses of Congress. Each year of a declared state of emergency would require another two-thirds vote in each house.

During the early ’80s, I was a member of the National Tax Limitation Committee’s distinguished blue-ribbon drafting committee that included notables such as Milton Friedman, James Buchanan, Paul McCracken, Bill Niskanen, Craig Stubblebine, Robert Bork, Aaron Wildavsky, Robert Nisbet, Robert Carleson and others. We drafted a Balanced Budget/Spending Limitation amendment to the U.S. Constitution. The U.S. Senate passed that amendment on Aug. 4, 1982, by a vote of 69 to 31, two more than the two-thirds vote required for approval of a constitutional amendment. The vote was bipartisan: 47 Republicans, 21 Democrats and 1 Independent voted for the amendment.

It was a different story in the House of Representatives. Its leadership, under Tip O’Neill tried to prevent a vote on the amendment; however, a discharge petition forced a vote on it. While the amendment was approved by a majority (236 to 187), it did not meet the two-thirds required by Article V of the Constitution. The vote was again bipartisan: 167 Republicans, 69 Democrats. The amendment can be found in Milton and Rose Friedman’s “Tyranny of the Status Quo.”

The benefit of a balanced budget/spending limitation amendment is that it would give Congress a bottom line just as we in the private sector have a bottom line. Congress would be forced to play one spending constituency off against another, rather than, as it does today, satisfy most spending constituents and pass the buck to the rest of us and future generations in the forms of federal deficits and debt.

The 1980s discussions settled on giving Congress a spending limit of 18 or 20 percent of our GDP. I thought a 10 percent limit was better. When queried by a reporter as to why 10 percent, I told him that if 10 percent is good enough for the Baptist Church, it ought to be good enough for Congress.

Our Moral Dilemma

Most of our nation’s problems are a direct result of our being immune, hostile or indifferent to several moral questions. Let’s start out with the simple and move to the more complex. Or, stated another way, let’s begin with questions that generate the least hostility, moving to those that generate the greatest.

If a person benefits from a hamburger, a suit of clothing, an apartment or an education, who should be forced to pay for it? I believe the question has only one moral answer, namely the person who benefits from a good or service should be forced to pay for it, that’s if we wish to distinguish ourselves from thieves who only care about enjoying something and who pays is irrelevant.

Aside from the moral question is the economic efficiency question. If the user of something isn’t paying, it’s a good chance that he’ll overuse and waste it. Our country’s problem is that too many Americans want to benefit from things for which they expect other Americans to be taxed.

A related moral question is: Does one American have a moral right to live at the expense of another American? To be more explicit, should Congress, through its taxing authority, give the Bank of America, Citibank, Archer Daniels Midland, farmers, dairymen, college students and poor people the right to live off of the earnings of another American? I’m guessing that only a few Americans would agree with my answer: No one should be forcibly used to serve the purposes of another American.

You might say, “Williams, if Congress makes it a law, then you should submit to being used to serve the purposes of others.”

Such a vision introduces the next moral question, namely under what conditions is it moral to initiate force and threats of force against a person who himself has not initiated force or threats against another? Before that question can be answered, you might ask for a bit more specificity that has an important bearing on the answer, namely are we talking about a free or a non-free society?

In a free society, there’s no moral case that can be made for the initiation of force against one who hasn’t himself initiated force against another. But that’s a societal ideal that might be beyond our reach here on Earth. After all, we have delegated certain rights to government to provide certain services, as enumerated in the U.S. Constitution, particularly as specified in Article I, Section 8 of the document. Each American is duty-bound to pay his share.

So a case can be made for the initiation of force against one who refuses to pay his share of those expenses. If an American says that he’ll pay his share of those constitutionally mandated functions of the federal government but refuses to give up his earnings to be used for handouts to the Bank of America, Citibank, Archer Daniels Midland, farmers, dairymen, college students and poor people, should some kind of force be initiated against him?

I am all too afraid that most of my fellow Americans would answer, “Yes, some kind of force, fines or imprisonment should be initiated against a person who refuses to give up his earnings for the use of another.” Their only source of disagreement would be just who had the rights to another’s earnings.

Some would argue that farmers and dairymen don’t have a right to another’s earnings, but students and poor people do. Others would argue the opposite.

French economist Frederic Bastiat (1801-1850) said, “Government is the great fiction through which everybody endeavors to live at the expense of everybody else.” That endeavor has plagued mankind throughout his history and has now reached a crisis stage in Western Europe and the United States, and the prospects for reversing it don’t appear to be promising.

