Politics Magazine

Rising GDP Can't Eliminate Poverty In A "Rigged" Economy

Posted on the 06 June 2014 by Jobsanger

“The federal government needs to remember that the best anti-poverty program is economic growth.”
Those are the words of Rep. Paul Ryan (House Budget Committee chairman), but they have become a mantra for right-wing Republicans -- especially those who are elected officials. And to prove their point, they point to the period between 1959 and 1973. During that period, the nation's economy (GDP) grew about 82% per person -- and the poverty rate dropped from 22.4% to about 11.1%.
Those are some pretty impressive numbers. Why then did this magical solution to poverty not continue to work? In the last generation, the economy has grown by about 147%. Shouldn't that mean poverty would currently be at a historical low (if not eliminated)? But that growth hasn't eliminated (or even further lowered the poverty level -- which has bounced between 12% and 15%, and currently rests at 15%.
The answer, of course, is that the Republicans are touting a simplistic solution to a complicated problem -- and they are ignoring the effect of legislation and policy on that poverty problem. For starters, while the rising GDP may have had a small effect on the poverty level between 1959 and 1973, the poverty programs passed in President Johnson's "Great Society" legislation had a much bigger impact on the poverty level. It is President Johnson's "war on poverty" that is primarily responsible for reducing poverty to a level of only 11.1% (and if more money could have been put into those programs, poverty probably could have been reduced even more).
But starting after 1980, the Republicans began to institute their "trickle-down" economic policy -- a policy that hurt unions, reduced regulations on financial and corporate entities, and lowered teas on the rich and the corporations. In the Bush administration, the GOP doubled-down on those policies. The effect was to stagnate worker wages (since rising production was no longer shared with workers), and since inflation continued to rise, many workers fell into poverty (even though they had full-time jobs).
The combination of this refusal to fairly share rising production, combined with rising inflation, the deregulation of Wall Street, the encouraging companies to export American jobs to third world nations, and falling government revenues (due to even more tax cuts for the rich and corporations) combined to throw the nation into a deep recession (which cost millions more in job losses). This resulted in a poverty level of 15% (which has remained constant since 2011) and a record number of Americans needing food stamps.
And the Republicans only solution for this larger level of poverty is to cut those government programs that fight poverty and lower taxes even more for the rich and the corporations. In other words, they want to give the country a bigger dose of the same policies that caused this economic mess -- and they have blocked all attempts by President Obama and the Democrats to return the country to a fairer and more stable economy.
The truth is that while rising GDP can't eliminate poverty, it can have a small but positive effect on poverty reduction. But it can only do that if unions are strong, production is shared with workers, an adequate minimum wage is instituted, and taxes remain at a level to adequately fund the government -- including the full funding of the social programs that have been shown to be effective in fighting poverty. Rising GDP is not, and never has been, a magical solution by itself to eliminate poverty -- especially when, as now, that rising GDP is hoarded by the rich.
In short, a rising GDP can help in fighting poverty -- but not under the "rigged" system instituted by the Republicans (which funnels all of that GDP growth into the picts and bank accounts of the rich).

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