What's in Your Wallet
A Look at Poverty In America, Part Two
by Paul Petillo

Poverty in this country has proven to be a tricky problem to solve and even harder to identify. It is frequently treated as nothing more than an underlying issue in the American economy, one that belongs to someone else yet it affects such a wide swath of the American landscape, it is hard to ignore.

But being poor is often much more than that. As someone once noted, "being poor often means knowing exactly how much everything costs". Being poor changes everything.

The lines that divide the rich from the poor have widened in recent years. Attesting to that distance are armloads of reports suggesting that this has both a good and a bad side.

The carrot danglers, the otherwise nice folks who believe that America remains the land of opportunity, offer the poor a look at a place where, through hard work and dedication to purpose, a man or woman can conquer that adversity and one day be successful. Breaking the economic stranglehold that poverty places on so many citizens here in the US is not that simple.

In the other camp the pessimists suggest something different. Those that suggest that the economic divide is not that easy to surmount tend to point to a variety of reasons. First and foremost, is the issue of wages. The imbalances in earned income create additional pressures on families.

What causes poverty in this land of plenty? There is no simple answer.

Immigration is often cited as a cause. While this is a hot button topic, it is not central in the problems facing the poor. From strictly an earnings point of view, the immigrant population tends to gravitate towards potential work. This makes their impact on wages less of a problem for a more sedentary population who tend to localize in one place.

And it is exactly that type of population that experiences the most glaring form of poverty. Poverty tends to stay in one place. Because of this, the solution that was supposed to come via private sector investment should have begun. The gains that were made due to the much-touted tax breaks for the private sector should have been spent revitalizing the economy. Yet the most impoverished neighborhoods have seen a lack of interest in such investments and that has led to little or no creation of local job opportunities.

Nothing pointed a jagged finger at this issue better than Hurricane Katrina. The visual reality should have burned itself into the American consciousness. Unfortunately, the American public and her elected politicians have a short attention span.

What could have set the stage for a refocused effort instead fell by the wayside. The net effect of this overlooked development has trickled down to an already economically stressed community.

One of the underlying problems is the lack of mobility in these communities. Because of that, many impoverished neighborhoods are forced to shop where they live. These neighborhoods marketplaces are often forced to charge an additional premium in the form of higher prices. This one factor hurts the poor by removing the first line of defense against future poverty: the ability to save.

Compounding the problem, these neighborhoods often have increased levels of crime compared to similarly population densities. This has an obvious spiraling effect of creating disenfranchised families and individuals fearful of seeking help.

Low-income individuals in comparison to other income groups have, as a result of their poverty poorer mental and physical health. Although numerous services are available, navigating the system keeps the impoverished from improving their plight.

Outsourcing is often cited as problematic offshoot of the problem for the wage earner at the lowest end of the scale. Once again, access to those low paying jobs often means familial disruption to pursue employment that does not offer much in the way of lifestyle improvements. From an economic standpoint, much of the outsourcing that has already taken place in this country did help many businesses expand and grow. And, there is empirical evidence that suggests the net effect of that expansion was jobs. But those jobs went to those with the best education.

The debate on why the poor are poor and the best way to change that particular lot in life always ends up on the doorstep of education. Low-quality neighborhood schools in impoverished neighborhoods are often considered a blemish and restrict the amount of Federal funding available. This puts pressure on the district as a whole to find the funding without tapping the already overburdened taxpayer while the government on a national level cuts back.

This increasingly levies a heavy burden on local governments forcing the economic hub of many neighborhoods to move. Known as the out-migration of middle-class households, the results can have a devastating impact on local economies.

The core problem with poverty lies in its dichotomy. The causes for poverty are often the results of poverty. Unemployment begets crime. Poor housing begets higher illness rates. Higher illness rates are often the result of the inaccessibility to care. Inferior quality schools limit the chances for a better paying job which leads back to unemployment.

An excerpt from a January 2007 GAO report suggests much of the same: "Economic research suggests that individuals living in poverty face an increased risk of adverse outcomes, such as poor health and criminal activity, both of which may lead to reduced participation in the labor market".

The report considers the current Census Bureau method of calculating need based on a combined cost of food and services in 1960 adjusted for inflation using the CPI. The report suggests "food stamps and the Earned Income Tax Credit could provide a combined amount of assistance worth an estimated $5,000 for working adults with children who earn approximately $12,000 a year."

Based on those calculations, there are over 37 million people living in the US right now, below that income level.

Ted Kulongoski, governor of Oregon took a recent challenge to live on Food Stamps for one week. For Gov. Kulongoski and his wife this meant surviving on a combined $6 a day for groceries. Many of us start our day with similar expenditures. While the effort brought national attention to the problem of providing nutritional density to a budget that does not afford some of the best foods, it also pointed out the time it consumed to find such sustenance. Based on the previously mention dichotomy of the problem, education is once again central to the problem.

Much of the sudden wealth growth experienced in this nation recently was distributed among the relatively few. The reasons are equally well documented and reported. The enrichment process came as a result of the tax cuts passed by Bush administration. The President had good intentions, we are lead to believe and had they gelled the way he intended, those tax cuts should have spawned a new wave of re-investment.

But they did something quite the opposite. The rich who got richer kept most of it. Higher productivity translated into stagnating wage growth which in turn fed profits.

Gross Domestic Product has declined steadily and if the measures used to determine the economic health in this country get a reality adjustment, it may show just how slow things have become. GDP is based on the productivity on a national level, which may be hiding significant losses in the value of goods and services at a more local level.

And lastly, I¹m struck by the total spending on poverty in this country (roughly $305 billion). There is an economic upside to increasing the funding to fighting poverty that is often ignored.

I would never suggest you try to live below the poverty line, subsisting on a $5.76 an hour income with $3 a day to spend for food. But I can ask you to imagine how an increase in living standards might have on a positive economic benefit to the health, welfare and future of this increasingly disparate group and the nation as a whole.

The first of the two part series: Farewell Mollie Orhsansky