Social Security Disaster

By Walter E. Williams

Politicians who are principled enough to point out the fraud of Social Security, referring to it as a lie and Ponzi scheme, are under siege. Acknowledgment of Social Security’s problems is not the same as calling for the abandonment of its recipients. Instead, it’s a call to take actions now, while there’s time to avert a disaster. Let’s look at it.

The term was derived from the scheme created during the 1920s by Charles Ponzi, a poor but enterprising Italian immigrant. Here’s how it works. You persuade some people to give you their money to invest. After a while, you pay them a nice return, but the return doesn’t come from investments. What you pay them with comes from the money of other people whom you’ve persuaded to “invest” in your scheme. The scheme works so long as you can persuade greater and greater numbers of people to “invest” so that you can pay off earlier “investors.” After a while, Ponzi couldn’t find enough new investors, and his scheme collapsed. He was convicted of fraud and sent to prison.

The very first Social Security check went to Ida May Fuller in 1940. She paid just $24.75 in Social Security taxes but collected a total of $22,888.92 in benefits, getting back all she put into Social Security in a month. According to a Congressional Research Service report titled “Social Security Reform” (October 2002), by Geoffrey Kollmann and Dawn Nuschler, workers who retired in 1980 at age 65 got back all they put into Social Security, plus interest, in 2.8 years. Workers who retired at age 65 in 2002 will have to wait a total of 16.9 years to break even. For those retiring in 2020, it will take 20.9 years. Workers entering the labor force today won’t live long enough to get back even half of what they will put into Social Security. Social Security faces Ponzi’s problem, not enough new “investors.” In 1940, there were 160 workers paying into Social Security per retiree; today there are only 2.9 and falling.

Some politicians claim that Social Security has a huge trust fund and is in good health. An uninformed public and a derelict news media don’t challenge that lie. Back in August, politicians were in a tizzy over raising the federal debt limit. In an effort to frighten seniors, President Barack Obama said in a CBS interview, “I cannot guarantee that those checks go out on Aug. 3 if we haven’t resolved this issue, because there may simply not be the money in the coffers to do it.” Here’s how we reveal the trust fund lie: According to the Social Security Administration, it has a trust fund with $2.6 trillion in it. If those were real assets, then the Social Security Administration could have mailed checks out regardless of what Congress did about the debt limit. The reality is that the Social Security trust fund consists of government IOUs that have no real value at all and probably are not even worth the paper upon which they are printed.

I believe that a person who is 65 years old and has been forced into Social Security is owed something. But the question is, Who owes it to him? Congress has spent every penny of his Social Security “contribution.” Young workers have no obligation to be fleeced in order to make up for the dishonesty and dereliction of Congress. The tragedy is that most seniors just want their money and couldn’t care less about whom Congress takes it from.

Here’s what might be a temporary fix: The federal government owns huge quantities of wasting assets — assets that are not producing anything — 650 million acres of land, almost 30 percent of the land area of the United States. In exchange for those who choose to opt out of Social Security and forsake any future claim, why not pay them off with 40 or so acres of land? Doing so would give us breathing room to develop a free choice method to finance retirement.

Our Nation's Future

By Walter E. Williams

Our nation is rapidly approaching a point from which there’s little chance to avoid a financial collapse. The heart of our problem can be seen as a tragedy of the commons. That’s a set of circumstances when something is commonly owned and individuals acting rationally in their own self-interest produce a set of results that’s inimical to everyone’s long-term interest. Let’s look at an example of the tragedy of the commons phenomenon and then apply it to our national problem.

Imagine there are 100 cattlemen all having an equal right to graze their herds on 1,000 acres of commonly owned grassland. The rational self-interested response of each cattleman is to have the largest herd that he can afford. Each cattleman pursing similar self-interests will produce results not in any of the cattlemen’s long-term interest — overgrazing, soil erosion and destruction of the land’s usefulness. Even if they all recognize the dangers, does it pay for any one cattleman to cut the size of his herd? The short answer is no because he would bear the cost of having a smaller herd while the other cattlemen gain at his expense. In the long term, they all lose because the land will be overgrazed and made useless.

We can think of the federal budget as a commons to which each of our 535 congressmen and the president have access. Like the cattlemen, each congressman and the president want to get as much out of the federal budget as possible for their constituents. Political success depends upon “bringing home the bacon.” Spending is popular, but taxes to finance the spending are not. The tendency is for spending to rise and its financing to be concealed through borrowing and inflation.

