Poverty and income inequality 579Poverty and income
inequality
The economic dislocation and poverty of the Great Depression and the desire to
eliminate poverty in the 1960s were the two central stimuli for social policies.
Although these policies had some success in reducing poverty, the persistence of
poverty remains the primary motivator for most social policy. In 2017, the poverty
line for a family of four was an annual income of $24,858; for a single person it was
$12,752.^15 In 2017, official estimates determined 39.7 million Americans were living in
poverty—12.3 percent of the population. Even the social programs that do not directly
help the poor and disadvantaged, such as Social Security and Medicare, affect poverty.
As the What Do the Facts Say? feature shows, the percentage of the elderly population
living in poverty plummeted from more than 35 percent in 1959 to 9.2 percent in 2017.
Official statistics on poverty were not collected before 1959, but the rate was certainly
much higher in the 1930s, before Social Security was established.^16 Given that more
than half of the elderly rely on Social Security as their primary income, the poverty rate
for the elderly would be much higher if Social Security and Medicare did not exist.
Another source of concern for some policy advocates is the growing income and
wealth inequality in the United States. Indeed, people in the top income levels in the
nation are benefiting disproportionately from income increases. From 1993 to 2015,
the top 1 percent of the income distribution had 52 percent of the net income gains.
The real income of the top 1 percent rose 94.5 percent during this period compared to
a 14.3 percent gain for the bottom 99 percent. These trends have produced a growing
concentration of income at the top. In 2015, the top 10 percent of households—those
earning more than $124,810 a year—earned more than half of the income, which is the
highest proportion since 1917 (see Figure 16.1); and in 2015, the top 1 percent—those
earning more than $443,000—earned 22 percent of the nation’s income.^17
The wealth gap is far greater. The median (meaning that half are above this level
and half are below) net worth of U.S. households in 2013 was $177,900, but the median
wealth for the top 10 percent was $1.87 million, and this group held 75.3 percent of
the nation’s wealth. Even within the top 10 percent, the wealth is concentrated at the
top. Forbes publishes a list of the wealthiest Americans every year. Bill Gates topped
the 2017 list for the twenty-fourth year in a row, with a net worth of $89 billion, and
the person at the bottom of the “Forbes 400” was worth $2 billion. The collective net
worth of the nation’s wealthiest 400 people in 2016 was $2.4 trillion, which is a 30-fold
increase since 1982, when Forbes first calculated their net worth at $93 billion.^18 This is a
trillion dollars more than the total wealth held by the bottom 50.
One important point to recognize when considering social policy as a tool to address
income inequality is that government policies help middle-income people and even
the wealthy, in addition to the poor. Consider federal housing policy: in fiscal year
2019, poor people received $31.8 billion a year from the federal government in direct
subsidies for their rent (with another $19 billion spent on all housing programs for the
poor). However, this number is dwarfed by the $130 billion spent on tax expenditures
for housing in 2017, mostly for the mortgage interest deduction, property tax deduction,
and capital gains tax exclusions. Most of this money went to relatively wealthy people;
for example, 73 percent of the tax savings from deducting mortgage interest goes to
people in the top 20 percent.^19 Other government policies that help the wealthy include
patent and copyright law, bankruptcy law, bailouts of the financial sector, immigration
policy, enforcement of tax law, and monetary policy.^20
Government programs that help the wealthy not only target individuals but also
benefit corporations. These policies, often called “corporate welfare,” are defined byThere’s class warfare, all right,
but it’s my class, the rich class,
that’s making war, and we’re
winning.—Warren Buffett, America’s
third-wealthiest personEXAMINE THE PROBLEM OF
POVERTY AS A TARGET OF
SOCIAL POLICIESFull_17_APT_64431_ch16_572-613.indd 579 16/11/18 11:28 AM