Does it pay for an individual congressman to say, “This spending is unconstitutional and ruining our nation, and I’ll have no part of it; I will refuse a $500 million federal grant to my congressional district”? The answer is no because he would gain little or nothing, plus the federal budget wouldn’t be reduced by $500 million. Other congressmen would benefit by having $500 million more for their districts.

What about the constituents of a principled congressman? If their congressman refuses unconstitutional spending, it doesn’t mean that they pay lower federal income taxes. All that it means is constituents of some other congressmen get the money while the nation spirals toward financial ruin, and they wouldn’t be spared from that ruin because their congressman refused to participate in unconstitutional spending.

What we’re witnessing in Greece, Italy, Ireland, Portugal and other parts of Europe is a direct result of their massive spending to accommodate the welfare state. A greater number of people are living off government welfare programs than are paying taxes. Government debt in Greece is 160 percent of gross domestic product. The other percentages of GDP are 120 in Italy, 104 in Ireland and 106 in Portugal. As a result of this debt and the improbability of their ever paying it, their credit ratings either have reached or are close to reaching junk bond status.

Here’s the question for us: Is the U.S. moving in a direction toward or away from the troubled EU nations? It turns out that our national debt, which was 35 percent of GDP during the 1970s, is now 106 percent of GDP, a level not seen since World War II’s 122 percent. That debt, plus our more than $100 trillion in unfunded liabilities, has led Standard & Poor’s to downgrade our credit rating from AAA to AA+, and the agency is keeping the outlook at “negative” as a result of its having little confidence that Congress will take on the politically sensitive job of tackling the same type of entitlement that has turned Europe into a basket case.

I am all too afraid that Benjamin Franklin correctly saw our nation’s destiny when he said, “When the people find that they can vote themselves money, that will herald the end of the republic.”

Future Generations

By Walter E. Williams

Is there any reason for today’s Americans to care about what happens to tomorrow’s Americans? After all, what have tomorrow’s Americans done for today’s Americans? Moreover, since tomorrow’s Americans don’t vote, we can dump on them with impunity. That’s a vision that describes the actual behavior of today’s Americans. It would be seen as selfish, callous and ruthless only if it were actually articulated. Let’s look at it.

Businesses, as well as most nonprofit enterprises, by law are required to produce financial statements that include all of their present and expected future liabilities. On top of that, they are required to hold reserves against future liabilities such as employee retirement.

By contrast, the federal government gets by without having to provide transparent and honest financial statements. The U.S. Treasury’s “balance sheet” does list liabilities such as public debt, but it does not include the massive unfunded liabilities of Social Security, Medicare and other federal future obligations. A conservative estimate of Washington’s unfunded liabilities for the year ending in 2011 is $87 trillion. That’s more than 500 percent of our 2011 GDP of $15 trillion.

Former Congressmen Chris Cox and Bill Archer have written an article — “Why $16 Trillion Only Hints at the True U.S. Debt,” The Wall Street Journal (November 26, 2012) — pointing out our dire economic straits. They say, “When the accrued expenses of the government’s entitlement programs are counted, it becomes clear that to collect enough tax revenue just to avoid going deeper into debt would require over $8 trillion in tax collections annually. That is the total of the average annual accrued liabilities of just the two largest entitlement programs, plus the annual cash deficit.” Let’s analyze that.

Washington would have to collect $8 trillion in tax revenue, not to pay off our national debt and have reserves against unfunded liabilities, but just to avoid accumulating more debt. Recent IRS data show that individuals earning $66,000 and more a year have a total adjusted gross income of $5.1 trillion. In 2011, corporate profit came to $1.6 trillion. That means if Congress simply confiscated the entire earnings of taxpayers earning more than $66,000 and all corporate profits, it wouldn’t be enough to cover the $8 trillion per year growth of U.S. liabilities.

Given this impossible picture, the message coming out of Washington, especially from our leftist politicians and the news media, is that we solve our budget problems by raising taxes on the rich. If Americans were more informed, such a message would be insulting to our intelligence. There are not enough rich people to satisfy Congress’ appetite.

In 2011, Congress spent $3.7 trillion. That turns out to be about $10 billion per day. According to IRS statistics, roughly 2 percent of U.S. households have an income of $250,000 and above. By the way, $250,000 per year hardly qualifies as being rich. It can’t even buy a Learjet.

Households earning $250,000 and above account for 25 percent, or $1.97 trillion, of the nearly $8 trillion of total household income. If Congress imposed a 100 percent tax, taking all earnings above $250,000 per year, it would bring in about $1.9 trillion. That would keep Washington running for 190 days, but there’s a problem because there are 175 more days left in the year.

The profits of the Fortune 500 richest companies come to $400 billion. That would keep the government running for another 40 days, to mid-July.

America has 400 billionaires with a combined net worth of $1.3 trillion. If Congress fleeced them of their assets, stocks, bonds, yachts, airplanes, mansions and jewelry, it would get us to at least late fall.

The fact of the matter is there are not enough rich people to come anywhere close to satisfying Congress’ voracious spending appetite. The true tragedy for our future is that there are millions of uninformed Americans who will buy the political demagoguery and treachery that our problems can be solved by taxing the rich.

Is There a Way Out?

By Walter E. Williams

According to a recent Fox News poll, 73 percent of Americans are dissatisfied with the direction of the country, up 20 points from 2012. Americans sense that there’s a lot going wrong in our nation, but most don’t have a clue about the true nature of our problem. If they had a clue, most would have little stomach for what would be necessary to arrest our national decline. Let’s look at it.

Between two-thirds and three-quarters of federal spending, in contravention of the U.S. Constitution, can be described as Congress taking the earnings or property of one American to give to another, to whom it does not belong. You say, “Williams, what do you mean?” Congress has no resources of its very own. Moreover, there’s no Santa Claus or tooth fairy who gives it resources. The fact that Congress has no resources of its very own forces us to recognize that the only way Congress can give one American one dollar is to first — through intimidation, threats and coercion — confiscate that dollar from some other American through the tax code.

If any American did privately what Congress does publicly, he’d be condemned as an ordinary thief. Taking what belongs to one American to give to another is theft, and the receiver is a recipient of stolen property. Most Americans would suffer considerable anguish and cognitive dissonance seeing themselves as recipients of stolen property, so congressional theft has to be euphemized and given a respectable name. That respectable name is “entitlement.” Merriam-Webster defines entitlement as “the condition of having a right to have, do, or get something.” For example, I am entitled to walk into the house that I own. I am entitled to drive the car that I own. The challenging question is whether I am also entitled to what you or some other American owns.

Let’s look at a few of these entitlements. More than 40 percent of federal spending is for entitlements for the elderly in the forms of Social Security, Medicare, Medicaid, housing and other assistance programs. The Office of Management and Budget calculates that total entitlement spending comes to about 62 percent of federal spending. Military spending totals 19 percent of federal spending. By the way, putting those two figures into historical perspective demonstrates the success we’ve had becoming a handout nation. In 1962, military expenditures were almost 50 percent of the federal budget, and entitlement spending was a mere 31 percent. The Congressional Budget Office estimates that entitlement spending will consume all federal tax revenue by 2048.

Entitlement spending is not the only form of legalized theft. The Department of Agriculture gives billions of dollars to farmers. The departments of Energy and Commerce give billions of dollars and subsidized loans to corporations. In fact, every Cabinet-level department in Washington is in charge of handing out at least one kind of subsidy or special privilege. Most federal non-defense “discretionary spending” by Congress is for handouts.

Despite the fact that today’s increasing levels of federal government spending are unsustainable, there is little evidence that Americans have the willingness to do anything about it. Any politician who’d even talk about significantly reining in unsustainable entitlement spending would be run out of town. Any politician telling the American people they must pay higher taxes to support handout spending, instead of concealing spending through deficits and running up the national debt and inflation, would also be run out of town. Can you imagine what the American people would do to a presidential candidate who’d declare, as James Madison did in a 1794 speech to the House of Representatives, “Charity is no part of the legislative duty of the government”?

If we are to be able to avoid ultimate collapse, it’s going to take a moral reawakening and renewed constitutional respect — not by politicians but by the American people. The prospect of that happening may be whistlin’ “Dixie.”

Do Americans Prefer Deception?

There’s more to the deceit and dishonesty about Social Security and Medicare discussed in my recent columns. Congress tells us that one-half (6.2 percent) of the Social Security tax is paid by employees and that the other half is paid by employers, for a total of 12.4 percent. Similarly, we are told that a Medicare tax of 1.45 percent is levied on employees and that another 1.45 percent is levied on employers. The truth of the matter is that the burden of both taxes is borne by employees. In other words, we pay both the employee and the so-called employer share. You say, “Williams, that’s nonsense! Just look at what it says on my pay stub.” OK, let’s look at it.

Pretend you are my employer and agree to pay me $50,000 a year, out of which you’re going to send $3,100 to Washington as my share of Social Security tax (6.2 percent of $50,000), as well as $725 for my share of Medicare (1.45 percent of $50,000), a total of $3,825 for the year. To this you must add your half of Social Security and Medicare taxes, which is also $3,825 for the year. Your cost to hire me is $53,825.

If it costs you $53,825 a year to hire me, how much value must I produce for it to be profitable for you to keep me? Is it our agreed salary of $50,000 or $53,825? If you said $53,825, you’d be absolutely right. Then who pays all of the Social Security and Medicare taxes? If you said that I do, you’re right again. The Social Security and Medicare fiction was created because Americans would not be so passive if they knew that the tax they are paying is double what is on their pay stubs — not to mention federal income taxes.

The economics specialty that reveals this is known as the incidence of taxation. The burden of a tax is not necessarily borne by the party upon whom it is levied. The Joint Committee on Taxation held that “both the employee’s and employer’s share of the payroll tax is borne by the employee.” The Congressional Budget Office “assumes — as do most economists — that employers’ share of payroll taxes is passed on to employees in the form of lower wages than would otherwise be paid.” Health insurance is not an employer gift, either. It is paid for by employees in the form of lower wages.

Another part of Social Security and Medicare deception is that the taxes are officially called FICA, which stands for Federal Insurance Contributions Act. First, it’s not an insurance program. More importantly, the word “contribution” implies something voluntary. Its synonyms are alms, benefaction, beneficence, charity, donation and philanthropy. Which one of those synonyms comes close to describing how Congress gets Social Security and Medicare money from us?

There’s more deceit and dishonesty. In 1950, I was 14 years old and applied for a work permit for an after-school job. One of the requirements was to obtain a Social Security card. In bold letters on my Social Security card, which I still possess, are the words “For Social Security Purposes — Not For Identification.” That’s because earlier Americans feared that their Social Security number would become an identity number. According to the Social Security Administration website, “this legend was removed as part of the design changes for the 18th version of the card, issued beginning in 1972.” That statement assumes we’re idiots. We’re asked to believe that the sole purpose of the removal was for design purposes. Apparently, the fact that our Social Security number had become a major identification tool, to be used in every aspect of our lives, had nothing to do with the SSA’s getting rid of the legend saying “For Social Security Purposes — Not For Identification.”

I wonder whether political satirist H.L. Mencken was right when he said, “Nobody ever went broke underestimating the intelligence of the American public.”

Income Inequality

By Walter E. Williams

Democrats plan to demagogue income inequality and the wealth gap for political gain in this year’s elections. Most of what’s said about income inequality is stupid or, at best, ill-informed. Much to their disgrace, economists focusing on measures of income inequality bring little light to the issue. Let’s look at it.

Income is a result of something. As such, results alone cannot establish whether there is fairness or justice. Take a simple example to make the point. Suppose Tom, Dick and Harry play a weekly game of poker. The result is: Tom wins 75 percent of the time. Dick and Harry, respectively, win 15 percent and 10 percent of the time. Knowing only the game’s result permits us to say absolutely nothing as to whether there has been poker fairness or justice. Tom’s disproportionate winnings are consistent with his being either an astute player or a clever cheater.

To determine whether there has been poker justice, the game’s process must be examined. Process questions we might ask are: Were Hoyle’s rules obeyed; were the cards unmarked; were the cards dealt from the top of the deck; and did the players play voluntarily? If these questions yield affirmative answers, there was poker fairness and justice, regardless of the game’s result, even with Tom’s winning 75 percent of the time.

Similarly, income is a result of something. In a free society, for the most part, income is a result of one’s capacity to serve his fellow man and the value his fellow man places on that service. Say I mow your lawn and you pay me $50. That $50 might be seen as a certificate of performance. Why? It serves as evidence that I served my fellow man and enables me to make a claim on what he produces when I visit the grocer. Google founders Sergey Brin and Larry Page are multibillionaires. Just as in the case of my serving my fellow man by mowing his lawn, they served their fellow man. The difference is they served many more of their fellow men and did so far more effectively than I and hence have received many more “certificates of performance,” which enables them to make greater claims on what their fellow man produces, such as big houses, cars and jets.

Brin and Page and people like them created wealth by producing services that improve the lives of millions upon millions of people all around the globe. Should people who have improved our lives be held up to ridicule and scorn because they have higher income than most of us? Should Congress confiscate part of their wealth in the name of fairness and income redistribution?

Except in many instances when government rigs the game with crony capitalism, income is mostly a result of one’s productivity and the value that people place on that productivity. Far more important than income inequality is productivity inequality. That suggests that if there’s anything to be done about income inequality, we should focus on how to give people greater capacity to serve their fellow man, namely raise their productivity.

To accomplish that goal, let’s look at a few things that we shouldn’t do. Becoming a taxicab owner-operator lies within the grasp of many, but in New York City, one must be able to get a license (medallion), which costs $700,000. There are hundreds of examples of government restrictions that reduce opportunity. What about the grossly fraudulent education received by so many minority youngsters? And then we handicap them further with laws that mandate that businesses pay them wages that exceed their productivity, which denies them on-the-job training.

Think back to my poker example. If one is concerned about the game’s result, which is more just, taking some of Tom’s winnings and redistributing them to Dick and Harry or teaching Dick and Harry how to play better? If left to politicians, they’d prefer redistribution. That way, they could get their hands on some of Tom’s winnings. That’s far more rewarding to them than raising Dick’s and Harry’s productivity.

Dependency, Not Poverty

There is no material poverty in the U.S. Here are a few facts about people whom the Census Bureau labels as poor. Dr. Robert Rector and Rachel Sheffield, in their study “Understanding Poverty in the United States: Surprising Facts About America’s Poor” (, report that 80 percent of poor households have air conditioning; nearly three-quarters have a car or truck, and 31 percent have two or more. Two-thirds have cable or satellite TV. Half have one or more computers. Forty-two percent own their homes. Poor Americans have more living space than the typical non-poor person in Sweden, France or the U.K. What we have in our nation are dependency and poverty of the spirit, with people making unwise choices and leading pathological lives aided and abetted by the welfare state.

The Census Bureau pegs the poverty rate among blacks at 35 percent and among whites at 13 percent. The illegitimacy rate among blacks is 72 percent, and among whites it’s 30 percent. A statistic that one doesn’t hear much about is that the poverty rate among black married families has been in the single digits for more than two decades, currently at 8 percent. For married white families, it’s 5 percent. Now the politically incorrect questions: Whose fault is it to have children without the benefit of marriage and risk a life of dependency? Do people have free will, or are they governed by instincts?

There may be some pinhead sociologists who blame the weak black family structure on racial discrimination. But why was the black illegitimacy rate only 14 percent in 1940, and why, as Dr. Thomas Sowell reports, do we find that census data “going back a hundred years, when blacks were just one generation out of slavery … showed that a slightly higher percentage of black adults had married than white adults. This fact remained true in every census from 1890 to 1940”? Is anyone willing to advance the argument that the reason the illegitimacy rate among blacks was lower and marriage rates higher in earlier periods was there was less racial discrimination and greater opportunity?

No one can blame a person if he starts out in life poor, because how one starts out is not his fault. If he stays poor, he is to blame because it is his fault. Avoiding long-term poverty is not rocket science. First, graduate from high school. Second, get married before you have children, and stay married. Third, work at any kind of job, even one that starts out paying the minimum wage. And finally, avoid engaging in criminal behavior. It turns out that a married couple, each earning the minimum wage, would earn an annual combined income of $30,000. The Census Bureau poverty line for a family of two is $15,500, and for a family of four, it’s $23,000. By the way, no adult who starts out earning the minimum wage does so for very long.

Since President Lyndon Johnson declared war on poverty, the nation has spent about $18 trillion at the federal, state and local levels of government on programs justified by the “need” to deal with some aspect of poverty. In a column of mine in 1995, I pointed out that at that time, the nation had spent $5.4 trillion on the War on Poverty, and with that princely sum, “you could purchase every U.S. factory, all manufacturing equipment, and every office building. With what’s left over, one could buy every airline, trucking company and our commercial maritime fleet. If you’re still in the shopping mood, you could also buy every television, radio and power company, plus every retail and wholesale store in the entire nation” ( Today’s total of $18 trillion spent on poverty means you could purchase everything produced in our country each year and then some.

There’s very little guts in the political arena to address the basic causes of poverty. To do so risks being labeled as racist, sexist, uncaring and insensitive. That means today’s dependency is likely to become permanent.